UK companies must report sustainability-related financial disclosures

As companies prepare their earnings reports for the first quarter of 2022, one new factor to be included is sustainability-related financial disclosures.

From this month 1,300 of the largest British companies will be making sustainability disclosures under new rules laid out by the Financial Conduct Authority (FCA). The laws stipulate UK companies need to adopt practices of assessing how a changing climate may affect their business model and strategy, and contribute to the UK’s transition to net zero.

It took five years to implement the new law

Five years ago the Task Force on Climate-Related Financial Disclosures (TCFD) published its final recommendations, establishing a global framework for companies and other organisations to develop effective climate-related financial disclosures in their existing reporting processes, demonstrating that climate-related risks have been considered and actions have been taken to mitigate them where necessary. In 2022 this law came into effect.

Climate-related reporting

While many fashion companies disclose sustainability as part of their collections and manufacturing processes at garment level, they do not disclose the climate-related risks affecting their operations and strategies.

With the effects of climate change becoming increasingly pronounced, climate-related disclosures are critical and here to stay, and the requirements on businesses will only increase.

Consumer help for identifying genuine credentials

In the UK a Green Claims Code introduced by the Competition and Markets Authority (CMA) helps consumers identify genuine environmental claims about products and services that they are considering purchasing.

The tips are designed to encourage consumers to ask themselves some simple questions when they see an environmental claim. Where possible, we would encourage consumers to be wary of vague claims and demand more information from businesses about their goods and services for which they claim environmental benefits.

As sustainability transparency becomes a requirement in reporting, consumers have access to more information to make choices about what they choose to buy and wear, understanding where and how their clothes are made and how this impacts the environment.

Article source: DLA Piper, Competition and Markets Authority, www.gov.uk