Reporting Metrics: Covering all data points

Regulations on Environmental, Social, and Governance (ESG) reporting have expanded in recent years, with further developments on the horizon. In the UK, there are established energy use and emissions disclosures, as well as the more recent Task Force on Climate-related Financial Disclosures (TCFD)-based requirements.

In the EU, we are starting to see the first disclosures published according to the Corporate Sustainability Reporting Directive (CSRD), whilst the US is debating on potential Securities and Exchange Commission (SEC) requirements. Given this heightened responsibility for reporting, businesses must be well-prepared and organised.

The first step is assessing which regulations are mandatory for your business, as the applicability thresholds differ. If not, it is still worth considering whether voluntary compliance would add value to your business.

The UK’s Streamlined Energy and Carbon Reporting (SECR) requires two of the following three thresholds to be met:

• over £36 million turnover
• balance sheet total of £18 million or more
• 250 employees or more)

For Climate-related reporting, companies can be caught by either the Department for Energy Security and Net Zero (DESNZ) or FCA regulations (or both). Under DESNZ regulations, companies meeting the following criteria must include Climate-related Financial Disclosures (CFD) in their Annual Report:

• Companies with more than 500 employees that are either traded, banking companies, or insurance companies.
• AIM-listed companies with more than 500 employees.
• Companies with over 500 employees and a turnover greater than £500 million.

The FCA listing rule 9.8 mandates that commercial companies with a UK premium or standard listing, including those that are sovereign-controlled, must include a TCFD statement in their annual financial report. This disclosure requirement applies to life insurers, asset managers, and FCA-regulated pension providers that meet the specified thresholds.

The EU’s Corporate Sustainability Reporting Directive (CSRD) has many thresholds which will be phased in over the next 4 years. Companies that meet two of the following three thresholds must produce a report for FY25:

• €50 million turnover or more
• €25 million in assets or more
• 250 employees or more

Metrics

Each of these regulations mandates the collection of specific data and metrics to track and compare progress. The volume of data required varies by framework, with the EU’s Corporate Sustainability Reporting Directive (CSRD) being the most comprehensive to date, encompassing over 1,100 metrics. However, there will likely be significant overlaps between the different requirements. It is crucial to ensure that you have adequate dedicated resources, whether internal or external, to manage this process effectively.

To facilitate a smooth and organized reporting process, we have a few key recommendations. It is advisable to start this process sooner rather than later to allow ample time to address any potential issues that may arise.

1. Assign a project lead: they will oversee the entire initiative, ensuring this responsibility is embedded in a specific role.

2. Identify and assess the required data: this ensures reporting requirements are met, and gaps are identified; designate a responsible individual for each data point or area.

3. Have a project plan: this should include deadlines, regular review meetings, a process for tracking progress and outstanding data, and a central repository with version control for data collection.

Whilst these requirements are additional work for businesses, the reporting can also add value to your business through customer retention, supplier engagement, increased access to capital, and a reduction in operating costs.

What’s next?

At Inspired, we support businesses in navigating the dynamic disclosure landscape.  

ESG reporting can be varied, therefore Inspired follows best international practices to ensure consistency and transparency in all deliverables. 

Inspired offer a comprehensive ESG disclosure service. Our expert ESG consulting solutions can support you in meeting your organisation’s unique ESG reporting requirements.