UK Sustainability Reporting Requirements and Laws in 2024 - Last Updated: January 2, 2024

The United Kingdom (UK), along with the EU, has some of the world's most advanced and complex corporate and investor sustainability laws and reporting requirements in the world. Sustainability is an important economic and cultural topic in UK, and the UK government is adapting additional policy steps to support its Net Zero 2050 targets.

However, as we all know, large economic and regulatory changes also create new compliance obligations for companies and investors, and the UK's embrace of sustainability reporting is no different. As the evolution of new UK sustainability regulations can be challenging to track, we’ve prepared this guide to summarize the major laws, reporting requirements, and what they mean for organisations in 2024.

Key UK Sustainability Reporting Rules and Regulations in 2024

Major 2024 UK Sustainability Reporting Laws and Regulations

  • Streamlined Energy and Carbon Reporting (SECR) - Requires large UK companies to disclose their energy use, carbon footprint, and greenhouse gas (GHG) emissions in their annual financial reporting
  • Financial Conduct Authority TCFD Reporting (FCA CRFD) - The UK Financial Conduct Authority (FCA) requires companies with UK-listed shares or deposit receipts, as well as FCA-regulated asset managers and asset owners to complete mandatory annual Task Force for Climate-Related Financial Disclosure (TCFD)-aligned climate disclosure reporting
  • Climate-Related Financial Disclosure (CRFD) via the Department for Energy Security and Net-Zero (formerly part of the Department for Business, Energy, and Industrial Strategy [BEIS]) - In February 2023, UK Prime Minister Rishi Sunak divided the UK Department for Business, Energy, and Industrial Strategy (BEIS), creating a new Department for Energy Security and Net-Zero. This new Department "will focus on easing the cost of living and delivering financial security by bringing down energy bills and keeping them down - better insulating consumers from external impacts. Longer term objectives include ensuring properly functioning energy markets, coordinating net zero objectives across government and bringing external delivery expertise to bear on its portfolio of major projects." Previously, BEIS has required UK-registered companies (public or private) with over 500+ employees or £500M+ in annual revenue to complete annual sustainability and climate-related disclosure reporting, based around TCFD. It is not yet known how these existing sustainability reporting requirements may change under the Department for Energy Security and Net-Zero's new policies
  • UK Sustainability Disclosure Standards (SDS) - A package of measures aimed at reducing greenwashing and unifying UK sustainability reporting. This includes sustainable investment labels, disclosure requirements, and restrictions on the use of sustainability-related terms in product naming and marketing. Official, complete UK SDS standards are expected to be published by July 2024, and aligned to the International Sustainability Standards Board (ISSB) standards.
  • Energy Savings Opportunity Scheme (ESOS) - A mandatory energy assessment scheme for organisations in the UK that meet the qualification criteria which must be carried out every 4 years. These assessments are audits of energy used by their buildings, industrial processes, and transport to identify cost-effective energy saving measures

The UK's Streamlined Energy and Carbon Reporting (SECR) Policy

UK SECR Sustainability Reporting

SECR requires specific company-level disclosures from large UK entities within their annual financial reporting, energy use, carbon footprint, and greenhouse gas (GHG) emissions

Latest version in effect: 2022

The UK’s Streamlined Energy and Carbon Reporting (SECR) policy was introduced in 2019 and applies to all UK companies and organisations who are:

  1. Quoted companies (companies listed on the London Stock Exchange, a European Economic Area market, the NYSE or NASDAQ)
  2. Large unquoted companies
  3. Large limited liability partnerships (LLPs)
  4. Academy trusts (a group of schools)

In addition to listed or quoted companies, large companies and LLPs are required to comply and report under SECR if they meet two or more of the following criteria:

  1. Turnover (or gross income) of £36 million or more
  2. Balance sheet assets of £18 million or more
  3. 250 employees or more

If a large company does not consume more than 40,000 kWh of energy in a reporting period, it qualifies as a low energy user and is exempt from reporting under SECR regulations. Any UK company that consumes over 40,000 kWh and meets the remaining criteria is required to report.

Under SECR, companies listed on the London Stock Exchange have had to include climate-related disclosures on a “comply or explain” basis in their reporting since January 1, 2022 (or January 1, 2021, in the case of premium-listed companies).

How to Comply with SECR Requirements: Quoted Companies

SECR requires quoted companies to collect and report the following annual data:

  1. Global scope 1 and 2 GHG emissions - Companies must inventory, calculate, and disclose their GHG emissions from direct operations. Scope 3 emissions reporting is voluntary, but recommended.
  2. At least one emissions intensity ratio - Intensity ratios are emissions factors that compare emissions data with an appropriate business metric or financial indicator, such as CO2e per employee or million £ in turnover
  3. Global energy usage - Energy consumption underlying the company's carbon calculations
  4. Previous year emissions and energy data - The previous reporting year or period's figures for energy use and GHG, to compare changes year-over-year
  5. Energy efficiency and emissions reduction projects - A narrative description of a company's main initiatives and projects during the reporting year to improve energy efficiency or reduce energy usage
  6. Reporting methodology - SECR recommends companies use widely recognized independent sustainability reporting standards, such as: GHG Reporting Protocol, ISO 14064-1:2018, or GRI (Global Reporting Initiative) guidelines

Large unquoted companies, LLPs, and academy trusts only need to report local UK energy usage.

SECR's "Comply or Explain" Provision

SECR also contains a helpful “comply or explain” provision. This clause permits companies to omit data if it's not possible to collect it, provided the reporting organisation explains what has been excluded and why. Deliberately omitting information in SECR reporting is strongly discouraged, but gives organisations that are earlier in their ESG reporting journey time to collect and prepare their information for a future year's report.

UK FCA TCFD Reporting Requirements

UK FCA TCFD Reporting

The UK FCA requires listed UK companies and investment entities to complete mandatory annual climate-related risk disclosure around an established set of 11 climate-related questions

Latest version in effect: 2022

In 2022, the UK Financial Conduct Authority (FCA) has made annual Task Force on Climate-Related Financial Disclosures (TCFD) reporting mandatory for over 1,300 of the country's largest UK-registered companies and financial institutions. This includes most of the UK’s largest publicly-traded companies, banks and insurers, as well as private companies with over 500 employees and £500 million in turnover. This means some large firms need to comply with both SECR and TCFD annual reporting.

UK regulators are using SECR and TCFD is to promote, standardize, and simplify sustainability reporting for companies. Many companies are currently under pressure to use a wide range of different sustainability reporting standards and frameworks. SECR and TCFD aim to consolidate transparency needs from UK regulators, investors, and other stakeholders.

Companies that issue UK-listed shares or global depositary receipts must either answer TCFD’s core questions in their annual financial reports, or include a prepared statement on why they haven't, applicable to accounting periods starting on or after January 1, 2022.

UK Department for Energy Security and Net-Zero (formerly BEIS) Streamlined TCFD Reporting

UK Department for Energy Security and Net-Zero (formerly BEIS) Climate Disclosure Sustainability Reporting

The UK Department for Energy Security and Net-Zero requires public and private UK companies with over £500M in annual turnover or 500+ employees to complete mandatory annual climate-related risk disclosure around an established set of 8 TCFD-aligned questions

Latest version in effect: 2022, expected to change in 2024 as the new Department assumes its full responsibilities

Formed in February 2023, according to the UK government, the Department for Energy Security and Net Zero (ESNZ) "will provide dedicated leadership focused on delivering security of energy supply, ensuring properly functioning markets, greater energy efficiency and seizing the opportunities of net zero to lead the world in new green industries."

As the sustainability successor to the former Department for Business, Energy and Industrial Strategy (BEIS), ESNZ will adopt the energy portfolio and regulatory oversight of sustainability previously held by the BEIS. Those sustainability and net zero disclosure requirements include:

  • A description of the company’s governance arrangements in relation to assessing and managing climate-related risks and opportunities
  • A description of the principal climate-related risks and opportunities arising in connection with the company’s operations, and the time periods by reference to which those risks and opportunities are assessed
  • A description of the actual and potential impacts of the principal climate-related risks and opportunities on the company’s business model and strategy
  • An analysis of the resilience of the company’s business model and strategy, taking into consideration different climate-related scenarios
  • A description of how the company identifies, assesses, and manages climate-related risks and opportunities
  • A description of how processes for identifying, assessing, and managing climate-related risks are integrated into the company’s overall risk management process
  • A description of the targets used by the company to manage climate-related risks and to realise climate-related opportunities and of performance against those targets
  • A description of the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and of the calculations on which those key performance indicators are based

These sustainability and net zero reports should be included in either (a) a non-financial and sustainability (NFIS) statement within a company's Strategic Report or (b) within their SECR report inside the company's standard annual report. Unless otherwise amended, Department for Energy Security and Net Zero reporting is mandatory for eligible companies after accounting periods starting on or after April 6, 2022 under previous BEIS requirements.

The UK Sustainable Disclosure Standards (SDS)

UK SDR Sustainability Reporting

The UK SDR is designed to centralise the UK’s new enhanced climate, sustainability, and ESG reporting, disclosure, and communications requirements

Expected to be finalized and take effect: January 1, 2025

The upcoming UK Sustainable Disclosure Standards (SDS) are a set of measures and modifications aligned to the IFRS® Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB). UK SDS is expected to institutionalize and unify SECR, TCFD, and ESOS reporting into an overall, annual set of sustainability reporting requirements. SDS will include:

  • ISSB S1 and S2 (which has incorporated TCFD) reporting, including Scope 3 emissions
  • Additional non-climate sustainability and ESG reporting disclosure
  • A detailed transition plan outlining the submitter’s path to net zero emissions

While SDS has yet to be finalized and officially implemented, we expect it will emerge as the definitive UK sustainability reporting standard when it's published in 2024. SDS may also introduce a UK Green Taxonomy, similar to EU sustainability legislation.

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UK Social Sustainability and Diversity Reporting

In additional to environmental and climate risk reporting, companies listed on the London Stock Exchange have had to disclose progress toward diversity targets on a comply-or-explain basis for financial years starting April 1, 2022. This past year, a large number of ESG-related proxy votes and shareholder proposals in the UK focused on topics like racial equity assessments, as well as efforts to combat workplace harassment and discrimination, making diversity (DEI or IDE) reporting another important reporting and disclosure area for UK organisations.

A Few Helpful UK Sustainability Reporting Recommendations

Your Next Steps With UK Sustainability Reporting

As you can tell from the length of this article alone, there are a lot of new and evolving UK sustainability laws going into effect in 2024 and future years. In fairness, it can feel very complex and daunting. However, from a positive perspective:

  • Most of these laws are being phased in over several years
  • UK regulators recognize they're at the forefront of global economic sustainable transition, and are looking to help UK companies successfully adopt and implement these changes
  • There's plenty of time to implement the necessary measures, standards, process changes, and reporting capabilities to keep pace - particularly for organisations who are proactive and already investing in these areas (or starting soon)
  • There are lots of existing market resources to help organisations and investors track, manage, and report around these changes more efficiently and effectively, including Brightest's software and services

For organisations in the early stages of their UK sustainability reporting journey, we have a few general recommendations, additional reading, and suggested next steps:

Materiality assessment - The principle of Materiality is embedded in most UK climate disclosure and sustainability laws, particularly within TCFD and the concept of double materiality. Materiality essentially asks and attempts to answer a fundamental question: what are the most important (re: material) ESG, climate, and sustainability risks and considerations for a business or investment? If your organisation hasn't already done so, a materiality assessment can help determine what your top sustainability goals, targets, risks, and priorities should be in relation to regulatory and investor sustainability reporting. In turn, this can help clarify where to focus, what to prioritize, and what aspects of pending or forthcoming UK and/or EU sustainability legislation matter most to you.

Understand the laws in depth - A full, in-depth breakdown of each law is outside the scope of this piece, but it is critical that, if your organisation meets UK sustainability disclosure criteria, you work with your leadership, directors, legal counsel, auditors, and other stakeholders to learn your organisation's specific obligations under each law.

Sustainability data systems and process - While this might go without saying, in order to report your organisation's sustainability performance, you need to know what it is - with a high degree of accuracy. Your materiality process can help guide you toward the main sustainability themes you may need to focus on and collect data around. Is employee travel a big source of your organisation's carbon footprint? Facilities? Manufacturing sites? Where does that data exist today, and how will you access or collect it? Many organisations start their sustainability reporting with relatively simple spreadsheets, surveys, and documents, but things can get complex fast - particularly for larger companies. If you're an organisation with a medium-to-large or complex environmental footprint, you likely need dedicated sustainability reporting and data management software, like the kind we design here at Brightest to help organisations stay compliant with SECR and other UK sustainability reporting requirements. Ongoing report archiving, version control, audit readiness, and governance are also important to think about, since you'll be reporting every year.

Further reading - Our free guides to sustainability measurement and sustainability reporting provide additional, detailed guidance and insights on how to measure and report your sustainability performance for SECR, TCFD, and other standards.