The UK has some of the world’s most advanced and complex sustainability reporting requirements for corporations. That’s great news for the country’s mission to become a fairer and more sustainable society, but it puts a lot of obligations on you.
As the evolution of UK sustainability regulations can be difficult to track, we’ve prepared this guide to summarise the main things you need to know in 2024.
1. Strategic reporting (Companies Act 2006)
Section 176 of the Companies Act 2006 requires large companies to include a statement in their strategic report which describes how they have performed their duty to promote “the success of the company for the benefit of its members as a whole”.
However, companies also need to describe their performance in regard to other matters, such as the interests of employees, fairness between company members, and “the impact of the company’s operations on the community and the environment.”
1a. Strategic reporting: Climate-related financial disclosures
In 2022, the government amended the Companies Act 2022 to include mandatory climate-related financial disclosure requirements for certain companies and LLPs. The disclosures are required as part of the strategic report’s non-financial and sustainability information (NFSI) statement
The requirements are based on the Task Force for Climate-Related Financial Disclosures (TCFD) recommendations, which encourage disclosures of governance, strategy, risk management, and metrics and targets.
2. Directors report: Streamlined Energy and Carbon Reporting (SECR)
Introduced by the government in April 2019, SECR requires certain UK-based companies to report on their energy use, carbon emissions, and related energy efficiency actions within their annual financial reports.
Three groups of businesses must comply unless they meet certain exemption criteria:
- quoted companies of any size that are already obliged to report their emissions under the changes to the Companies Act that came in 2013.
- unquoted companies incorporated in the UK that are ‘large’ (see below)
- ‘large’ LLPs have to prepare and file an ‘Energy and Carbon Report’
. Companies are large if they meet at least two of the following criteria in a reporting year:
- turnover of £36 million or more;
- a balance sheet of £18 million or more; or
- 250 employees or more.
3. Department for Energy Security and Net Zero Streamlined TCFD Reporting
Formed in 2023, the Department for Energy Security and Net Zero is in charge of the energy portfolio and regulatory oversight of sustainability previously held by the Department for Business, Energy and Industrial Insight. These disclosure requirements a description of:
- the company’s governance arrangements in relation to managing climate risks and opportunities
- the main climate-related risks arising in connection with the company’s operations
- the potential and actual impacts of the main climate-related risks
- how the company identifies, assesses and manages climate-related risks and opportunities.
Future reporting requirements
UK Sustainable Disclosure Standards
The upcoming UK Sustainable Disclosure Standards (UK SDS) is a set of measures aligned with the International Sustainability Standards Board’s Sustainability Disclosure Standards.
The UK SDS is expected to unify some of the reporting requirements we’ve talked about in addition to:
- S1 and S2 requirements as set out by the International Financial Reporting Standards. This includes scope 3 emissions that an organisation indirectly affects in its value chain.
- Additional non-climate sustainability and ESG reporting disclosures.
- A detailed transition plan outlining how the company will reach Net Zero.
While the UK SDS has yet to be finalised, it is expected to be published in 2024 or 2025.
Do you need help with your sustainability reporting? We help companies manage their sustainability reporting and compliance so you can focus on your business.