CRC Energy Efficiency Scheme and Sustainability Reporting Ready for a new environment?

1. CRC Energy Efficiency Scheme and Sustainability Reporting Ready for a new environment? 17 May 2010 Castle View House Steve Sweet

2. Setting the scene Key Public Sector Sustainability reporting requirements DEFRA Carbon Reporting Guidelines Other DEFRA Guidelines e.g. water, waste, etc Climate Change Act CRC Energy Efficiency Scheme FReM Sustainability Reporting Sustainable Development in Government (SDiG) Carbon Reduction Delivery Plans Sustainable Development Action Plans (SDAPs) Sustainability in the Government Estate (SoGE) targets Workshop on CRC and sustainability

3. Who is impacted? CRC Overview Highlights Source: ENDS / NERA • Mandatory carbon trading for c. 5,000 UK private & public sector organisations • All organisations using > 6,000MWh p.a. on electricity; Central Government regardless • Measures UK based CO2 emissions from fixed point sources i.e. electricity, gas, non-transport fuel • Grouping rules – rules on what is included within Central Government participant • Rules on who is responsible for certain types of energy use • Impacted sectors: • Central Government • Retailers • Telcos • Water companies • Local authorities (including schools) • Universities • Hospital trusts • Professional services • Engineering • Banks Scheme commenced April 2010 Workshop on CRC and sustainability

4. CRC Overview What is it and how will it work? • Ultimately a “cap and trade” scheme • April 2010 to April 2011 – “reporting only” year • Organisations must prepare annual reports and evidence packs to record energy use • Second and third compliance years – allowances bought for £12/tonne CO2 (uncapped) • Performance league table of all companies is published at end of each year • Cash is recycled to participants based on league table performance – early action metric part of performance criteria • Capped phase 2013 will be full auctioning – variable (and rising?) carbon price Year (ending March) Bonus or penalty Percentage bonus or penalty is based on organisation’s position within performance league table: Level of bonus or penalty increases by 10% each year until 2015 +/- 10% 2011 +/- 20% 2012 +/- 50% 2015 Workshop on CRC and sustainability

5. CRC Risks and opportunities overview The CRC may bring both Non-compliance fines Reputation Cashflow CRC Energy Efficiency Scheme Efficiency savings Bottom line impact Accounting implications Workshop on CRC and sustainability

6. Sustainability Reporting Context of reporting in the private sector • 62% • Of those companies in the Top 100 European companies producing reports gain assurance 62% Of those companies in the Top 100 European companies producing reports gain assurance Source: Deloitte 64% Of FTSE 100 CR reports seek some form of 3rd party assurance Source: Deloitte (2009) 85 Of FTSE 100 companies produce comprehensive CR reports Source: Deloitte (2009) Global reporting growth between 1992 and 2007 from 27 annual reports to 2,500. Source: Corporate Register Workshop on CRC and sustainability

7. Setting the scene Key Public Sector Sustainability reporting requirements DEFRA Carbon Reporting Guidelines Other DEFRA Guidelines e.g. water, waste, etc Climate Change Act CRC Energy Efficiency Scheme FReM Sustainability Reporting Sustainable Development in Government (SDiG) Carbon Reduction Delivery Plans Sustainable Development Action Plans (SDAPs) Sustainability in the Government Estate (SoGE) targets Workshop on CRC and sustainability

8. Amendments to FReM - Sustainability Reporting • HM Treasury Executive Briefing and Draft Guidance (August 2009) • Aim is to provide the reader of public sector annual reports with some confidence that information published is consistent and comparable between both different public sector bodies and between different accounting periods for the same body. • Requirements overview (based on the Draft Guidance): • Will be required to include a section in Annual Report covering performance on sustainability during the year. • Reporting to include those entities over which the department has budgetary control i.e. to directly match the departmental accounting boundary (N.B. This could change to an operational control boundary in the future) • Must include: • Commentary of performance in the report year • Overview of forward/future plans • Table of financial and non-financial information • Initially sustainability reporting required in three main areas: • Emissions • Waste minimisation and management • Finite Resources • Inclusion of relevant targets and key performance indicators (KPIs) • Timing is likely to be a dry run in reporting year 2010-11 with full, formal, • reporting in 2011-12 Workshop on CRC and sustainability

9. Amendments to FReM - Sustainability Reporting Minimum and best practice requirements Source: Draft HMT Guidance: Sustainability Reporting in the Public Sector Workshop on CRC and sustainability

10. Example FReM Sustainability Report Component Year on year trend data Non-financial indicators Workshop on CRC and sustainability Performance commentary Forward plans Financial indicators Target(s)

11. Sustainability Reporting: Risks and opportunities Examples, overlaps with CRC Audit Reputation with stakeholders HMT Sustainability Reporting Efficiency savings Improved environment performance Workshop on CRC and sustainability

12. CRC and Sustainability reporting challenges A central role for Finance ... discuss. Understanding boundaries CRC registration Measurement and evidence maintenance Reporting Governance and responsibilities Internal / external assurance CRC financial management Allowance monitoring and trading Improving environmental performance Workshop on CRC and sustainability

13. Contact details and further information http://thegfp.treasury.gov.uk/resources/gasette/Gasette102.pdf ssweet@deloitte.co.uk 0207 007 7692 Workshop on CRC and sustainability