Environmental Natural Capital

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Medium and small enterprises represent 99.9% of the UK's local and national economy and have the most potential to deliver financial and environmental benefits - in all sectors including service sectors and manufacturing.

2006 UK Companies Act

In 2013 an amendment in the 2006 UK Companies Act requires all UK companies (except small companies) to include an environmental report in their annual reports.  Listed companies are also required to publish disclosures on their greenhouse gas emissions in their Directors’ Report.

This requires disclosures on environmental matters, with key performance indicators

Natural Capital Committee

The UK Government made a commitment in 2011, that this should be “the first generation to leave the natural environment of England in a better state than we found it" (Nb1)

Achieving this means looking after our environment – our natural capital – and making the most of opportunities to protect and improve it.

In 2012, the Natural Capital Committee (NCC) was set up to report to the UK Government and advise as  an independent body, on how to ensure ‘natural wealth’ is valued and managed efficiently and sustainably.  

The Natural Capital Committee has produced several reports to the government on the 'State of Natural Capital'.    It's also called on the Office for National Statistics to integrate the state of the country's natural assets, also known as "natural capital" into mainstream accounting.

The Companies (Miscellaneous Reporting) Regulations 2018

Large companies are required to include a statement in their strategic report describing how the directors have had regard to the matters in section 172(1)(a) to (f) of the Companies Act 2006.

Duty to promote the success of the company

Companies with more than 250 UK employees are required to include a statement as part of their directors’ report summarising:-

172(1) of the Companies Act

(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard to:-

(a) the likely consequences of any decision in the long term

(b) the interests of the company's employees

(c) the need to foster the company's business relationships with suppliers, customers and others

(d) the impact of the company's operations on the community and the environment

(e) the desirability of the company maintaining a reputation for high standards of business conduct, and

(f) the need to act fairly as between members of the company.

Very large private and public unlisted companies are required to include a statement as part of their directors’ report stating which corporate governance code, if any, has been applied and how.

This applies to all companies that satisfy either or both of the following conditions:

• more than 2,000 employees;

• a turnover of more than £200 million, and a balance sheet of more than £2 billion.

Frequently Asked Questions

Q1. Does the Government have a preferred corporate governance code for large private companies?

The Government hopes that the corporate governance principles for large private companies  developed by James Wates and a coalition group will be widely adopted.

Nothing in the Wates Principles overrides or is intended as an interpretation of directors’ duties as set out in the Companies Act 2006. The duties of directors are set out in sections 170-177. These include, in section 172, the duty of a director to promote the success of the company for the benefit of its members as a whole. This duty applies to all directors, regardless of whether the company is public or private, a parent or a subsidiary, large or small.

Q1. What are the consequences of non-compliance for a company within scope?

The regulations add to the matters that companies already need to report on in their strategic report, directors’ report and directors’ remuneration report. As for these existing requirements, if the directors of a company knowingly do not comply with any of the required provisions, or are reckless as to their compliance, they will be committing an offence.

Q2. When will companies have to start complying with the new reporting obligations?

The new requirements apply to company reporting on financial years starting on or after 1 January 2019.

This means that, with one exception, reporting on the new requirements will begin in 2020, covering activities undertaken and information collected in 2019.

The exception is the requirement for companies to illustrate the impact of share price increases on executive pay outcomes which will apply to any new remuneration policies brought forward by companies from 1 January 2019. This timetable aligns with the Financial Reporting Council’s plans for bringing the recently revised UK Corporate Governance Code3 into effect.

Q3. Why do the regulations add new employee, customer and supplier reporting requirements to the directors’ report when these could be covered in the strategic report section 172(1) statement?

The new directors’ report requirements ensure that company reports include information about these important aspects of the section 172(1) duty even where the directors do not judge the information to be of sufficient strategic importance to be included in the strategic report that year. They also give companies the opportunity to provide more information, for example, about how they are meeting the new UK Corporate Governance Code stakeholder and employee engagement provision

Q4. Where should the statement be published?

The statement must be included in the directors’ report (or alternatively in the strategic report using the flexibility in section 414C(11) of the Companies Act 2006) and published on a website maintained by or on behalf of the company.

At Country Landscapes we can help you meet your environmental responsibilities and ensure your business gains key benefits by dove-tailing your environmental responsibilities e.g under your Environmental Management System e.g. ISO14001, so that it works for you from the ground upwards!

 

6 Business BENEFITS of utilising your Natural Capital

 

Terms of Reference

 

(Nb1) H.M. Government (2011) The Natural Choice: Securing the value of nature (Natural Environment White Paper), CM 8082, The Stationery Office, London: https://www.gov.uk/government/publications/the-natural-choice-securing-thevalue-of-nature

(2) The NCC’s third State of Natural Capital Report; The state of natural capital: protecting and improving natural capital for prosperity and wellbeing (2015): https://www.gov.uk/government/publications/natural-capital-committees-thirdstate-of-natural-capital-report

(Nb3) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/755002/The_Companies__Miscellaneous_Reporting__Regulations_2018_QA_-_Publication_Version_2__1_.pdf

 

 

 

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