Corporate Reporting Standards and Requirements

Since 2022 most large UK companies and LLPs, including banks, insurers, pension schemes and asset managers and owners report climate-related financial information in their non-financial and sustainability information statement as part of their Strategic Report. Where no Strategic Report is being prepared, the information will need to be disclosed in an Energy and Carbon Report as part of the Annual Report. 

Companies and LLPs within scope have to disclose information on climate-related risks and opportunities, where these are financially material. The disclosures need to address how climate change is addressed in corporate governance; how it might impact strategy; how related risks and opportunities are managed; and the performance measures and targets applied in managing these issues. 

In September 2023 the Taskforce on Nature-related Financial Disclosures published its recommendations to complement the 2017 climate recommendations. The taskforce has started discussions with jurisdictions on adoption and has stated that the recommendations are suitable for organisations of all sizes, sectors and value chains. 

The recommendations set out the suggested disclosure framework and 14 desirable disclosures. They are consistent with the language, structure and approach of both the TCFD and the International Sustainability Standards Board (ISSB) to enable integrated climate- and nature-related reporting. 

Of the 14 recommended disclosures three deal with governance; four with strategy; four with risk and impact management; and three with metrics and targets. 

In January 2023 the EU Corporate Sustainability Reporting Directive (CSRD) entered into force. Companies subject to the CSRD will have to report according to European Sustainability Reporting Standards. These standards take a ‘double materiality’ perspective, in other words companies will need to report on how environmental and social issues might create financial risks and opportunities for the business and how the business might impact on the environment and society

The standards require 12 disclosures on issues such as climate, pollution, water and marine resources, biodiversity, circular economy, own workforce, affected communities and business conduct. The EU Corporate Sustainability Reporting Directive is closely aligned with the ISSB’s International Financial Reporting Standards (IFRS) S1 and S2. 

The UK government is currently working on its own corporate sustainability disclosure standards, which should also be closed aligned with (and based on) the IFRS. In July 2023 the UK Financial Reporting Council called for evidence on UK endorsement of IFRS S1 and S2. The UK sustainability standards might come into force in 2025. In January 2024 the UK Financial Reporting Council published its UK Corporate Governance Code 2024, updating the current 2018 code, covering companies with a premium listing on the London Stock Exchange. 

Transition Plan 

In April 2022 HM Treasury launched the Transition Plan Taskforce to develop “the gold standard for private sector climate transition plans”. In October 2023 the taskforce published its suggested disclosure framework, which is designed to be consistent with and builds on the climate-related disclosure standards (IFRS2) issue by the International Sustainability Standards Board (ISSB) in June 2023

The framework identifies five elements of a good practice transition plan: foundations (strategic ambition of the plan); implementation Strategy (actions taken to achieve its strategic ambition, as well as the resulting implications for its financial position, financial performance, and cash flows); engagement strategy (with regards value chain, industry peers, government, public sector, communities, and civil society); metrics and targets (used to drive and monitor progress towards strategic ambition); and governance (how is transition plan embedded in governance structures and organisational arrangements).