UK firms set to face new requirements to back up climate claims

The government-backed Transition Plan Taskforce is seeking feedback on its disclosure framework, which requires firms to produce evidence of “concrete” short-term action taken to reduce their carbon footprints, according to a statement on Tuesday that was published to coincide with the COP27 climate summit in Egypt. 

Following up on rules unveiled at last year’s COP summit in Glasgow, the UK is set to force large companies and certain financial sector firms to publish a transition plan from 2023. The proposals take aim at so-called “paper decarbonisation”, which focuses solely on net-zero targets without providing a credible roadmap to emissions reduction.

“We have seen a wave of private companies announcing their ambitions to contribute to net zero,” said Amanda Blanc, chief executive of Aviva Plc and co-chair of the taskforce. “We now need financial firms and companies to come forward with high quality plans to show how they will meet their targets.” 

The UK, which was successfully sued by a group of climate activists earlier this year for putting forward an unclear net-zero plan, has nonetheless set itself the goal of being a world leader in climate finance. Its transition disclosure framework builds on the International Sustainability Standards Board’s recommendations, but with more “specificity and granularity”, according to the consultation document. 

The disclosure framework and implementation guidance are open for feedback until the end of February. The UK’s Financial Conduct Authority plans to base its disclosure requirements for corporations and investment firms on the final proposals.

The TPT’s framework gives companies scope to pursue climate solutions in so-called hard-to-abate sectors. Though these may fail to deliver a material reduction in their attributed emissions in the short-term, they might still contribute materially to the economy-wide transition, it said. 

The approach acknowledges “the contribution all companies, including those in the service sector with relatively low emissions, can play in enabling and accelerating the transition”, said Alison Rose, chief executive of NatWest Group Plc. 

While the framework is looking to weed out greenwashers, it’s also looking to tackle companies wary of putting their climate pledges up for public scrutiny, according to Jacques Morris, head of policy at the UK Centre for Greening Finance. Greenwashing has become pervasive even as businesses set more ambitious internal targets

“If there is nervousness from the market to talk about their net-zero targets, one way to support that is to give the market guidance on how to create a high-quality transition plan,” Morris, team leader of the TPT secretariat, said in an interview. 

The TPT also proposed:

• That any emissions-reduction target should consider Scope 1, 2, and 3 emissions and should prioritise decarbonisation through direct abatement over purchasing carbon credits
• Firms must disclose current and planned engagement activities with companies in their supply chains as well as customers, so as to align their activities with the climate transition
• Companies disclose whether and how they are aligning employees’ remuneration with the firm’s environmental objectives. BM/DM