Mandatory sustainability disclosure is here!

For many years, corporate sustainability disclosure was voluntary. Companies could choose whether to disclose sustainability performance, and how to do so.

That is no longer the case!

Across the globe, governments and regulators are introducing regulations to make sustainability disclosure mandatory.

This trend has emerged partly due to recognition of the critical importance of a sustainable business approach, but also as a response to greenwashing claims around sustainability performance.

A brief summary of some of the key mandatory sustainability disclosure requirements in the UK and Europe are set out below.

UK Mandatory Sustainability Disclosure Requirements

• FCA requirement for TCFD-aligned disclosures
  • Since January 2021, the UK Financial Conduct Authority (FCA) has required UK premium listed companies and standard listed companies to include a statement in their annual financial report setting out whether they have made disclosures consistent with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
  • In January 2022, the FCA introduced similar TCFD-aligned disclosure rules for asset managers and certain asset owners in the ‘ESG Sourcebook’. These rules came into force for the largest asset owners on 01 January 2022 and for smaller firms from 01 January 2023.
• Climate-related Financial Disclosure Regulations 2022
  • The UK Government introduced the Climate-related Financial Disclosure Regulations in January 2022, which require certain publicly quoted companies, large private companies and Limited Liability Partnerships to incorporate TCFD-aligned climate disclosures in their annual reports. Qualifying companies have been required to provide climate disclosures since 6th April 2022.
• The Streamlined Energy and Carbon Reporting (SECR) regulations
  • The SECR regulations require quoted UK companies and large unquoted companies incorporated in the UK, to report on their global energy use and for large businesses to report their UK annual energy use and greenhouse gas emissions  in their annual Directors’ Report. Impacted companies have been required to make disclosures since 01 April 2019.

EU Mandatory Sustainability Reporting Requirements

• Sustainable Finance Disclosure Regulation (SFDR)
  • Largely effective from 10 March 2021, the EU SFDR requires asset managers such as Alternative Investment Fund Managers (AIFMs) and Undertakings for the Collective Investment in Transferable Securities (UCITS) managers to provide prescript and standardised disclosures on how ESG factors are integrated at both an entity and product level.
• EU Taxonomy
  • The EU has set a requirement for providers of financial products, including pension providers, to disclose, for each investment, fund or portfolio, what share of underlying investments meet the definition of environmentally sustainable based on its contribution to six environmental objectives.
  • The disclosure requirements apply from 01 January 2022 in relation to the two climate change – related objectives, and from 01 January 2023 for the other four environmental objectives.
• Corporate Sustainability Reporting Directive (CSRD)
  • Adopted by the European parliament in 2022, the Corporate Sustainability Reporting Directive (CSRD) will require all large EU companies, to disclose sustainability performance in line with the European Sustainability Reporting Standards (ESRS).
  • Companies currently subject to the Non-Financial reporting Directive will need to report to CSRD/ESRS from 01 January 2024. Other large companies and SMEs will need to comply commencing 2025 and 2026 respectively.

FuturoFirma can help you robustly meet your sustainability disclosure requirements

We have developed strong familiarity and understanding of the various mandatory sustainability disclosure regulations.

Our data and evidence-driven approach means that we can help you meet the applicable disclosure requirements in a way that is credible, auditable and resonates with stakeholders.

Give us a call and we will be very happy to discuss what disclosure requirements are applicable to you, and how we can support you in meeting them.