How it works
CARBON POLICY FOR
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Location
UK
Industry
Business Services and Supplies
Employees
<250
Revenue
Less than £36m / €40m / $40m
Listed
No
Supplier
No
Mandatory Reporting Requirements
These requirements are enforced in legislation and failure to comply may lead to fines, loss of tenders and contracts, reputational damage, and open your organisation to law suits.
UK Streamlined Energy and Carbon Reporting (SECR)
Who has to comply?
All UK businesses in the following categories have to comply, unless they meet certain exemption criteria:
- Quoted companies (i.e. listed on the stock market)
- Large unquoted companies and Limited Liability Partnerships (LLPs)
Companies and LLPs are defined as large if they meet 2/3 of the below criteria:
- Turnover of £36m+
- Balance sheet of £18m+
- 250+ Employees
What are the requirements?
UK SECR legislation requirements include:
- UK Energy Use (as a minimum gas, electricity and transport, including UK offshore area) and associated GHG emissions.
- Scope 1 and 2 emissions – they encourage voluntary Scope 3 emissions reporting (Quoted companies only)
- At least one intensity ratio – these compare emissions data with an appropriate business or financial metric, such as sales revenue or square metres of floor space.
- Energy efficiency actions – a description of principal measures taken to improve energy efficiency within the reported financial year. Planet Mark can directly support with SECR submissions.
Planet Mark can directly support organisations with SECR submissions.
Taskforce on Climate-related Financial Disclosures (TCFD) – UK
Who has to comply?
- All UK businesses with more than 500 employees traded on a UK-regulated market, as well as banking and insurance companies.
- All UK companies and LLPs with more than 500 employees and over £500m in turnover.
What are the requirements?
TCFD is being used as a reporting framework by bodies like the Financial Conduct Authority (FCA) to enforce mandatory disclosures, including:
- Organisations must report on their governance, strategy, risk management, targets and metrics with respect to climate-related risks and opportunities.
- Organisations must disclose their scope 1 and 2 emissions and, if appropriate, scope 3 emissions.
- It is worth looking at the Transition Plan Taskforce Framework for net zero transition plans as the FCA has announced plans to use this to reinforce TCFD reporting requirements for listed companies.
Planet Mark can directly support organisations with TCFD reporting.
NOTE – TCFD is being formally taken over by IFRS S1 & S2 from January 2024. It not yet clear if/how the UK Government will update their requirements to match this, so in the meantime it should be assumed to still apply.
UK Transition Plan Taskforce (TPT) Framework
Announced by HM Treasury in at COP26 in 2021, the Taskforce have developed a gold standard framework for private sector net zero transition plans. The UK Financial Conduct Authority (FCA) and UK Government plan to use this framework to strengthen existing disclosure requirements via TCFD and SECR. It recommends that a good transition plan should cover:
- High-level targets to address climate change, including GHG emissions.
- Short, medium and long-term actions to achieve targets and how they will be financed.
- Governance and accountability mechanisms to support delivery.
- Measures to address material risks and opportunities for the natural environment and stakeholders (e.g. workforce, supply chains, communities or customers).
UK Energy Savings Opportunity Scheme (ESOS)
Who has to comply?
Large UK organisations meeting either of the below criteria:
- Employ 250+ people
- £44m+ annual turnover, and a £38m+ annual balance sheet
What are the requirements?
Large UK organisations meeting either of the below criteria:
- Calculate the organisations total energy consumption.
- Identify areas of significant energy consumption.
- Appoint a Lead Assessor to carry out an energy audit and ESOS assessment.
- Confirm ESOS compliance with the Environment Agency.
- Keep records of ESOS compliance, which may be further audited by the Environment Agency.
The ESOS Phase 3 submission deadline has been delayed till June 2024.
Planet Mark can directly support organisations with Energy Audits and ESOS Compliance.
UK Public Procurement Notice (PPN 06/21)
Who has to comply?
Suppliers bidding for government contracts worth over £5 million per year, including for central government departments, executive agencies and non-departmental public bodies like HMRC, CPS and DVLA.
What are the requirements?
Prepare a detailed Carbon Reduction Plan (CRP) confirming the suppliers commitment to achieving net zero by 2050, with the below technical requirements:
- Commitment to achieving net zero by 2050 across your UK operations.
- Details of your net zero carbon emissions baseline.
- Overview of your current emissions across scopes 1 and 2, plus a subset of scope 3.
- Emission reduction targets in CO2e and progress to date.
- Evidence of your carbon reduction measures and those that will be used to achieve net zero by 2050.
Planet Mark can directly support with PPN 06/21 compliance.
EU Non-Financial Reporting Directive (NFRD)
Who has to comply?
The EU’s NFRD applies to all companies with 500+ employees. NFRD is set to be replaced by CSRD for the 2023 reporting year.
What are the requirements?
Prepare a detailed Carbon Reduction Plan (CRP) confirming the suppliers commitment to achieving net zero by 2050, with the below technical requirements:
- Companies must disclose information regarding (1) Environmental Impact, (2) Social and Employee Issues, (3) Human Rights, (4) Bribery and Corruption, and (5) Diversity on Company Boards.
- It is recommended that companies disclose scope 1, 2 and 3 emissions, as well as absolute reduction targets.
- It is recommended that banks and insurance companies focus on their scope 3 emissions.
EU Corporate Sustainability Reporting Directive (CSRD)
Who has to comply?
EU companies meeting 2/3 of the conditions: (1) €40m+ in net turnover, (2) €20m+ in assets, (3) 250 or more employees.
In addition, listed SMEs and non-EU based companies with subsidiaries or securities in the EU must also comply with CSRD. This legislation came into effect on 5th January 2023, replacing NFRD from the 2024 financial year. Listed SMEs are currently given until 2027 to comply, with an additional supplement to the Directive for SME sustainability reporting more broadly due by 30th June 2024.
What are the requirements?
Under the CSRD, companies must undertake audited reporting underpinned by the EU Sustainability Reporting Standard (ESRS) on five core areas:
- Business Model and Strategy.
- Policies & Governance (e.g. measurable sustainability targets, due diligence processes implemented).
- Actual or potential adverse impacts of company sustainability policies and how they are managed.
- Risks and risk management (principal sustainability risks and how they are managed).
- Key performance indicators, including: (1) Full Scope 1, 2 and 3 emissions, (2) Energy Consumption, (3) Intensity Ratios (e.g emissions per unit of revenue).
European Sustainability Reporting Standard (ESRS)
This is the disclosure standard that underpins the EU Corporate Sustainability Reporting Disclosures Standard (CSRD), so should be referenced to ensure compliance with any CSRD submissions. It has adopted a ‘double materiality’ approach, aligning with both IFRS and GRI to ensure a high degree of interoperability. It covers a wide range of environmental, social and governance issues, including climate change, biodiversity and human rights.
EU Taxonomy
Who has to comply?
Companies who are subject to NFRD and CSRD reporting requirements, so typically this is organisations with 500+ employees unless they meet exemption criteria.
What are the requirements?
The EU set out 6 Environmental Objectives within their Taxonomy:
- Climate Change Mitigation
- Climate Change Adaptation
- Sustainable protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
Organisations must demonstrate that they substantially contribute to at least one of the six environmental objectives, do no significant harm to any of the other objectives and comply with minimum social safeguards. They must then disclose:
- The proportion of their turnover derived from products/services associated with activities that qualify as environmentally sustainable.
- The proportion of their capital and operational expenditure related to assets or processes that qualify as environmentally sustainable.
EU Corporate Sustainability Due Diligence Directive (CSDDD) – Upcoming (2025)
Who has to comply?
- EU companies with 500+ employees and a worldwide turnover of €150m+
- Non-EU companies who generate a turnover of €150m+ in the EU
- EU and Non-EU Companies who operate in ‘high impact’ sectors (e.g. textiles, agriculture, mineral extraction) and generate €40m+ turnover in the EU.
What will it require?
The details are still being negotiated, and the legislation is unlikely to come into effect before 2025 at the earliest. However, in the current draft (June 2023), companies covered must identify actual and potential adverse environmental impacts and human rights violations from their operations and supply chains, including established relationships with contractors, subcontractors and partners. They must also have a business model and strategy that is compatible with transitioning to a sustainable economy, in line with the 1.5 degree Paris Agreement limit. Notably, the proposal contains sections that would also make changes to Director fiduciary responsibilities to oversee and implement their due diligence policies. This means that both the businesses and Directors personally could be liable for damages if they fail to comply with obligations to prevent potential adverse impacts.
SEC Climate Disclosures Proposal – (Upcoming)
The United States Securities and Exchange Commission (SEC) has proposed new rules to enhance and standardise climate-related disclosures by public companies. If accepted, they would be phased in between 2023-2026. Among other things, companies would need to disclose:
- Scope 1 and Scope 2 emissions
- Scope 3 emissions, if they are material or the company has set scope 3 targets (small companies are exempt)
- Governance of climate risks
- Material impact of climate risks on the business (including risks to strategy/business model)
- Impact of climate-related events (e.g. severe weather) on items of their consolidated financial statements
Are we missing something that you think should be here? Let us know!
Industry-Specific Policy
These requirements apply to particular sectors and markets and often drive competitor advantage.
UK Extended Producer Responsibility (Packaging)
Who has to comply?
Companies who meet any of the below criteria:
- >£2m annual turnover and >50 tonnes of packaging (reporting & fees requirement)
- £1m-£2m annual turnover and 25-50 tonnes of packaging (reporting requirement)
- >£25m annual turnover but <50 tonnes of packaging (reporting requirement)
What are the requirements?
Businesses who meet the relevant criteria (known as obligated producers) will be made responsible for reporting on their packaging usage and/or paying fees to cover the full cost of managing packaging waste when it is disposed of. You do not need to be the packaging manufacturer for this to apply and also will apply to you if you are importing packaged products from other countries.
Obligated companies will need to report on their packaging data from 2023, extra fees will begin to apply in 2024, and these fees will become varied/modulated based on the recyclability of the packaging material from 2025. There are six types of obligated producer – brand owners, importers, distributors, online marketplaces, sellers and service providers. A business may fall into more than one category of producer.
EPR is not the same as the UK Plastic Packaging Tax (PPT) which came into effect in April 2022.
SBTi Clothing
SBTi has developed guidelines for emission reduction target setting in the clothing sector (SBTi Apparel and footwear).
Planet Mark can help organisations to set SBTi targets.
UK Net Zero Carbon Buildings Standard – Upcoming (Dec 2023)
This standard is currently being developed by leading industry organisations, including BBP, BRE, UKGBC, RIBA, CIBSE, Planet Mark and many more. It will provide a framework for the industry to robustly prove that their built assets are net zero carbon and in line with UK climate targets. It will cover whole-life carbon, including both embodied and operational emissions, and is likely to require at least one year of real operational emissions post-tenancy, not operational emission estimates.
Planet Mark are actively involved in the working groups developing this standard. If you would like to learn more, please reach out to us directly.
UK Minimum Energy Efficiency Standards (MEES)
There are minimum energy effiency standards (in the form of EPC ratings) for domestic and non-domestic rented property in order for landlords to be allowed to rent their property to tenants. They recommend a ‘fabric first’ policy, i.e. changes to insulation, windows and doors should happen first before changes to heating systems etc. There are spend caps in place setting an upper limit for how much a landlord must demonstrate that they have spent to improve energy efficiency even if it cannot get the property to the required EPC rating. There are also a number of proposals under consultation to increase EPC rating requirements further leading up to 2030.
It is worth noting that Scotland and Northern Ireland have their own EPC requirements, with Scotland requiring an EPC of a ‘D’ for new tenancies since 2022 and by 2025 for existing tenancies.
Domestic Property Requirements
- April 2018 new tenancies EPC ‘E’ (spend cap of £3,500)
- April 2020 existing tenancies EPC ‘E’ (spend cap of £3,500)
- April 2025 new tenancies EPC ‘C’ (spend cap of £10,000) – under consultation
- April 2028 existing tenancies EPC ‘C’ (spend cap of £10,000) – under consultation
Non-Domestic Property Requirements
- April 2018 new tenancies EPC ‘E’ (7 year payback and all improvements made exemptions)
- April 2023 existing tenancies EPC ‘E’ (7 year payback and all improvements made exemptions)
- April 2025 new tenancies EPC ‘C’ – under consultation
- April 2027 existing tenancies EPC ‘C’ – under consultation
- April 2028 new tenancies EPC ‘B’ – under consultation
- April 2030 existing tenancies EPC ‘B’ – under consultation
Planet Mark can help organisations to improve their EPC Ratings through our Built Environment Certifications and ESOS Audits.
BREEAM (Building Research Establishment’s Environment Assessment Method)
BREEAM assessment evaluates the procurement, design, construction and operation of a development against a range of targets based on performance benchmarks. It focuses on sustainable value in energy, land use and ecology, water, health and wellbeing, pollution, transport, minerals, waste and management. Each criteria is scored and then multiplied by a weighting. There are two stages – a design stage assessment resulting in an interim certificate, and a post-construction assessment resulting in a final certificate and rating from unclassified (<30%) to outstanding (>85%).
Planet Mark can help organisations to improve their BREEAM scores through our Built Environment Certifications.
EU Energy Performance of Buildings Directive (EPBD)
EPBD sets out timelines for building emission reduction targets, technology roll-out, measures against energy poverty, a ban on fossil fuel heating systems by 2035 and minimum EPC ratings in both domestic and non-domestic properties across Europe. Currently these are set out to be:
- 2026 all new public authority buildings to be zero-emission
- 2027 Non-residential and public buildings to achieve EPC of ‘E’
- 2028 all new buildings to be zero emission and equipped with solar technologies
- 2030 Residential buildings to achieve EPC of ‘E’, non-residential to achieve ‘D’
- 2033 Residential buildings to achieve EPC of ‘D’
Planet Mark can help organisations to comply with EPBD through our Built Environment Certifications.
PAS 2080 (2023) Carbon Management in Buildings and Infrastructure
This specifies requirements for the management of whole-life carbon in buildings and infrastructure. It looks at the whole value chain and aims to reduce carbon and cost through intelligent design, construction and use. It is targeted at built environment asset owners and managers, designers and architects, constructors, material and product suppliers, regulators and financiers.
SBTi Transport
The transport sector accounts for 23% of energy-related emissions globally, and is moreover a rapidly growing sector.
SBTi has developed guidelines for this sector (SBTi Transport).
Planet Mark can help organisations to set SBTi targets.
SBTi Maritime
SBTi has developed guidelines for this sector (SBTi Maritime).
Planet Mark can help organisations to set SBTi Targets.
UK Petrol and Diesel Vehicles Phase Out
Sales of new fossil fuel driven vehicles in the UK are being phased out in three stages:
- 2030 – No new sales of petrol or diesel cars and vans.
- 2035 – No new sales of hybrid cars and vans, or HGVs <26 tonnes (fully zero emission at tailpipe).
- 2040 – No new sales of petrol or diesel Heavy Goods Vehicles (HGVs) >26 tonnes.
EU Petrol and Diesel Vehicles Phase Out
Under proposed legislation, all new cars that come onto the market after 2035 will need to be zero emission (i.e. no petrol/diesel or hybrids). Specific member states may implement earlier targets, for example the UK are phasing out petrol and diesel cars and vans by 2030, hybrids by 2035 and all heavy goods vehicles by 2040.
US Petrol and Diesel Vehicles Phase Out
Current legislation mandates that light-duty vehicles added to the government fleet will be 100% zero emission by 2027, with the rest of the fleet following this by 2035.
17+ US States have already adopted more ambitious targets for privately owned vehicles following the California Zero Emission Vehicle (ZEV) Program, which mandates that all new passenger cars, trucks and SUVs must be zero emissions by 2035.
PCAF Global GHG Accounting and Reporting Standards
The Partnership for Carbon Accounting Financials (PCAF) standards include measurement and reporting methodologies for:
- Part A: Financed Emissions
- Part B: Facilitated Emissions (GHG emissions associated with capital market transactions)
- Part C: Insurance-associated Emissions (GHG emissions associated with re/insurance underwriting)
Key features of reporting requirements include:
<.ul>Planet Mark can directly support with PCAF reporting for Scope 3 Category 15 financed emissions.
SBTi Finance
SBTi has developed guidelines for the finance sector (SBTi Financial institutions).
SBTi has also released a report explaining how their guidelines relate to the TCFD recommendations.
Planet Mark can help organisations to set SBTi targets.
EU Sustainable Finance Disclosure Regulation (SFDR)
Who has to comply?
Financial market participants and financial advisors within the EU. This includes asset managers, institutional investors, insurance companies, and pension funds, among others. Organisations with fewer than 500 employees are not required to produce a principal adverse impact statement. However, if they do not comply, they are required to explain why.
What are the requirements?
- Financial market participants must publish a principal adverse sustainability impacts statement on their website and in other relevant prospectuses and reports. It should include information about emissions and other climate-related matters, as well as social and employee matters
- Reporting on scope 1,2 and 3 emissions.
- GHG emissions intensity of investee companies, and on their own exposure to companies active in the fossil fuel sector.
EBA Standards on ESG Risk Disclosures
The European Banking Authority (EBA) ‘Implementing Technical Standards’ (ITS) on Pillar 3 disclosures of ESG risks came into effect in June 2022, with the first disclosure taking place in 2023.
Who has to comply?
Large institutions that have issued securities traded on a regulated EU market.
What are the requirements?
The EBA requires banks to disclose the following information:
- Climate risks, including both transition risks and physical risks.
- Mitigating actions in place to address those risks.
- Green Asset ratio and Banking Book Taxonomy Alignment ratio (to understand how institutions are financing activities that will meet the publicly agreed Paris agreement objectives of climate change mitigation and adaptation based on the EU taxonomy of green activities.
- ESG strategy, governance and risk management.
UN Principles of Responsible Investment (PRI)
Signatories pledge to incorporate ESG issues into investment analysis and decision-making processes. Signatories may include:
- Asset owners
- Investment Managers
- Service Providers (offering products or services to one of the above)
UNEP FI Principles for Sustainable Insurance (PSI)
Launched in 2012, this serves as a global framework for the insurance industry to address environmental, social and governance risks and opportunities. Sustainable insurance is a strategic approach to ensuring all activities in the insurance value chain are done in a responsible and forward-looking way. It later led to the formation of the Net Zero Insurance Alliance (NZIA).
SBTi Information and Communication Technology (ICT)
SBTi has developed guidelines for setting emission reduction targets in this sector (SBTi ICT).
Planet Mark can help organisations to set SBTi targets.
Are we missing something that you think should be here? Let us know!
Voluntary Reporting Frameworks
Frameworks that, whilst currently optional, are useful tools and are often used by policy makers as the basis for future regulation.
UN-backed Race to Zero Campaign
The Race to Zero is the largest global coalition of 10,000+ organisations who have set net zero targets that comply with the requirements set out by the UN High Level Champions, including:
- Pledge – set a target at a head of organisation level committing to achieve net zero as soon as possible before 2050 and a 50% minimum reduction by 2030.
- Plan – within 12 months of pledging, develop a robust plan to achieve these targets.
- Proceed – within 12 months take immediate action to achieve reductions in carbon emissions.
- Publish – disclose progress against targets publicly on an annual basis.
- Persuade – align any communications, policy and lobbying with your net zero commitment.
Planet Mark are one of ~10 official Partners of the Race to Zero for businesses. You can make your commitment at the link below.
ISO Net Zero Guidelines
The ISO Net Zero Guidelines were launched at COP27, providing the first end-to-end guidance on best practice in net zero governance, including measurement, target setting, achievement and wider leadership principles. They are an incredibly useful framework for organisations wanting to demonstrate a robust approach to net zero strategy.
Planet Mark helped to develop the guidelines and can directly support compliance with them.
UK Streamlined Energy and Carbon Reporting (SECR)
Who has to comply?
All UK businesses in the following categories have to comply, unless they meet certain exemption criteria:
- Quoted companies (i.e. listed on the stock market)
- Large unquoted companies and Limited Liability Partnerships (LLPs)
Companies and LLPs are defined as large if they meet 2/3 of the below criteria:
- Turnover of £36m+
- Balance sheet of £18m+
- 250+ Employees
What are the requirements?
UK SECR legislation requirements include:
- UK Energy Use (as a minimum gas, electricity and transport, including UK offshore area) and associated GHG emissions.
- Scope 1 and 2 emissions – they encourage voluntary Scope 3 emissions reporting (Quoted companies only)
- At least one intensity ratio – these compare emissions data with an appropriate business or financial metric, such as sales revenue or square metres of floor space.
- Energy efficiency actions – a description of principal measures taken to improve energy efficiency within the reported financial year. Planet Mark can directly support with SECR submissions.
Planet Mark can directly support organisations with SECR submissions.
Science-Based Targets initiative (SBTi)
- Globally-recognised framework for organisations to set short, medium and long term targets to reduce carbon emissions in consistent with a temperature rise below 1.5°C compared to pre-industrial levels.
- Most organisations will need to measure and set reduction targets for all of scopes 1, 2 and 3.
- A typical trajectory involves needing to achieve a 50% reduction from baseline across all scopes by 2030 and a 90%+ reduction by 2050 at the latest, with unavoidable residual emissions being offset using certified carbon removal offsets.
There are various industry-specific SBTi frameworks.
Planet Mark can directly support organisations with Science-Based Target setting.
PAS 2060 Carbon Neutrality
This is a ‘Publicly Available Specification’ (PAS) for organisations to make carbon neutral claims. It has been adopted by various governments, including in the UK, as the legislated framework for this purpose and may be a requirement for bids and tenders, particularly for public procurement. This involves:
- Assessment of GHG emissions across scopes 1 and 2 at minimum, with scope 3 measures strongly encouraged.
- Carbon Management Plan to reduce emissions.
- Offsetting of excess emissions, usually by purchasing certified carbon credits.
- Documentation and verification through qualifying explanatory statements and public disclosure.
Planet Mark can support PAS 2060 compliance.
Taskforce for Climate-related Financial Disclosures (TCFD) – UK
Who has to comply?
- Assessment of GHG emissions across scopes 1 and 2 at minimum, with scope 3 measures strongly encouraged.
- Carbon Management Plan to reduce emissions.
- Offsetting of excess emissions, usually by purchasing certified carbon credits.
- Documentation and verification through qualifying explanatory statements and public disclosure.
What are the requirements?
TCFD is being used as a reporting framework by bodies like the Financial Conduct Authority (FCA) to enforce mandatory disclosures, including:
- Organisations must report on their governance, strategy, risk management, targets and metrics with respect to climate-related risks and opportunities.
- Organisations must disclose their scope 1 and 2 emissions and, if appropriate, scope 3 emissions.
- It is worth looking at the Transition Plan Taskforce Framework for net zero transition plans as the FCA has announced plans to use this to reinforce TCFD reporting requirements for listed companies.
Planet Mark can directly support organisations with TCFD reporting.
NOTE – TCFD is being formally taken over by IFRS S1 & S2 from January 2024. It not yet clear if/how the UK Government will update their requirements to match this, so in the meantime it should be assumed to still apply.
Taskforce on Climate-related Financial Disclosures (TCFD) – Global
TCFD is being used as a reporting framework by bodies like the UK Financial Conduct Authority (FCA) to enforce mandatory disclosures, including:
- Organisations must report on their governance, strategy, risk management, targets and metrics with respect to climate-related risks and opportunities.
- Organisations must disclose their scope 1 and 2 emissions and, if appropriate, scope 3 emissions.
- It is worth looking at the Transition Plan Taskforce Framework for net zero transition plans as the UK FCA has announced plans to use this to reinforce TCFD reporting requirements for listed companies.
Given Scope 3 and supply chain reporting requirements for large businesses, it is likely that SMEs who sit within the supply chain of large companies will be indirectly affected by this legislation by being asked for data disclosure by customers.
Planet Mark can directly support organisations with TCFD reporting.
NOTE – TCFD is being formally taken over by IFRS S1 & S2 from January 2024. It not yet clear if/how governments around the world will update their requirements to match this, so in the meantime it should be assumed to still apply if it has previously.
UK Energy Savings Opportunity Scheme (ESOS)
Who has to comply?
Large UK organisations meeting either of the below criteria:
- Employ 250+ people
- £44m+ annual turnover, and a £38m+ annual balance sheet
What are the requirements?
Large UK organisations meeting either of the below criteria:
- Calculate the organisations total energy consumption.
- Identify areas of significant energy consumption.
- Appoint a Lead Assessor to carry out an energy audit and ESOS assessment.
- Confirm ESOS compliance with the Environment Agency.
- Keep records of ESOS compliance, which may be further audited by the Environment Agency.
The ESOS Phase 3 submission deadline has been extended till June 2024.
Planet Mark can directly support organisations with Energy Audits and ESOS Compliance.
UK Transition Plan Taskforce (TPT) Framework
Announced by HM Treasury in at COP26 in 2021, the Taskforce have developed a gold standard framework for private sector net zero transition plans. The UK Financial Conduct Authority (FCA) and UK Government plan to use this framework to strengthen existing disclosure requirements via TCFD and SECR. It recommends that a good transition plan should cover:
- High-level targets to address climate change, including GHG emissions.
- Short, medium and long-term actions to achieve targets and how they will be financed.
- Governance and accountability mechanisms to support delivery.
- Measures to address material risks and opportunities for the natural environment and stakeholders (e.g. workforce, supply chains, communities or customers).
Given Scope 3 and supply chain reporting and planning requirements for large businesses, it is likely that SMEs who sit within the supply chain of large companies will be indirectly affected by this legislation by being asked for data disclosure and transition plans by customers.
EU Corporate Sustainability Reporting Directive (CSRD)
Who has to comply?
EU companies meeting 2/3 of the conditions: (1) €40m+ in net turnover, (2) €20m+ in assets, (3) 250 or more employees.
In addition, listed SMEs and non-EU based companies with subsidiaries or securities in the EU must also comply with CSRD. This legislation came into effect on 5th January 2023, replacing NFRD from the 2024 financial year. Listed SMEs are currently given until 2027 to comply, with an additional supplement to the Directive for SME sustainability reporting more broadly due by 30th June 2024.
What are the requirements?
Under the CSRD, companies must undertake audited reporting underpinned by the EU Sustainability Reporting Standard (ESRS) on five core areas:
- Business Model and Strategy.
- Policies & Governance (e.g. measurable sustainability targets, due diligence processes implemented).
- Actual or potential adverse impacts of company sustainability policies and how they are managed.
- Risks and risk management (principal sustainability risks and how they are managed).
- Key performance indicators, including: (1) Full Scope 1, 2 and 3 emissions, (2) Energy Consumption, (3) Intensity Ratios (e.g emissions per unit of revenue).
European Sustainability Reporting Standard (ESRS)
This is the disclosure standard that underpins the EU Corporate Sustainability Reporting Disclosures Standard (CSRD), so should be referenced to ensure compliance with any CSRD submissions. It has adopted a ‘double materiality’ approach, aligning with both IFRS and GRI to ensure a high degree of interoperability. It covers a wide range of environmental, social and governance issues, including climate change, biodiversity and human rights.
EU Taxonomy
Who has to comply?
Companies who are subject to NFRD and CSRD reporting requirements, so typically this is organisations with 500+ employees unless they meet exemption criteria.
What are the requirements?
The EU set out 6 Environmental Objectives within their Taxonomy:
- Climate Change Mitigation
- Climate Change Adaptation
- Sustainable protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
Organisations must demonstrate that they substantially contribute to at least one of the six environmental objectives, do no significant harm to any of the other objectives and comply with minimum social safeguards. They must then disclose:
- The proportion of their turnover derived from products/services associated with activities that qualify as environmentally sustainable.
- The proportion of their capital and operational expenditure related to assets or processes that qualify as environmentally sustainable.
EU Corporate Sustainability Due Diligence Directive (CSDDD) – Upcoming (2025)
Who has to comply?
- EU companies with 500+ employees and a worldwide turnover of €150m+
- Non-EU companies who generate a turnover of €150m+ in the EU
- EU and Non-EU Companies who operate in ‘high impact’ sectors (e.g. textiles, agriculture, mineral extraction) and generate €40m+ turnover in the EU.
What will it require?
The details are still being negotiated, and the legislation is unlikely to come into effect before 2025 at the earliest. However, in the current draft (June 2023), companies covered must identify actual and potential adverse environmental impacts and human rights violations from their operations and supply chains, including established relationships with contractors, subcontractors and partners. They must also have a business model and strategy that is compatible with transitioning to a sustainable economy, in line with the 1.5 degree Paris Agreement limit. Notably, the proposal contains sections that would also make changes to Director fiduciary responsibilities to oversee and implement their due diligence policies. This means that both the businesses and Directors personally could be liable for damages if they fail to comply with obligations to prevent potential adverse impacts.
SEC Climate Disclosures Proposal (Upcoming)
The United States Securities and Exchange Commission (SEC) has proposed new rules to enhance and standardise climate-related disclosures by public companies. If accepted, they would be phased in between 2023-2026. Among other things, companies would need to disclose:
- Scope 1 and Scope 2 emissions
- Scope 3 emissions, if they are material or the company has set scope 3 targets (small companies are exempt)
- Governance of climate risks
- Material impact of climate risks on the business (including risks to strategy/business model)
- Impact of climate-related events (e.g. severe weather) on items of their consolidated financial statements
IFRS Sustainability Disclosure Standards – S1 & S2 (ISSB)
In June 2023, IFRS published standards governing sustainability-related (S1) and climate-related (S2) financial disclosures, developed by the ISSB. These are expected to be adopted as the global minimum sustainability reporting requirements enforced by governments and has formally replaced TCFD (Taskforce for Climate-related Financial Disclosures). Disclosure requirements take a ‘single materiality’ approach, looking at financial risks to the business itself, covering:
- Governance – the processes, controls and procedures to monitor and manage sustainability.
- Strategy – the approach to addressing risks and opportunities for your business model.
- Risk Management – the processes to identify, assess and manage sustainability risks.
- Metrics and Targets – information to monitor the entity’s sustainability performance over time.
B Corp Certification
B Corp Certification is a designation that a business meets high standards of verified performance, accountability and transparency on factors from employee benefits and charitable giving, to supply chain practices and input materials. In order to achieve certification, a company must:
- Demonstrate high social and environmental performance by achieving a B Impact Assessment (BIA) score of 80+ and passing our risk review.
- Make a legal commitment by changing their corporate governance structure to be accountable to all stakeholders, not just shareholders.
- Exhibit transparency by allowing information about their performance measured against B Lab’s standards to be publicly available on their B Corp profile.
Many B Corps seek Planet Mark certification in order to strengthen their BIA score on environmental and social measures. There are many Planet Mark Members who are also seeking to become B Corps – we are very symbiotic! Planet Mark Certification can help you to score higher on the BIA.
CDP
CDP operates the largest global disclosure system for environmental impacts. To comply with CDP, organisations must disclose the following emission metrics:
- Scope 1, 2 and 3 emissions
- Emission intensities (e.g. carbon per £100k of turnover)
- Whether they have any emissions targets and emission reduction initiatives
Planet Mark can help organisations with CDP Disclosures.
Global Reporting Initiative (GRI)
GRI is one of the most common long-standing sustainability reporting standards used by over 10,000 companies worldwide. It is designed to help business, government and other organisations to understand and communicate their sustainability impacts. New Universal Standards came into effect on 1st January 2023 with the below criteria:
- You must include a statement on your sustainable development strategy.
- You must determine which sustainable development topics are material to your business, which almost certainly includes GHG Emissions.
- GHG emissions reporting requirements include scope 1, 2 and 3 emissions, GHG emissions intensity ratio (e.g. carbon per £100k of turnover) and reduction of GHG emissions.
Taskforce on Nature-related Financial Disclosures (TNFD)
The TNFD Framework established a methodology for delivering risk management and disclosure for nature-related risks and opportunities. The complete recommendations will be published in September 2023, which will include:
- Core Concepts and Definitions
- LEAP Risk & Opportunity Assessent Approach
- Recommended Disclosures
- Data, Metrics and Targets
Disclaimer
The information provided on this page does not constitute legal advice and is published in good faith and for general information purposes only. Planet Mark does not give any guarantees about the completeness, reliability or accuracy of this information. Any action you take upon the information you find on this page is at your own risk. Planet Mark will not be liable for any losses and/or damages in connection with the use of the information provided on this page.
Policy into Practice
Sign up to the Planet Mark mailing list to receive our ‘Policy into Practice’ updates to help you stay compliant with current and future legislation. Our Policy Tool is regularly updated to reflect the most recent state of major UK, EU and US frameworks. If you have questions about the detail behind any of the regulations we have shared, contact our expert team for support.
