The government consultation on a streamlined energy and carbon reporting system is open until 4th January 2018.
Many companies still don’t save as much energy, carbon and cost as they can.
This is partly because decision makers are just not aware of the opportunities that exist across businesses.
Take a large business that operates in a competitive industry. Let’s say that it has a turnover of £40 million and it’s EBITDA margin is around 20%, giving it £8 million in earnings.
The costs of energy might only be around 5% for such a business – at around £2 million.
If it could save 10% through low-cost energy efficiency investments, that would add £200,000 to EBITDA, an increase of 2.5%.
The business would need to increase sales by £1 million to have the same impact on profits as cutting energy costs by 200,000.
And, especially for listed companies, that increase in earnings can directly increase shareholder value through valuation multiples.
But there are problems.
There are too many reporting systems, the obligations are fragmented and the benefits are unclear.
Most companies see it is as just another obligation that needs to be met at the lowest cost rather than a source of opportunities.
The consultation aims to change that.
Under its proposals, existing reporting mechanisms will be streamlined into a simpler reporting framework that will make energy and emissions information more standardised and transparent, increasing awareness among shareholders and senior managers.
It will apply to large companies, whether defined by energy usage, financial strength or company structure. Between 4,000 and 10,000 organisations will need to comply with these proposals.
The reporting will cover energy and transport and potentially also cover other forms of energy such as biofuels – drawing more emissions into the reporting framework.
It is meant to be UK specific, although listed companies will report on global operations.
In addition, there may be a requirement to report against progress on energy efficiency opportunities.
Following the consultation and the governments response, the new rules are likely to be introduced by 2019.
Companies will need to report this information on their annual reports filed with Companies House, and there may be a separate data portal set up to hold and provide this information as well.
So, what should you do now?
Whatever conclusion the government comes to, it’s likely to involve some form of reporting.
So, start collecting your energy data now.