Environmental reporting
The importance of reporting on companies’ effect on the natural environment, or vice versa, has increased immensely over the past decade. Large companies should be looking at this and considering how their business model might need to change in the future to accommodate the low carbon transition and environmental change effects. Having considered it, companies then need to explain their approach to the workforce, customers and investors. The annual report is a key platform for communication.
Environmental reporting takes a number of forms in the annual report: in ESG sections; energy and carbon/greenhouse gas reporting and within risks; the non-financial reporting statement; Section 172 and business model sections; and reporting based on the Task Force on Climate-related Financial Disclosures (TCFD) framework, whether in accordance with the Listing Rules and/or the Companies Act regulations. Many listed companies also produce dedicated sustainability or Corporate Social Responsibility (CSR) reports. Navigating the changing mix of regulation, and investor, customer and workforce demands to satisfy expectations, minimise duplication, achieve year-on-year consistency and present a consistent and clear picture (without being accused of greenwash) is a continuing challenge.
Three of the mandatory components of are highlighted below:
Energy and carbon reports
Energy and carbon reports are required of all large companies, though with exemptions for some very low energy users. Requirements differ between quoted and unquoted companies but those for unquoted companies, though nominally simpler, can leave an incomplete picture.
As from 1 January 2021, premium listed companies are obliged to report under the TCFD framework for the first time, and as from 1 January 2022 so will standard listed companies. Some companies have been doing this voluntarily for a number of years and this number has increased recently. This change has been introduced through the Listing Rules, but it is now underpinned by regulation in the Companies Act 2006, which also captures AIM-listed companies and certain larger unlisted companies.
Non-Financial Information Statement
UK and European company legislation was introduced in 2017 to comply with the European Commission’s Non-Financial Reporting Directive (NFRD) to require public interest entities (PIEs) with more than 500 employees to report on environmental matters as well as social, anti-bribery and corruption and employee issues within a Non-Financial Information Statement (NFIS). UK subsidiaries of European parents used to be able to take advantage of an exemption from preparing a NFIS. However, as a result of the UK’s exit from the EU, this exemption is no longer available, thereby requiring some companies to report under this legislation for the first time from 1 January 2021.
The NFRD, on which the UK legislation is based, has recently been heavily revised to make it substantially more detailed and prescriptive. The UK government is committed to a similar path, however, watch this space for the UK proposals when they become available.
How we can support you
We can help you develop, define and disclose your environmental policy, decide which issues are material and why, and help you develop a suite of performance indicators and milestones to measure progress and credibly demonstrate achievement of medium and long-term targets. We can advise on achieving compliance with the Listing Rules and the Companies Act regulations, providing the information investors want and expect, presented as a coherent story.
This can include:
- Guiding you through the regulatory requirements;
- Reviewing your suite of KPIs for effective measurement of key environmental issues; and
- Holding workshops to bring together reporting on key initiatives and major uses of energy, water or other resources.
Contact us
If you would like to contact us, please use the link below and a member of the Accounting Technical Services team will be in contact.
National contact
Related pages
TCFD
The TCFD disclosure requirements became effective for UK premium listed companies at the start of 2021 and will do so for standard listed companies from January 2022. New regulations will also become effective from April 2022 which will also capture some unlisted companies. Here we look at what it means for companies to report using the TCFD framework.
Streamlined energy and carbon reporting (SECR)
The UK government has made it mandatory for large unquoted businesses incorporated in the UK to report on their energy use and carbon emissions.
Narrative reporting
Pressure for greater transparency from shareholders, not only in the financial statements, but in explaining performance in detail and in more forward-looking areas like strategy and plans for the future is not new.