Business energy and carbon compliance rules are changing. Here’s our quick guide

3 min read published on April 28, 2022

The past few years have seen a growing sense of urgency about the climate. The regulatory landscape is changing as the government seeks to encourage businesses to decarbonise, and the public is becoming increasingly aware of greenwash. All this means that there is increasing pressure on businesses to take stock of their energy and carbon footprint. We’ve put together a quick guide to some of the changes you need to prepare for in the coming months. 

TCFD reporting: mandatory climate disclosures for large companies

This year, over 1,300 of the largest UK-registered companies and financial institutions will have to disclose climate-related financial information on a mandatory basis – in line with recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD). 

Initially, the rules will apply to companies listed in the Premium and Standard sections of the London Stock Exchange, and will come in for accounting periods starting on or after 6 April 2022. However, legislation has been drafted that would also apply the rules to other types of business, including those meeting the Companies Act definition of “large”.

The point is to help investors and businesses better understand the financial impacts of their exposure to climate change. It means reporting on what impact your business has on the climate, and on how the changing climate could affect operations. 

TCFD reporting is just the start of plans to green up the UK financial system. More rigorous “Sustainability Disclosure Requirements” are under consultation – you can learn more by reading the government’s Greening Finance Roadmap.  

“Green” tariff shake-up

The UK government is increasingly aware that “green” energy tariffs can be misleading, and that the lack of transparency for consumers in the energy market is not helping to drive decarbonisation. ENTRNCE is proud to have been an expert contributor to the government’s research into the shortcomings of the current system. 

2022 will see a shake-up in the way that energy is marketed to customers, giving a more accurate reflection of how that energy is sourced. This is ultimately good news for businesses with a net zero strategy, because the new market will allow for much more informed choices. But it is bad news for any business using a “renewable” tariff just to tick a compliance box; deeper engagement with your energy sourcing will be required. For more information on what the government is currently researching, see our blogpost How to fix the REGOs problem: questions the government is asking.

Big changes to ESOS

The government is considering big changes to the Energy Savings Opportunity Scheme (ESOS). It was designed as a way to gently nudge businesses towards cutting carbon through energy savings, but has not effected as much change as originally intended. One of the proposals to make the scheme more effective is a requirement for businesses to report on their greenhouse gas emissions, in the context of a plan for reaching net zero. If this proposal is adopted, it would be the first time ever that a government has made it legally mandatory for businesses to develop a net zero plan. 

The other measures proposed by the government focus on making ESOS reporting more accurate and useful. It may well become mandatory to include half-hourly energy consumption data in ESOS reporting and follow specific standards when analysing it. 

Even if the proposals are watered down for this phase of the scheme, the direction of travel is clear: businesses need to get to grips with reporting on and managing their energy use. This includes businesses that may not currently be in scope of ESOS - the government is considering widening the scheme to include medium-sized businesses.  

SECR scope widening

The government is also considering changing the rules for the Streamlined Energy and Carbon Reporting (SECR) scheme in order to drive more action on emissions. This may mean some kind of requirement for businesses to get their SECR reports externally validated, in order to reduce potential for in-house errors. There may also be a change in emphasis from recording and reporting data to actually setting and meeting carbon-related targets.  

What’s driving the changes?

All the regulatory changes we are likely to see in this area have something in common: they are driven by a need for better, clearer data on energy consumption and carbon emissions to help the UK meet its net zero target. 

Individual businesses have exactly the same need: you can’t drive down emissions unless you have an accurate picture of them.

At ENTRNCE, we’re helping businesses gain a more transparent picture of their energy sourcing, to meet increasingly rigorous reporting requirements and catalyse change. Our latest business guide to avoiding the greenwash explains how large energy users can gain transparency over their energy supply. 

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Picture of Jaron Reddy - Business Lead UK

Published April 28, 2022

Jaron Reddy - Business Lead UK