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New climate change reporting requirements for large businesses

15 February 2022 / Insight posted in Technical guidance

Stakeholder expectation for transparency and information related to a business’s activity regarding climate change continues to increase. New reporting requirements, for accounting periods commencing on or after 6 April 2022, were approved in January 2022 and affect certain very large businesses.

Which businesses are affected?

The new reporting regulations apply to companies and limited liability partnerships (LLPs) which have:

turnover over £500 million, and
more than 500 employees.

These thresholds apply to a group. They also apply to an individual company or LLP that has no subsidiaries. Companies will be required to include climate-related disclosures, equivalent to the Task Force on Climate-related Financial Disclosures (TCFD) published by the Financial Stability Board, within their strategic report. Large LLPs that do not prepare a strategic report will be required to include the disclosures within their energy and carbon report.

What needs to be reported?

Descriptions of how the business considers climate-related risks and opportunities within its governance, strategy and risk management, as well as targets and metrics the business uses, need to be reported. Providing meaningful disclosures for stakeholders is the largest challenge of implementing the new requirements.

The regulations give businesses the option of excluding some of the disclosures if the directors or members consider them unnecessary for an understanding of their business. A clear and reasoned explanation of the directors’/members’ belief must be included. With stakeholders focusing on businesses’ climate-related impacts, we do not anticipate this exemption being widely adopted.

What needs to be done?

All businesses meeting the size criteria above must review their current processes, procedures and reporting and identify any gaps. They will also need to consider whether their organisation requires the support of external specialists or experts. Identifying this early will often result in robust and connected systems, which makes preparing the disclosures easier.

For more information, please contact one of the team below.