A recent report ‘Preparing for New Sustainability Reporting Regulations in the UK’, published by the UN Global Compact Network UK, offers a comprehensive overview of the evolving landscape of sustainability reporting.
Here are the key takeaways:
- Alignment of reporting standards: the UK is increasingly aligning its sustainability reporting frameworks with international standards, notably the EU’s Corporate Sustainability Reporting Directive (CSRD) and the International Sustainability Standards Board (ISSB) guidelines. These changes aim to harmonise reporting practices, ensuring consistency, comparability and reliability of ESG data across borders.
- Key regulatory developments: CSRD expands the scope of companies required to report, introduces more detailed reporting requirements, and mandates external assurance of reported information. The ISSB Standards focus on creating a global baseline for sustainability disclosures, emphasising materiality and relevance to investors.
- Implications for UK businesses: businesses will need to provide detailed information on a range of ESG factors, from carbon emissions to social impacts. In addition, external third party assurance and verification will soon become mandatory, to ensure the credibility of reported data.
How should companies prepare and future proof themselves?
- Early engagement: businesses are encouraged to familiarise themselves with the new standards and begin integrating them into their reporting cycles.
- Data management: robust data collection and manage- ment systems will be needed to capture relevant metrics.
- Stakeholder communication: firms should engage with all stakeholders, including their community, to understand their information needs and expectations.
- Capacity building: investment in building internal expertise in sustainability reporting is advised.
There are many challenges for businesses around
a) resource allocation – smaller companies might face challenges related to limited resources and expertise – and
b) keeping up with the fast-changing regulatory landscape. This will require continuous monitoring and adaptability.
EU differences
For those businesses operating in the EU, there are some key differences to take into account. The CSRD is a central component of the EU’s Green Deal, significantly expanding the scope of companies required to report on sustainability. The CSRD requires comprehensive reporting across a wide range of ESG factors, with a strong emphasis on ‘double materiality’ – companies must report not only on how sustainability issues affect them, but also how their operations impact society and the environment. Compared to the EU, the UK has traditionally been more focused on ‘single materiality’ business impacts, rather than ‘double materiality’ including external societal impacts.
Assurance and verification
The CSRD introduces mandatory external assurance for sustainability reports, aiming to enhance the credibility and reliability of ESG data. The UK is moving towards mandatory external assurance but has yet to implement such stringent requirements as the EU. However, it is anticipated that UK regulations will seek to maintain international credibility and investor confidence.
The CSRD has a clear and structured timeline, with phased implementation extending to smaller entities by 2026. The UK’s timeline is more fluid, ensuring businesses have sufficient time and resources to comply. The CSRD is more prescriptive, which may limit flexibility but ensures uniformity and comparability across the EU. The UK’s framework is more adaptable, allowing companies some leeway in how they meet reporting requirements.
The EU’s approach is primarily driven by its own legislative and policy objectives. The UK is placing a significant emphasis on aligning with global standards, particularly the ISSB, to maintain its position as a leader in international finance and sustainability.
Do not ignore!
The shift towards more rigorous sustainability reporting is only going one way. It reflects a global trend emphasising the importance of ESG considerations in business operations. By proactively adapting to these changes, companies can not only ensure compliance but also enhance their reputation, attract investment, and contribute positively to broader societal goals.
So, take action now – avoid playing catch up later, and don’t get caught on the wrong side of history!
To find out more contact Adrian on 07720 297402 or via adrian@bepartners.org
To find out more about Be. Partners Ltd, visit www.bepartners.org
