The UK Government is looking to “simplify” corporate reporting requirements. This simplification apparently includes removing specific ESG factors from corporate reporting. A recent Crowell memo examines the proposal and summarizes how it could change disclosures for UK companies:
“The government proposes to replace most existing strategic reporting requirements with five baseline narrative disclosures covering a company’s business model, performance, resources and relationships, strategy and principal risk exposures. Critically, the following would be removed as explicit legislative requirements:
- Environmental matters, including the impact of a company’s business on the environment;
- Employee matters, including employment policies, engagement and diversity;
- Social and community matters;
- Respect for human rights; and
- Anti-corruption and anti-bribery matters.”
This proposal follows global trends in North America and Europe, which have sought to scale back ESG over the past several years. Similar actions in the EU and Canada have delayed or reduced corporate ESG reporting requirements. However, in the case of the UK, there may be a trade-off occurring. The UK is currently grappling with ISSB alignment. A recommendation on whether the government should adopt mandatory ISSB-aligned reporting is expected next year. Many of the above topics are covered in the ISSB standards. While these topics will no longer be required in corporate financial reports, the information may migrate to ISSB reports. This proposal would not alter climate reporting in the UK, which is currently under a TCFD framework. Despite removing ESG factors from corporate reporting, the government stated that companies may be required to furnish information on the above topics if they are deemed financially material.
Our members can learn more about ESG disclosure laws here.
