By Nicky Sinker
With the pace of change in ESG regulatory reporting requirements it is interesting to see that this is still an area that often falls through the cracks. It is increasingly important to have someone in the firm horizon scanning for changing ESG regulations and staying up to date with developments.
The ESG reporting landscape can be challenging to navigate. However, a lot of reporting requirements are still voluntary, albeit firms are increasingly being asked by stakeholders, such as clients and investors, to report via different platforms e.g. CDP or Ecovadis to name but a few.
Investors and other stakeholders are asking regulators across the globe to focus on implementing enhanced sustainability reporting to provide more detail and greater consistency.
The UK Climate Change Act committed to a 100% reduction of emissions over 1990 levels by 2050. As we get closer to this deadline it is therefore expected that we will see the pace of regulation in this area continue to increase. In the UK, the most recent development was the publication of a new framework for the development of UK sustainability reporting standards (SRS) and an implementation update on sustainability disclosure requirements, which occurred in May this year.
The UK SRS will be created through the ISSB (“International Sustainability Standards Board) developing IFRS (International Financial Reporting Standards) which will then be endorsed by the Secretary of State. These will then be implemented through UK legislation and the FCAs (Financial Conduct Authority’s) rules for listed companies. At present there are two IFRS standards which have been issued by the ISSB: IFRS S1 “General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 “Climate related disclosures).
The UK government is aiming to make endorsement decisions on these two standards by Q1 2025. This will include details on size and type of companies that might be required to report using SRS and the timetable. IFRS standards replace TCFD (Taskforce on Climate Related Financial Disclosure) requirements for firms to disclose climate-related risks and opportunities in their financial filings.
In the EU, recent developments include the adoption of the Corporate Sustainability Due Diligence Directive in May and the Corporate Sustainability Reporting Directive.
So which regulatory requirements should you be mindful of? The following gives an overview of those mandatory requirements which are impacting firms in the UK across sectors:
| Regulatory Requirement | Companies impacted | Overview | Timeline |
| SECR (Streamlined Energy and Carbon Reporting) | Firms which meet any two of the following three criteria: · Over 250 employees · Over £36m turnover · Over £18m balance sheet | Reporting in directors report. Energy and emissions reporting covering scope 1, 2 and select scope 3 with energy efficiency narrative. | Annual requirement |
| ESOS (Energy Savings Opportunity Scheme) | Companies which meet either or both of the following criteria: 1. Over 250 employees 2. Revenue over EUR50m and balance sheet over EUR43m | Energy usage. Verification required by an ESOS lead assessor. Site visits. | Reporting every 4 years via the Environment agency website. |
| CSRD (Corporate Sustainability Reporting Directive) | Large companies based in the EU (meeting 2 of 3 criteria – over 250 employees, over EUR 20m balance sheet and over EUR40m revenue), credit institutions/captive insurance companies, large non-European groups with over 150m in the EU | Reporting included in annual report. Requires annual verification by statutory auditor or accredited audit firm. Looks at double materiality – impact organisation has or impact on the organisation. Qualitative and quantitative measures across a range of topics including climate change, pollution, biodiversity, own workforce, affects communities, consumers and business conduct. Scope includes value chain so companies need to include their scope 1, 2 and 3 emissions. Requires the setting of targets, including timelines for achieving these. | Annual Requirement. First phase 2025, with impacted companies coming in in different phases depending on category |
| CBAM (Carbon Border Adjustment Mechanism) | Applies to companies importing certain products into the EU (aluminium, iron, steel, mineral products (cement), electricity, fertilisers, inorganic chemicals and hydrogen). | Quarterly reporting until 1st January 2026 when moved to annual. Reporting of embedded emissions in products imported into the EU.
| Quarterly/Annual. |
In addition to mandatory reporting, there are a host of voluntary reporting options. However no matter how you are reporting, the important first step if we are to achieve our net zero ambitions is to start measuring your impact and use this information in order to drive meaningful and prioritise actions you take in your business.
