A new law forcing businesses to report their greenhouse gas emissions for the first time will take effect from October, 2013.

It will make it compulsory for companies to include emissions data for their entire organisation, including cars and vans, in their annual reports.

Employees using their own cars on business will not be included.

Initially, the new legislation will only affect 1,100 businesses listed on the main market of the London Stock Exchange.

The new regulations will then be reviewed in 2015, before ministers decide whether to extend the approach to all large companies from 2016 (Fleet News, July 5, 2012).

However, environmental experts believe that the new rules could be open to interpretation, with leased vehicles being treated differently to those owned by the company.

Gary Davis, operations director at carbon accounting specialist Ecometrica, said: “In the case of assets such as vehicles that may be purchased, leased or hired we would recommend that emissions should be included regardless of the means of financing.

“However, given the non-prescriptive nature of the regulation it is likely that businesses will take varied interpretations.”

The Department for Environment, Food and Rural Affairs (DEFRA) has issued guidance on how companies should report their greenhouse gas emissions.

It says that businesses need to report on their greenhouse gas emissions from activities for which they are responsible.

However, while it clearly stipulates that vehicles owned by the company must be included, it appears to leave the door ajar as to whether it has to do the same for certain leased assets.

A question of ownership

The greenhouse gas reporting protocol says that for company vehicles obtained under a finance or capital lease, the lessee is considered to have ownership and both financial and operational control of the leased asset. Therefore, the emissions should be reported.

However, under an operating lease, the lessee is considered not to have ownership or financial control, but to have operational control of the leased asset.

As a result, it says that whether a company reports on these emissions depends on how it defines its ‘organisational boundary’.

DEFRA says that a company’s organisational boundary should be defined by the areas over which it has financial or operational control, which would suggest that all cars and vans should be included.

“It may be some time before consistent accounting practices are widely adopted,” warned Davis. “But it would not be a surprise if some companies considered changing their accounting policies to achieve emission reductions.”

Nevertheless, recent research from GE Capital reveals how UK fleets are already driving down emissions and are among the greenest in Europe.

British car fleets reduced their CO2 emissions by 17.26g/km between 2008 and 2012. While this reduction is lower than other European markets, UK fleets were the second ‘greenest’ in 2008 (with an average of 144.8g/km) and were still among the most efficient in 2012, with average emissions of just 127.5g/km.

The average emissions produced by British fleets were consistently lower, in absolute terms, than the European average in all five years considered in the GE study.

UK companies  adopted green car policies relatively early and remained focused on CO2, although the gap between the UK and other European countries has progressively narrowed.

For example, the Benelux region has achieved a remarkable reduction in CO2 emissions, cutting the average carbon output by 36 grams per car per km from 159g/km in to 2008 123g/km. Top performance goes to France with 122.17g/km.

Alex Barbereau, EU accounts and consultancy director, GE Capital EMEA, said: “This is reflective of the improved fuel efficiency of new vehicles and also an on-going focus on greener car policies.”

 

 

More articles on: