Sunday, June 16, 2024

Firms urged to continue carbon reporting in the wake of Government’s regulatory rule change

East Midlands accountancy and business advice practice Duncan & Toplis is urging employers to continue carbon reporting after proposed regulatory changes come into effect.

In March, the UK government published suggested changes to company size limits that will impact 131,000 companies nationwide by changing auditing thresholds and other reporting requirements, including carbon reporting obligations.

These changes could see 5,000 large companies reclassified as medium-sized, 13,000 medium-sized companies reclassified as small and 113,000 small companies reclassified as micro-entities.

While the reforms aim to reduce the non-financial reporting obligations for businesses, Duncan & Toplis is warning that companies could be at substantial risk if they don’t maintain existing obligations around sustainability.

Stuart Brown, Director and Head of Technical and Compliance at Duncan & Toplis said: “At first glance, businesses may think that the government’s changes to company size are an easy win that would simplify auditing and annual reporting – but there’s more to it than initially meets the eye.

“The proposed reclassification would mean that thousands of currently ‘large’ companies can take advantage of eased requirements to cut their admin spend, but it also means that thousands of businesses will no longer be required to report their carbon emissions to the government – as this only applies to large companies. This could prove especially problematic for companies that are effectively downsized by the move, potentially extending as far as limiting their access to loans if they cease their carbon reporting.”

The move has been projected to save £150 million per year for UK companies and while, on the surface, this will reduce the regulatory burden on thousands of companies, there may well be unintended consequences. The company highlights that the potential fallout from the reduced regulatory need to report carbon emissions could mean that they no longer appear committed to environmental sustainability – something that lenders, customers, suppliers and employees are increasingly invested in.

A recent study by the Journal of Banking & Finance found that banks in 30 countries globally are more likely to offer lower loan rates to companies that show clear environment and sustainability concerns – increasing their rates to companies that fail to do so. There are also concerns about the impact this may have on recruitment and retention.

Sally-Anne Hurn, Sustainability Champion at Duncan & Toplis, explains: “With figures from DWF showing that almost two-thirds of businesses are already losing out on recruiting new staff and tender agreements due to poor environmental, social and governance performance, further loosening the current requirements could put businesses at risk of losing customers, suppliers and emerging talent – ultimately impacting on the profitability of the company.

“Environmental and social responsibility is an increasing concern for jobseekers and there has been a pronounced shift in focus towards seeking out sustainable, environmentally-friendly employment opportunities in recent years. Employers should prioritise investing in continued carbon reporting and being transparent about their emissions.

“My advice to businesses is to continue diligently monitoring your carbon emissions and the environmental footprint of doing business, even if the legal mandate to do so is removed when your company is reclassified as a medium entity.

“You may well find that failure to do so means that banks are less likely to lend you finance and you may struggle to win tenders against more socially responsible competitors. Importantly, larger suppliers may still require businesses to undertake calculations in order to trade with them. This will be as larger corporations will be considering their Scope 3 emissions – so it’s vital this isn’t overlooked.”

A message from the Editor:

Thank you for reading this story on our news site - please take a moment to read this important message:

As you know, our aim is to bring you, the reader, an editorially led news site and magazine but journalism costs money and we rely on advertising, print and digital revenues to help to support them.

With the Covid-19 pandemichaving a major impact on our industry as a whole, the advertising revenues we normally receive, which helps us cover the cost of our journalists and this website, have been drastically affected.

As such we need your help. If you can support our news sites/magazines with either a small donation of even £1, or a subscription to our magazine, which costs just £31.50 per year, (inc p&P and mailed direct to your door) your generosity will help us weather the storm and continue in our quest to deliver quality journalism.

As a subscriber, you will have unlimited access to our web site and magazine. You'll also be offered VIP invitations to our events, preferential rates to all our awards and get access to exclusive newsletters and content.

Just click here to subscribe and in the meantime may I wish you the very best.








Latest news

Related news