Spotlight on the UK: The Transition Plan Taskforce and the wider sustainability reporting landscape

The UK has ambitious, legally binding net zero targets and, since 2021, has committed to become the world’s first Net Zero-aligned Financial Centre. The recent publication of the UK’s Transition Plan Taskforce Disclosure Framework provides valuable guidance that companies should use to prepare for mandatory sustainability disclosure requirements that are on the horizon.

UK has a strong climate agenda but faces obstacles

Despite recent political developments and some concerning policy announcements from Government, the UK still remains a climate leader, both in action and in word. Greenhouse gas (‘GHG’) emissions have dropped over 48% since 1990^1, more than any other G20 nation, it was the first to adopt the recommendations of the Task Force for Climate Related Financial Disclosures (‘TCFD’) for listed companies, and in 2019, Britain was also the first in the G7 to set a legally binding target of net zero by 2050². These are significant moves in the context of global decarbonization. 

Yet in spite of such bold initiatives and announcements made in recent years, in comparison to its European neighbours, the UK does not yet have a fully developed sustainability regulatory framework in place. Nor do many British companies have credible transition plans, according to data from CDP, an international climate disclosure organisation, with only 28% having such pathways in place^3.

Data transparency and credible transition plans are key

To transition the whole economy towards decarbonisation and net zero, private capital flows and incremental investments in the coming years and decades are absolutely critical to funding this, as it requires a wholesale transformation of business practices. However, investors and regulators need access to companies’ sustainability data and to see credible transition plans in order to provide the much-needed capital to drive the transformation. Given the interconnected nature of our economy, mandatory sustainability disclosure requirements therefore are a vital step to move this forward. 

This is why the publication in October of the long-awaited Transition Plan Taskforce (‘TPT’) Disclosure Framework, is such an important development. Following the UK Presidency of COP26 in 2021, the cross-sector task force was tasked by Government to develop a ‘gold standard’ of good practice in private-sector sustainability reporting and transition planning. Aligned with global reporting standards, including the Task Force for Climate Related Financial Disclosures (‘TCFD’) and the International Sustainability Standards Board (‘ISSB’), the framework provides a much-needed tool for companies to develop credible net zero transition plans.

Companies need a clear framework of useful disclosures

Of key importance for companies to consider is the overriding requirement to disclose their objectives and priorities in response to, and delivering on the ‘whole-of-economy-transition’. This is specifically with regards to reducing GHG emissions, responding to their climate-related risks and opportunities, and ‘the actions…it may take within its business model to embed and accelerate the transition⁴. For companies to do this, they need a clear framework of useful sustainability disclosures, and a best-practise guideline on how to report, both of which the TPT Disclosure Framework has, and should use. 

And so, with mandatory sustainability disclosure requirements on the horizon, companies do not want to be found wanting. On 2 August 2023, the Government announced guidance on its proposed UK Sustainability Disclosure Standards (‘UK SDS’), to be issued by the Department for Business & Trade, currently expected in July 2024, and based on the ISSB’s IFRS⁵ Sustainability Disclosure Standards (‘S1’ and ‘S2’). For those companies who haven’t yet begun their disclosure journey, getting familiar with TCFD reporting will help make the transition easier down the road. 

Those already acquainted with some form of reporting should then look to professionalize how they do this, and align with IFRS S1 and S2 in preparation for the planned endorsement in July 2024. This is at least in part to avoid a shock as the regulatory burden hits, and to avoid unnecessary surveillance from the Financial Conduct Authority (‘FCA’). 

Until then, what else can companies do to gear up and get their house in order?

Set internationally recognised targets – In 2018, just 4% of FTSE100 companies had set net zero targets, according to the London Stock Exchange Group. By December 2022, this had reached 85%⁶. Though this is an encouraging development, there is an inconsistency in the credibility of these net zero targets, as many of them are not externally verified. Corporates could look to the Science Based Target Initiative (SBTi), and the Transition Pathway Initiative (‘TPI’), to ensure what they’re reporting on aligns with widely, consensually agreed targets and, more importantly, shows much and how quickly they need to reduce their emissions. C-suites and executive committees should continue to publicly reiterate and commit to these targets within a clear, accountable, and realistic timeframe.

Prioritise accurate measurement and assessment of emissions – It is critical that organisations systematically and accurately calculate, measure and manage their Scopes 1, 2 and 3 emissions in line with the GHG Protocol Corporate Standard. Companies cannot build decarbonisation strategies without access to the actionable insights that an emissions evaluation can reveal. While many organisations report, with varying degrees of accuracy, on their Scopes 1 and 2 emissions, accurate measurement up and down the value chain for Scope 3 can prove elusive without proper investment in both appropriate software and the human expertise to interpret and transpose into actionable transition plans. For instance, Position Green’s integrated Carbon accounting solution combines a tailored platform geared to each organisational structure, capturing emissions data across the three scopes with actionable analysis, and informing our strategic advisers, offering a turnkey solution, turning intent into action.

Internal Capacity Building – From the C-suite down, companies should develop employee awareness and skills related to sustainability and climate action, drawing together finance, accounting, risk, compliance, audit, legal and procurement. They should establish training programs to enable employees to contribute to the net zero transition. Position Green’s Academy, offering e-learning and instructor-led courses,  can help gear up employees ahead of the significant reporting and transition planning ahead, and be sure companies have the internal resources, skills, and capacity, to move beyond compliance and deliver commercial growth.

<sup>1. International Energy Agency – United Kingdom
2. Department for Energy Security & Net Zero 
3. CDP – Response to launch of the Transition Plan Taskforce Disclosure Framework
4. Transition Plan Taskforce Disclosure Framework
5. International Finance Reporting Standards
6. London Stock Exchange Group</sup>