Large UK businesses and those in the finance sector need to be aware that standards for climate reporting are getting higher. The current government sees green investment as a key lever for delivering on its net zero promises. The 2019 Green Finance Strategy and its 2023 update are clear how they intend to do this: by requiring businesses to be transparent about the risks and opportunities they face in relation to the environment and the low carbon transition. Only then can investors make informed decisions.
Climate transparency
In 2024, the climate is a material risk factor for businesses and the UK government is determined that investors will get the information they need to make the right choices. Labour is similarly committed to “delivering a world-leading green finance regulatory framework”. It’s what investors have been demanding for a long time; the Institutional Investors Group on Climate Change has been lobbying since 2001 for greater transparency in everything to do with how a business relates to the environment.
Investors want to know how climate will affect the supply chain of a business, its transport logistics, its workforce, its reputation and more. June 2024 saw a fresh call for water risk data, and the appetite for more information in more areas will only continue to grow.
Where we are now
The UK already requires certain businesses - UK-registered large companies and financial institutions – to carry out climate reporting in line with TCFD best practice. Now the TCFD has been replaced by the International Sustainability Standards Board (ISSB). The UK government is currently working on endorsing the ISSB’s first set of global standards to create its own version: the UK Sustainability Reporting Standards. Then the government and the Financial Conduct Authority will use these to develop more reporting requirements for businesses.
This is a lengthy process, partly because it involves multiple consultations. But it is happening. Meanwhile the FCA is working on complementary rules requiring more information from the companies it regulates. May 2024 saw the implementation of an anti-greenwashing rule and July 2024 brought in a labelling regime for investment funds.
Opacity is not an option
We do not actually expect businesses to have to comply with new requirements based on the UK Sustainability Reporting Standards until 2026 or later. But it is clear that the demand for transparency and more detailed information is only going to grow. In other news, the GHG Protocol (the internationally accepted standard for emissions reporting) is reviewing its rules as we speak – and we are likely to see an approach which better links consumption with physical delivery of electricity.
As a UK business, this means it is time to evaluate the standard of your climate reporting. When it comes to Scope 2 emissions, are you still claiming “100% renewable energy sourcing” on the basis of a CPPA or a green-badged supplier tariff? If so, it’s time to collect some real data. The ENTRNCE Matcher monitors the mix of sources in your energy supply at half-hourly intervals (whether that’s the grid, on-site assets or a mix) and gives you the real percentage of renewables. It then tracks this against your actual consumption, again at half-hourly intervals, to see how much of your energy use is really from renewables.
This is the kind of granular data that future reporting regimes will demand, and it makes sense to get ahead with it now. For a demonstration of the Matcher and how it can futureproof the Scope 2 part of your sustainability reporting, get in touch.
