Business energy and carbon compliance: what’s new in 2022?

More and more businesses are being held to account on climate through mandatory disclosure – and this set to continue into 2022.

Here’s our round-up of the carbon and energy reporting changes businesses can expect to see next year.

1. Mandatory TCFD reporting for large companies

In 2022, over 1,300 of the largest UK-registered companies and financial institutions will need to start disclosing climate-related financial information on a mandatory basis – in line with recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD).

TCFD-aligned reporting is already mandatory for premium-listed companies, but from 6 April 2022 the rules will extend to many of the UK’s largest traded companies, banks and insurers, as well as private companies with over 500 employees and £500 million in turnover.

Mandatory TCFD reporting paves the way for another acronym: SDR, short for Sustainability Disclosure Requirements. These were announced by the Chancellor in June 2021 and will go even further than TCFD. Exact details are subject to consultation, but for what we know so far, you can read Project Net Zero’s short guide to the Sustainability Disclosure Requirements.

Key dates: From 6 April 2022, TCFD-aligned disclosure will be mandatory for 1,300 of the largest UK-registered companies and financial institutions.

2. Will ESOS be extended to medium sized businesses?

This year the government announced it will be shaking up the Energy Savings Opportunity Scheme (ESOS), including introducing public disclosure of data and widening the scope to medium sized businesses. BEIS recently consulted on scheme changes that would improve the quality of audits and increase uptake of energy efficiency measures. It also wants to require businesses to include an assessment of actions needed for them to achieve net zero by 2050.

Key dates: Most of the changes proposed are being considered for the current cycle (ESOS Phase 3), which runs from 2019 – 2023. We’ve written a summary of the main proposals being considered to strengthen ESOS – more will become clear in 2022 when the outcome of the consultation is published.

3. SECR: prepare for widening of scope

Streamlined Energy and Carbon Reporting (SECR) came into force in 2019, so for most companies it will be a trodden path, making the reporting process easier next time around.

As mentioned in the response to a recent consultation on mandatory climate-related financial disclosures, the government is considering whether to implement changes to SECR by 2023.  Companies would be wise to prepare themselves for more ambitious requirements over the next couple of years, to drive greater climate action ahead of the UK’s net zero target.

One area in which SECR rules might change is reporting on emissions scopes. SECR largely focuses on just Scope 1 and 2 emissions (one type of Scope 3 emissions is compulsory to report). However, many businesses are choosing to voluntarily report on Scope 3 emissions – those created by their value chain. Scope 3 is a hot topic right now as these emissions make up the bulk of those associated with the average large business… so it’s likely that Scope 3 reporting will become compulsory in the future.

Key dates: SECR changes may be implemented by 2023, but companies are advised to consider going beyond the minimum requirements now.

4. Performance-based energy ratings for large buildings

If your business owns, or is the sole tenant of a large building, you may soon be required to rate its energy performance in-use.

The government is consulting on a framework for rating the energy and carbon performance of commercial and industrial buildings above 1,000m²; annual ratings and mandatory disclosure will be the first step.

The consultation was launched in March 2021, and we’re waiting on the outcome, but the government’s proposal is to introduce the rating in three phases over this decade.

Phase one will apply to the office sector only, and may start with a soft launch in April 2022. This would require all appropriate sites to register and produce a rating within the first 12 months.

Key dates: Office buildings may be impacted as soon as April 2022. Other sectors will be brought into the scheme in later phases.

To learn more, read our guide to the new energy performance ratings for large commercial and industrial buildings.

5. UK ETS: changes to the emissions cap

The UK Emissions Trading Scheme launched in 2021, replacing the UK’s participation in the EU ETS when the UK left the EU. The scheme puts a cost on carbon pollution to encourage polluters to reduce the amount of greenhouse gases they emit.

The UK government and devolved administrations have committed to reviewing and consulting on the UK ETS’s cap and setting a trajectory for it that is consistent with net zero. In 2022, there are plans for a consultation on the trajectory for the scheme’s cap.

Changes to the cap will then be implemented in 2023, or 2024 at the latest. The government says it also intends to continue its review of free allocation in the UK ETS, which started with a call for evidence in spring 2021.

Key dates: The government is consulting on a net zero trajectory for the UK ETS cap in 2022.

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