What are the new climate disclosure rules for UK companies?

More than ever, businesses are coming under scrutiny for their environmental policies.

The direction of travel is very clear. On the horizon in many of the world’s developed and emerging economies is paradigm-shifting legislation that will require financial businesses to make detailed climate-related disclosures.

The aim of this article is to give an update on the current legal position for UK businesses, where climate change has moved from the fringes to centre stage.

UK lawmakers are drawing up new rules which will require listed companies to publish plans laying out a pathway to reduce their carbon emissions to net zero by 2050. That legislation is expected to come into force in 2023.

As part of this, the companies will have to report every year on what their carbon emissions are. Fail to do so and they risk being fined.

Consumers will be able to look up a financial company’s carbon footprint. Therefore, these companies will need to ensure they are walking their talk, or they will be vulnerable to accusations of greenwashing. Innovative companies will be able to show that they are cleaner than the competition.

These transition plans come on top of existing requirements for large companies to publish information about the climate risks of their business operations and investments. The UK was the first country to commit to making climate reporting aligned with the Task Force on Climate-Related Financial Disclosures (TCFD) mandatory.

For the uninitiated it can feel like a spaghetti soup of regulations, so here’s a rundown of some key reporting requirements so far this year.

• UK pension schemes are to measure and publish sustainability information from October 2022.
• Mandatory climate-related financial disclosures are now required by publicly quoted companies, large private companies, and LLPs. This applies to reporting for financial years starting on or after 6th April 2022.
• FCA Climate-Related Financial Disclosures
• Applies to issuers of standard listed equity shares and Global Depositary Receipts (GDRs); issuers of standard listed shares or equity shares represented by certificates; and to FCA-regulated asset managers and asset owners, including life insurers and pension providers.
• Applies from January 2022
• Asset managers and asset owners will have a phased implementation, with the rules initially applying to the largest firms and coming into effect for smaller firms one year later.
  

Currently, the finance sector is the focus of the changes because it is regarded as a key engine for tackling the challenge. However, it is anticipated that TCFD-aligned disclosures will be fully mandatory across the UK economy by 2025.

Many firms are getting a head start on the impending legislation by getting organised now. As a leading consultancy, we are seeing growing interest from clients that want to get ahead of the curve but need help making the transition to an eco-friendlier world. We believe our technological innovation, FutureTrack, will be critical in the battle against climate change.

We’ve said it before, and no doubt we’ll say it again, but the need to shrink carbon footprints presents opportunities, as well as risks. Sustainability is one of the defining issues of our generation, and people are more likely to buy into a brand that is making a meaningful effort. In other words, the carrot is just as powerful as the stick.

We provide advice and support for businesses as they prepare their net zero plans ahead of independent scrutiny and verification. Many companies have ambitious sustainability targets, but realistically the only way they will get there is by working with next-generation technology like FutureTrack. Our focus is on solutions, not problems.

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To request a free demo of FutureTrack and start your journey to net zero, click here.