Alessandra McConville is an independent energy consultant specialising in the Carbon Reduction Commitment (CRC). She has advised many leading corporate companies and has worked for the Carbon Trust and Jones Lang LaSalle.
What do companies reporting under the CRC find most challenging?
Many companies find the lengthy and complex regulations (around 350 pages in total!) very difficult to understand and have consequently needed to employ specialist consultants. This complexity and the fact that the CRC payments are fairly small compared to total energy spend means that the CRC can be a fairly peripheral issue to many CFOs.
Unusually for environmental regulation, the CRC applies at highest parent company level – all companies owned by this parent need to report together. This proved interesting when it became apparent how complex and inter-connected UK businesses really are and how little these “sister-companies” actually deal with each other on a day to day basis. This meant that new processes had to be set up to gather data from all parts of the organisation.
For some organisations such as institutional investors, even determining which companies were included was an extended and costly exercise requiring legal advice.
Even for companies which had already collected carbon emissions data, the additional accuracy requirements of the CRC proved challenging and exposed issues with meter reading accuracy and data validation.
Was scrapping the CRC Performance League Table (PLT) the right thing to do?
In some respects the PLT was better than no table at all as it allowed the public to compare the carbon footprint of the country’s biggest companies. This was one of the original intentions of the CRC and created a certain amount of media interest.
The league table did try to take company growth into account – the so-called Growth Metric compared emissions/£1000 turnover. However it was felt to be an unsatisfactory measure by most participants. The table did not showcase participants’ actual efficiency.
In what way could companies reporting under the CRC be compared?
One possibility is for each individual sector to agree on what metrics to use, as currently happens with the Climate Change Agreements for certain manufacturing sectors. For example, service industries whose activities mainly occur in offices might agree to normalise their carbon emissions based on net lettable area in m² or square feet.
However, getting consensus among all companies in a certain industry is extremely difficult and is unlikely for the foreseeable future. In addition, the fact that CRC applies at highest company level makes this tricky, as there may be companies from many different sectors within the group structure.
How do you see the CRC changing in the future?
We already know how the scheme will be simplified for Phase 2. However I see a number of missed opportunities to simplify further. For example, the organisation rules are still very complex, and there are still rules about accounting for sales of large subsidiaries.
The Chancellor announced in the Autumn Statement in December that the CRC would be subject to review in 2016 and would be a high priority for removal when the public finances allow. It sounds like it has had a stay of execution but is still under a death sentence.