Environmental, social and governance | UK Regulatory Outlook November 2022

Climate transition plans: TPT consultation on disclosure framework and implementation guidance

On 8 November 2022, the UK Transition Plan Taskforce (TPT) published for consultation its proposed disclosure framework for private sector climate transition plans and accompanying implementation guidance. The framework provides recommendations for companies and financial institutions to develop gold-standard transition plans, and the guidance sets out the steps to develop a transition plan, as well as when, where and how to disclose a plan.

Briefly, the TPT considers that a good practice transition plan should cover:

• An entity’s high-level ambitions to mitigate, manage and respond to the changing climate and to leverage opportunities of the transition to a low greenhouse gas (GHG) and climate resilient economy, including GHG reduction targets (for example, a net zero commitment).
• Short, medium and long-term actions the entity plans to take to achieve its strategic ambition, alongside details on how those steps will be financed.
• Governance and accountability mechanisms that support delivery of the plan and robust periodic reporting.
• Measures to address material risks to, and leverage opportunities for, the natural environment and stakeholders such as the workforce, supply chains, communities or customers which arise as part of these actions.

The consultation closes on 28 February 2023. The final guidance is expected to be published next year.

European Parliament adopts position on proposal for Corporate Sustainability Reporting Directive

On 10 November, the European Parliament adopted its position on the proposal for a Corporate Sustainability Reporting Directive (CSRD). The CSRD introduces more detailed reporting requirements on companies’ impact on the environment, human rights and social standards, see more in our Insight. It is reported that under the new directive around 50,000 companies will be covered by the new rules, which is an increase from the 11,700 who are covered by the current rules. These new rules can be seen as huge progression in terms of reporting standards within the EU. Businesses that fall under the scope of the new directive must be aware of the steps they will need to take to comply with their obligations under the new directive.

Among the European Parliament's amendments, the majority of which were clarification points, they set out the deadlines for the differing sized businesses. The rules will start applying between 2024 and 2028, with smaller businesses having more time to adapt to the new rules. The timeline is as follows:

• From 1 January 2024 for large public-interest companies (with over 500 employees) already subject to the non-financial reporting directive, with reports due in 2025;
• From 1 January 2025 for large companies that are not presently subject to the non-financial reporting directive (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets), with reports due in 2026;
• From 1 January 2026 for listed small and medium enterprises (SMEs) and other undertakings, with reports due in 2027. SMEs can opt-out until 2028.

The Council adopted the proposal on 28 November, which will then be signed and published in the EU Official Journal. The directive will enter into force 20 days after publication. The new rules will need to be implemented by Member States 18 months later.