24 February 2022
While many businesses will be focused on tackling the cost implications of the ongoing energy price increases, it is important to ensure that you keep up to date with changing legislation and any compliance requirements.
Here we summarise the biggest upcoming changes for energy and sustainability compliance and how they may impact your business.
Taskforce on Climate-related Financial Disclosure (TCFD)
For large businesses, the biggest impact is likely to come from 6 April 2022 when they will be required to disclose climate-related financial data. The UK becomes the first G20 country to make disclosing this information a mandatory requirement and it is estimated that around 1,300 companies are required to report- those with over 500 employees and £500 million in turnover fall under the new reporting requirements.
SECR came into force in 2019, so for many organisations, it will be something that they are already familiar with. However, the government is considering expanding the scope of the reporting to make them more ambitious. Currently SECR covers only scope 1 and scope 2 emissions, but it is expected to expand further to cover scope 3 emissions, those created by your value chain rather than your own operations or energy usage.
Whilst many large organisations are already voluntarily reporting on their scope 3 emissions, it is likely that this will become compulsory in the future so it would be worth going above what is required now, if you are not already, to make sure you are ready for the changes which are due in 2023.
Currently, ESOS reporting applies to organisations that employ 250 people or more, or has an annual turnover in excess of €50 million (approx. £40m), with an annual balance sheet total in excess of €43 million (approx. £35m). However, a consultation by the department for business, energy & industrial strategy (BEIS) on ESOS is expected to be published during 2022, which may include the extension of ESOS to cover medium-sized businesses. The proposed changes also include introducing public disclosure of data and trying to increase the uptake of the energy-efficient measures that the reports highlight. The changes will cover ESOS phase 3 which runs until 2023, and we should know more once the consultation outcome is published later this year.
Energy rating system for large commercial and industrial buildings
A new energy rating system for large commercial and industrial buildings is expected this year (the consultation closed June 2021), which will transition them to a performance-based rating system, providing annual metered data to an administrator to generate an ongoing rating.
Businesses with premises larger than 1,000 square meters will have a year from the start date to register and complete a rating.
The long-awaited Environment Act was passed into law in November 2021, nearly five years after a bill was first proposed to govern environmental matters after the UK’s departure from the EU. The Environment Act gives the government power to set legally binding, longer-term, environmental targets lasting at least 15 years across four priority areas (water, air quality, biodiversity, and waste/resource efficiency). Consultations on these targets and the measures that will be needed to ensure the targets are achieved are beginning early 2022, with the final output due at the end of the year, providing everything runs to schedule.
Engaging with these important developments now only puts you ahead of the need for reactive changes in the future and helps to develop better relations with your customers now. For further information, or to find out how your organisation may be impacted by any compliance changes please contact us on 08451 46 36 26.