Monthly Corporate Sustainability Briefing
UK bodies have been busy on standards and regulation in recent weeks, despite Sunak’s backpedalling on net zero
While UK Prime Minster Rishi Sunak was making headlines last week by agreeing to ‘max out’ oil exploration in the North Sea, government advisors have had the awkward job this month of suggesting ways in which the country could position itself as a leader on greening business.
The UK body steering plans to create a “gold standard” for corporate climate transition plans has summarised feedback to its proposals. Since they were made last November, the Transition Plan Taskforce said it had engaged with more than 500 organisations and that “stakeholders strongly supported TPT’s approach, the core conceptual framework, and direction of travel”.
A final framework will be published in October, followed swiftly by a public consultation on sector-specific guidance for financial institutions, electric utilities & power generation, food & agriculture, metals & mining and oil & gas, to be released early next year. Recommendations on how transition plans can address climate adaptation, the just transition and nature are also in the pipeline.
All this will form the basis of regulatory requirements for listed companies to publish climate plans in the UK.
Sustainability disclosures, taxonomies and DNSH
The Financial Reporting Council has opened a call for evidence to help it advise the UK’s Department for Business & Trade on the creation of Sustainability Disclosure Standards, based on the ISSB’s new rules, to underpin all future ESG reporting rules in the country. The consultation closes in October and will inform official recommendations from the UK Sustainability Disclosure Technical Advisory Committee (led by the FRC) to government.
The UK Green Technical Advisory Group has sketched out how it thinks the upcoming taxonomy regulation should be drafted to account for companies’ broader environmental performance.
The concept of Do No Significant Harm was created by the EU to filter out business activities that undermine objectives like biodiversity and the circular economy, even if they contribute to climate goals.
The UK taxonomy is based on the EU’s, but GTAG is calling for a less “binary” approach to DNSH, saying that simply ruling a business activity ‘in’ or ‘out’ of the taxonomy based on whether it meets all the criteria isn’t helpful. The activity might actively contravene some of the criteria, but it may also just lack the paperwork or evidence to prove it doesn’t, for example. This is especially true for activities associated with older assets.
“Having a reporting framework that does not allow for this distinction to be communicated denies important information to the market and risks undermining the effectiveness of the UK’s wider green finance agenda,” GTAG said. It wants the regulation to give companies space to explain why they fall foul of any DNSH requirements and what they’re doing (if anything) to fix it. It also wants the 700 DNSH criteria to be reduced.
Companies are using incomparable metrics for their carbon targets and failing to disclose against those metrics in subsequent reports, according to research from FTSE. The data provider looked at 130 companies from the FTSE Europe Developed Index, of which more than two-thirds had an established decarbonisation target. “We were only able to identify the level of emissions reductions achieved in the target year for less than half of these companies,” it said, adding: “Where we can track targets, almost half of companies did not hit them.”
Meta has said it plans to work with two-thirds of its suppliers to set emissions reduction targets by 2026, and has issued a request for information to help it reduce or offset its value-chain emissions in hard-to-abate sectors.
Shell executive László Varró took to social media last week to point out that Vattenfall, Orsted and Iberdrola have all cancelled renewables projects recently. The firm’s vice president for the global business environment said the decisions demonstrated that similar moves by the oil majors lately isn’t driven by a lack of commitment to decarbonisation, but by “the same toxic combination of depressed returns, cost inflation and Byzantine regulatory bureaucracy” that green energy leaders are facing.
More than two thirds of people involved in mergers and acquisitions in Europe, the Middle East and Africa would pay a premium for targets that align with their own ESG priorities, according to a report from KPMG. The financial services firm surveyed more than 150 “active dealmakers” in the region and found that most considered ESG factors in their processes, but nearly half felt they lacked access to robust data and policies.