New Clause 17 — Regulations about reporting by companies

Orders of the Day – in the House of Commons at 8:45 pm on 28th October 2008.

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'(1) 'The Secretary of State must, not later than 6th April 2012—

(a) make regulations under section 416(4) of the Companies Act 2006 (c. 46) requiring the directors' report of a company to contain such information as may be specified in the regulations about emissions of greenhouse gases from activities for which the company is responsible, or

(b) lay before Parliament a report explaining why no such regulations have been made.

(2) Subsection (1)(a) is complied with if regulations are made containing provision in relation to companies, and emissions, of a description specified in the regulations.'.— [Joan Ruddock.]

Brought up, and read the First time.

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

With this it will be convenient to discuss the following:

New clause 5— Company reporting of greenhouse gas emissions—

'(1) Any company that is required to produce a business review under section 417 of the Companies Act 2006 (c.46) must have regard to any guidance issued under section 80 of this Act when reporting on greenhouse gas emissions.

(2) The Secretary of State may by order provide that any company that is required to produce a business review that includes information on environment matters (including the impact of the company's business on the environment) under section 417(5) of the Companies Act (c.46) must include information on greenhouse gas emissions, and in doing so have regard to any guidance issued under section 80 of this Act.

(3) The Secretary of State may by order provide that compliance with guidance issued under Section 80 of this Act will be presumed to constitute compliance with section 417 of the Companies Act 2006 (c.46).

(4) The Secretary of State must make provision under either subsection (2) or subsection (3) before 1st April 2010.

(5) The expiry of the period mentioned in subsection (4) does not affect the power of the Secretary of State to make further provision by order under subsections (2) and (3).

(6) The Secretary of State shall, when setting carbon budget pursuant to section 4 of this Act, lay before Parliament a report on any changes to any guidance issued hereunder which the Secretary of State believes are necessary to promote the achievement of any carbon targets.

(7) Any order under this section is subject to affirmative resolution procedure.'.

New clause 18— Report on the civil estate—

'(1) It is the duty of the Office of Government Commerce to lay before Parliament each year a report setting out the progress Her Majesty's Government has made towards improving the efficiency and sustainability of its civil estate.

(2) The report must include the progress made towards—

(a) reducing the size of the civil estate;

(b) improving the sustainability of the buildings that already form part of the civil estate; and

(c) ensuring that any new buildings procured for the civil estate are in the upper quartile of energy performance.

(3) Where any new building procured for the civil estate is not in the upper quartile of energy performance, the report must state the reasons why this is the case.

(4) A report under this section must be laid before Parliament not later than 1st June in the year in which it is to be so laid.'.

New clause 20— Company reporting of greenhouse gas emissions (No. 2)—

'(1) The Secretary of State may by order provide that companies of particular classes or descriptions must produce as part of their business review under section 417 of the Companies Act 2006 (c. 46) such information on greenhouse gas emissions as may be specified in the order.

(2) Any company that is required to produce information under subsection (1) must have regard to any guidance issued under section 80 of this Act when reporting on greenhouse gas emissions.

(3) The Secretary of State may by order provide that compliance with guidance issued under section 80 of this Act will be presumed to constitute compliance with section 417 of the Companies Act 2006 (c. 46).

(4) The Secretary of State must make provisions under either subsection (1) or subsection (3) before a date to be prescribed by order.

(5) The expiry of the period mentioned in subsection (4) does not affect the power of the Secretary of State to make further provision by order under subsections (1) and (3).

(6) The Secretary of State shall, when setting carbon budget pursuant to section 4 of this Act, lay before Parliament a report on any changes to any guidance issued hereunder which the Secretary of State believes are necessary to promote the achievement of any carbon targets.'.

Amendment No. 16, in clause 13, page 7, line 26 , at end insert—

'(3A) The Secretary of State must prepare an annual report to be laid before Parliament setting out the level of expenditure within the whole UK economy spent on efforts to achieve the targets fixed in the carbon budgets.'.

Government amendment No. 44.

Photo of Joan Ruddock Joan Ruddock Parliamentary Under-Secretary (Energy and Climate Change)

The amending provisions in the group concern various reporting obligations on both Government and business. The key issue is the corporate reporting of emissions, which we have, of course, discussed before at various stages of the Bill's passage.

Levels of reporting on greenhouse gas emissions in the UK are already high. Many companies currently report their emissions under the EU emissions trading scheme or will be required to do so under the upcoming carbon reduction commitment. We also expect that many will report on environmental issues under the Companies Act 2006 narrative and involuntary schemes.

The Government want to provide as much certainty as possible for the business community and to show leadership internationally. However, we also have a duty to ensure that we do not impose new requirements without a robust examination of whether regulation is the most effective intervention to drive corporate climate change improvements.

Government new clause 17 and Government amendment No. 44 are designed to reinforce our commitment to the importance of corporate transparency and to taking forward the process as quickly as possible. We will consult publicly next year on the detail of how companies' carbon emissions should be defined and measured. The outcome of that consultation, which will include close work with individual stakeholder groups, will be reflected in the guidance on measurement of emissions that the Government are required to publish by 1 October 2009.

Photo of Elliot Morley Elliot Morley Labour, Scunthorpe

I know that time is pressing, but I wanted to tell my hon. Friend that I greatly welcome the new clause. I know that the Aldersgate group, which represents many prominent companies, and non-governmental organisations welcome it, as does Christian Aid, which is also a big supporter of my new clause 5. I understand that the objective of new clause 17 is to provide for exactly the same commitment on companies as does my own new clause. I greatly welcome what the Government have done and I look forward to the consultation, a standardised method of reporting and clarity for companies on their carbon footprints.

Photo of Joan Ruddock Joan Ruddock Parliamentary Under-Secretary (Energy and Climate Change)

I am extremely grateful to my right hon. Friend for making those points and I assure him that we are very much trying to meet the spirit of so much of the good work that he has done on the provisions he mentioned.

Government new clause 17 takes on board the strong views expressed in Committee that we should press for further action on corporate reporting. We therefore propose that by 6 April 2012, the Secretary of State must either use powers within the Companies Act 2006 to mandate reporting by companies on their greenhouse gas emissions or, if he decides not to use those powers, to explain to Parliament why not. This makes clear the Government's intention to move in the direction of mandatory reporting of emissions, provided that we can demonstrate that it is environmentally beneficial and cost-effective.

The use of these powers—or the report to Parliament outlining why they have not been used—in 2012 must be supported by evidence of the environmental benefit, accompanied by a robust impact assessment and extensive stakeholder consultation. I hope that Conservative Members will take note of that point. Setting a deadline of 2012 allows business and the Government to have established a standard, while also allowing time for businesses to prepare. In recognition of the urgency of the issue, amendment No. 44 brings forward to 2010 the deadline for examining, on a strategic basis, the contribution that mandatory reporting can make towards our climate change objectives.

I move on to new clause 5 and new clause 20, making clear the two key reasons for not setting a requirement for mandatory reporting in the Bill now. First, there is not yet a reporting standard on which the Secretary of State could base such a requirement. More time is needed to develop such a standard, which means getting all the details right. Secondly, many companies already report some of their emissions—under the EU ETS, for example, or under voluntary initiatives such as the carbon disclosure project. More will be doing so under the carbon reduction commitment. Once we have undertaken public consultation on the definition of the reporting standard, we will be in a better position to see what the gaps are between what is currently reported and what we want to see reported. We will then be able to design that requirement.

Let me summarise what I have said so far. I entirely agree with those who have drawn attention to the need to consider the question of corporate reporting as a matter of urgency, and to introduce a mandatory requirement if we can get it right. I therefore propose to accelerate the existing timetable, and to place a stronger onus on the Government to introduce reporting requirements. I consider that proposal to be both ambitious and proportionate.

New clause 18 requires the Office of Government Commerce to produce an annual report on progress made towards improving the efficiency and sustainability of the Government estate. The report will cover steps taken to reduce the size of the civil estate, to improve the sustainability of existing buildings, and to ensure that new buildings that are procured are in the upper quartile of energy performance.

We are committed to including all Government Departments in the carbon reduction commitment, which will provide incentives for the introduction of energy efficiency measures and the occupation of more energy-efficient office space. Government Departments are subject to the "sustainable operations on the Government estate" targets, which are reported through the chief executive of the Office of Government Commerce and the Cabinet Secretary. The new clause extends those mechanisms by requiring the Office of Government Commerce to produce a report. It follows an amendment tabled by my hon. Friend Mr. Caton, and a private Member's Bill introduced by my hon. Friend Anne Snelgrove. I believe that the report will enable us to define the top quartile that was the subject of the private Member's Bill, and to monitor the commitment that was made through the introduction of energy performance certificates and display energy certificates. I am therefore happy to support the new clause, although parliamentary counsel have pointed out that some drafting changes would be desirable for legal reasons. I hope that all parties will support it if it becomes necessary.

I am afraid that I cannot be as accommodating when it comes to amendment No. 16, which would require the Secretary of State to produce an annual report setting out total expenditure in the United Kingdom economy on action to meet the carbon budgets. The Bill has already established a new, transparent framework for reporting Government action to meet carbon targets. We are required to produce reports once the targets have been set, explaining which policies and measures will be used. The annual reports by the Committee on Climate Change on progress towards meeting targets and budgets must set out the progress that has been made, and the further progress that is needed to meet the budgets.

It is difficult to see how we could be precise about how much is spent by Government, or the United Kingdom economy as a whole, exclusively on meeting carbon budgets, compared with expenditure on other policies and objectives. I think that the discussion we have had about fuel poverty is a good example, as are our discussions about renewable energy. Moreover, Departments already provide publicly available details of their annual expenditure in their departmental reports.

For a combination of reasons—including the practical difficulties of accurately defining expenditure to meet carbon budgets, the level of scrutiny to which each Department's expenditure is already subject, and the Bill's existing provisions for the publishing of information about Government action of meet carbon budgets—the new clause is not acceptable to the Government. I very much hope that my hon. Friend will understand our reasons, and that, while recognising our support for all the hard work that he has done on all aspects of climate change throughout the Bill's passage, he will be willing not to press his amendment to a Division.

Photo of Gregory Barker Gregory Barker Shadow Minister (Energy and Climate Change)

We are disappointed that the Government have not shown greater leadership and urgency on the issue of mandatory corporate reporting. There is, however, much in the rest of this group of new clauses and amendments of which we are in favour. For instance, Government amendment No. 44 brings forward the Secretary of State's reporting date by one year, which is extremely sensible.

On the issue of mandatory reporting, we feel that the Government ought to take a real lead. Simply introducing a measure that allows at least four years—nearly as long as the entire duration of the second world war—before we can reach a point at which we will, or perhaps will not, introduce mandatory corporate reporting is not good enough. There was a good deal of merit in new clause 5, but we believe that there is a strong case for allowing the leading group of companies—perhaps a small group such as the FTSE 350, the majority of whose members already report their carbon emissions—to lead on a set of standards.

We have to accept that internationally accepted accounting standards are already changed regularly. It seems that we are allowing the perfect to become the enemy of the good. We would like Britain to start to blaze a trail by allowing our leading companies to have a clear and defined role, but the Government are failing to give that leadership.

It being Nine o'clock, Madam Deputy Speaker put forthwith the Question already proposed from the Chair, pursuant to Order [9 June].

Clause read the Second time, and added to the Bill.

Madam Deputy Speaker then put the Questions necessary to dispose of the business to be concluded at that hour.

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