Carbon Reduction Commitment clock ticking for UK companies to avoid penalties

April 28th, 2011 by PwC

UK companies could add between five to eleven percent to their energy bills if they don’t submit their first Carbon Reduction Commitment (CRC) report right first time, according to analysis by PwC of the potential costs of business getting their reporting wrong.

Over 3,000 organisations, mostly with energy bills of more than £500,000, are affected by the scheme, and must submit their first reports by the 31 July 2011. The scheme relies on companies’ ability to gather the raw numbers related to their usage of electricity, gas, diesel and coal across all of their sites in a CRC Footprint Report and a CRC Annual Report. The report must be verified by the company and can be spot audited by the Environment Agency.

Henry Le Fleming, carbon reporting specialist at PwC, said “Registration last year was the relatively easy part. Now the hard work begins. Many companies won’t have stress tested their processes, systems and controls for gathering the data. If they have large numbers of sites with shared responsibility for energy bills it could be more difficult than expected.”

The regulator’s powers are wide-ranging. Failing to submit reports on time will earn a £5,000 fine for each report, plus £500 a day every day the report is outstanding. Inaccuracies in reporting can attract fines of £40 a tonne for under or over reporting. For an organisation spending £20m on energy, a 20% mistake would result in fines of £1m. A company with a £1m energy bill which was 20 days late in submitting reports, and made a 20% error in the numbers in its annual report, would face fines of just over £80,000.  Download a PwC paper for further demonstrations of potential fines.

Yet despite this, analysis by PwC shows that a significant number of companies who will be affected by CRC may not be adequately prepared. In a recent PwC survey of over 160 large public and private companies 67% reported that there were CRC participants, yet only 21% said they were currently reporting carbon emissions.

Henry Le Fleming said “while it’s not certain how strictly they will be enforced, with late reporting or incorrect data both attracting fines, the clock is ticking for companies to get this right over the coming weeks before the deadline.”

The reports due in July also offer companies the chance to control the costs of the CRC. The CRC Footprint report will define the sources reported annually for the next three years. Using this effectively will enable some companies to reduce exposure by 10%, as the sources cannot be changed for the next 3 years.

Henry Le Fleming said “However the regulator chooses to apply fines, this is the year to get it right – there is a financial upside as well as a downside. Added to that is the published league table which will create attention for those companies without a track record on carbon reporting. The countdown is on.”



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