Many in the rail industry may be aware that the government is likely to bring in mandatory carbon reporting next April for organisations listed on the London Stock Exchange, but few outside those directly affected will fully understand the impact this move will have on the wider rail industry.
As part of the UK Climate Change Act 2008, it is expected that companies listed on the London Stock Exchange will be required to report their greenhouse gas emissions alongside financial figures in their annual report. This piece of legislation went out for consultation last summer, with a final decision now imminent. Indications from the government point to mandatory reporting being required from April 2013, which will not give affected organisations that long to prepare. What’s more, companies will not only be required to report on their carbon emissions, but will also find it necessary to include figures for all six Kyoto recognised greenhouse gases.
The legislation will clearly galvanize into action those companies that are directly affected, although most will already be well prepared. But the implications for the rail industry go far wider.
If large companies listed on the London Stock Exchange are going to have to report on their carbon and greenhouse gases, then it is highly likely that they will be looking to their suppliers to track their emissions too. Many organisations are already requesting carbon footprint details are made available as part of the information required for compliance under the tendering process. In the near future, the awarding of contracts is likely to be weighted towards suppliers with a lower carbon footprint.
There are companies in the rail sector already moving in this direction. Network Rail recently announced that it is to award five per cent of all tender points on a supplier’s ability to meet its sustainability criteria. As of 1st December 2012, the rail infrastructure manager gives five percentage points towards the overall score to the most sustainable tender, with the remaining tenders awarded between zero and four percentage points depending on how well they meet the criteria. The rail operator is making sustainability count, commercially. But there are many other buyers, especially in the related construction sector, already applying such techniques to their procurement processes and attributing between 10 and 15 per cent of tender scores to sustainability targets.
For suppliers, the writing is on the wall. To compete and win business, they are going to have to take carbon reporting and sustainability very seriously.
Many suppliers are actively engaged in creating or acting upon a sustainability strategy. A growing proportion of companies are aware of the significance of sustainability in winning new business: they are integrating the processes for managing sustainability into those used to manage the supply chain by placing compliance on sustainability alongside health and safety, quality and the other key areas of potential supply chain risk. A collaborative approach to pooling this information and making it available to buyers across the rail community is widely seen as the best way of achieving visibility.
The rail industry is well placed, as a provider of transport services to the public, to present itself as a leader in adopting green initiatives and in driving carbon and wider sustainability reporting down through the multiple tiers of its supply chains. But, providing visibility on compliance will take a collaborative effort if it is not to add another layer of assessment and assurance on suppliers. The rail industry should use its collaborative structures to bring carbon and sustainability reporting data to buyers within the industry, and Link-up – the UK rail industry supplier qualification scheme, is best placed to support this.
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