The UK has earned a position as the first country in the G20 to enshrine a new climate reporting framework into law. Based on the framework of the Taskforce for Climate-Related Financial Disclosures (TCFD), this new regulation will expand upon an earlier regulation asking many companies to report emissions data (SECR). The new regulation goes further, requiring companies to report on their climate strategy and risk management in response to climate change’s impact on their business.
The UK’s largest listed companies begin reporting April 2022 and a roadmap to include other larger and listed companies is drafted that will progress into 2025.
What does ‘SECR’ stand for?
Streamlined Energy and Carbon Reporting (SECR) has been in effect in the UK since April 2019 and is required from large and listed UK companies and Limited Liability Companies.
The purpose of the SECR framework “is intended to encourage the implementation of energy efficiency measures, with both economic and environmental benefits, supporting companies in cutting costs, and improving productivity at the same time as reducing carbon emissions”.
It requires companies to measure and submit data for their emissions Scope(s) 1 and 2. Scope 3 is optional, but strongly encouraged (see resources, below, for details on these scopes).
What does ‘TCFD’ stand for?
The Taskforce on Climate-related Financial Disclosures (TCFD) was formed by the Financial Sustainability Board (G20) in 2017 in a bid to encourage the uptake of unified climate risk and opportunity measurement and disclosure.
They developed a reporting framework that focuses on four key areas: governance, strategy, risk management, and metrics and targets. Since then, the TCFD framework has become widely adopted around the world.
What is the difference between ‘SECR’ and ‘TCFD’?
While SECR is about reporting figures (emissions data), the TCFD framework asks companies to truly understand their emissions data and react to it.
By evaluating and understanding their company’s environmental risks and opportunities and developing a strategy around them, businesses are compelled to increase their environmental ambitions and accelerate their actions.
How will it work?
In October 2021, the UK Government confirmed that some of the largest UK listed companies will have to provide TCFD reporting from April 2022. This makes the UK the first G20 country to enshrine the framework into law. [Source]
The UK Government has stated that “by applying a common set of requirements aligned with the TCFD recommendations, UK companies will be provided with a uniform way to assess how a changing climate may impact their business model and strategy, and ensure they are well placed to harness opportunities from the UK’s transition to net-zero”. [Source]
While some of the largest UK listed companies are reporting from 2022, the UK taskforce behind the mandate has also published a tentative roadmap which implies that by 2025 more listed companies and most UK financial institutions should be fully adopting TCFD recommendations. A summary of that roadmap is here, though it’s important to note that future consultations will determine when each of the categories will need to comply.
The UK Energy and Climate Change Minister Greg Hands said: “if the UK is to meet our ambitious net-zero commitments by 2050, we need our thriving financial system, including our largest businesses and investors, to put climate change at the heart of their activities and decision making. By mandating large businesses to disclose their climate risks and opportunities … we (the UK) are showing global leadership by making our financial system the greenest in the world”.
If you’re not a large, listed company or financial institution, why does this matter?
While smaller and non-listed companies are not subject to the same level of regulatory requirements, they can benefit from proactively following the TCFD recommendations by improving their resilience to climate-related risks, enhancing their reputation with banks and investors, and better aligning their business strategies with the transition to a low-carbon economy. Banks and investors may incorporate climate considerations into their lending and investment decisions in the future.
Falcon can be a resource on both emissions data and climate-related supply chain risks and opportunities. We will be publishing our third CDP climate disclosure this year (which is TCFD aligned) and we will be voluntarily publishing our first TCFD report later this year. Please contact us through your sales rep for more information.
Further reading and useful resources
For guidance on emissions scopes:
On the UK’s TCFD reporting: