EU and UK climate disclosure programmes: an overview

A collage showing a close-up of wind turbines in a row laid out in perspective on a vast field of grass and dirt, paired with a vectorized map of Europe

Governments are asking companies harder questions about climate action, with Europe leading the way. While the EU and UK already require large companies to report some energy and emissions data, these programmes are expanding in what they ask and whom they ask it from.

Many companies find it difficult to track all the new acronyms and understand exactly what’s required of them. But if you operate in the EU or UK and have 250+ employees or significant revenue and balance sheet, you likely need to start reporting advanced disclosures by 2023—including precise emissions across your full supply chain and detailed plans of how you’re going to reduce them this decade.

This guide—which we’ll keep updated as rules evolve—breaks down the main programmes: what they require, when they require it, and how they’re expected to change.

Watershed helps companies build high-impact, compliance-ready climate programmes. If we can help with anything from measurement to reductions to reporting, please get in touch.

Climate Disclosure: Terminology 101

A few key terms you’ll find throughout this post:

What climate disclosure programmes exist in the UK & EU

EU/UK Disclosures Regulatory Summary

Download the summary PDF →

Climate Disclosure Programmes in the European Union

The EU has adopted an ambitious “net zero by 2050” master policy plan, and is currently replacing their old climate disclosure regime (NFRD) with a new suite of programmes that will require all but the smallest companies to report on—and aggressively reduce—their emissions.

NFRD - Non-Financial Reporting Directive

NFRD requirement: Public-interest companies of 500+ employees. File in 2022.

The EU’s primary—but aged—ESG disclosures programme. While revised in 2019 to include TCFD questions, the update was optional for filers, and further adjustments have been shelved in lieu of a replacement programme (CSRD), which we cover in the next section.

What is required for the NFRD?

Filers must provide “information” (imprecisely defined) on process and outcomes related to the environment, human rights, employee treatment, anti-corruption efforts, and board diversity.

How do I submit my NFRD report?

Organisations are free to report the required information in line with a number of popular interpretations / approaches (e.g., GRI, OECD, ILO, or ISO 2600).

Whats next for the NFRD?

NFRD will soon be replaced by a more defined and more demanding successor programme, CSRD (see next section). While the first reporting year for CSRD won’t be until 2025 (on 2024 data), Watershed strongly advises advance preparation—particularly measuring supply chain emissions and having a concrete plan to reduce them.

CSRD - Corporate Sustainability Reporting Directive

a graphic displaying the timing and essential elements of CSRD, the EU ESG master program

The EU’s new master ESG disclosures programme, designed around their vision for an era of robust social action, particularly around climate. CSRD will replace NFRD (see prior section) with companies reporting to CSRD instead of NFRD beginning in 2025. It is expected to roughly quadruple the number of covered organisations—many of which will be reporting in depth on their carbon emissions for the first time.

What is required for the CSRD?

CSRD will add the following climate-centric disclosures to NFRD’s baseline:

CSRD also covers additional sustainability categories beyond just climate impact—like pollution, water, and biodiversity.

Organisations already reporting under NFRD will need to submit their first CSRD filing in 2025 (covering 2024 data). Newly eligible companies that never met the NFRD criteria can file a year later, or two years later if they're a publicly-listed SME. Though investors and other stakeholders are likely to ask for many of these inputs far in advance of those dates.

How is the CSRD going to be submitted?

CSRD disclosures will require auditing, and for the formatting to be machine-readable so that submissions can be aggregated into a single EU-wide database. While exact rules are forthcoming, each filing will be a clearly identifiable section within a larger existing annual report that combines financial and non-financial information.

Where is the CSRD going?

CSRD's rules are now substantially final. The EU Parliament and EU Council have both signed off on the programme, and CSRD became law on 5 January 2023. More detailed reporting standards, along with sector-specific requirements for the most “high-impact” (ie. carbon-intensive) sectors, will be consulted on and finalised over the course of 2023.

SFDR - Sustainable Finance Disclosure Regulation

SFDR requirement: Any org that manages, sells, or advises on investment products available to consumers in the EU. File in 2022.

The EU’s programme for creating ESG “nutritional labels” for financial products and the firms that market them—giving buyers and investors context on climate impact and any associated risks. SFDR will pair closely with the EU’s Green Taxonomy (see next section), the new rulebook on what counts as officially green.

What is required for the SFDR?

The programme has two “levels” of rules, both of which are now in force and applicable to the next filing date of 30 June 2023.

(What follows is a simplified summary of a highly nuanced ruleset. For precise details, see the official rulebook or get in touch with one of our programme specialists.)

How do I submit my SFDR disclosures?

Depending on the firm and product, SFDR disclosures can fall into one of three reporting categories:

  1. Public (ie. mandatory online disclosures)
  2. Pre-contractual (ie. a brief provided to prospective customers)
  3. Periodic Reports (largely annual)

While first-time filers in 2022 only needed to submit the qualitative portions as outlined here—this included specifying which quantitative measures would be tracked and disclosed starting in 2023.

What's next for the SFRD?

While SFRD is officially an EU-wide programme, some further country-level customisation is still expected. Discussions are also still ongoing around Level 2 specifics and how to harmonise the timelines with CSRD (as investors are being required to ask their portfolio companies for information that those companies haven’t yet had any regulatory reason to collect).

Climate Disclosure Programmes in the United Kingdom

The UK is positioning itself as a leader on ESG and climate reporting, and is replacing their pre-Brexit rules with far more comprehensive requirements—covering Scope 3 emissions and the specifics of how you’re going to reduce them.

SDR - Sustainable Disclosure Requirement

SDR is being designed as the new central regime for enhanced climate and ESG reporting in the UK, and is expected to eventually incorporate the other UK programmes covered here over coming years. Though SDR's first set of rules likely won't be finalised until 2023, SDR will ask companies for far more detailed data and plans than many past programmes, and Watershed recommends starting on compliance early.

SDR requirement: Most orgs with 500+ employees. File in 2023 or 2024.

What it’s going to require for the SDR?

  1. Answers to the 11 core TCFD questions. (While TCFD currently allows companies to choose whether they’ll cover Scope 3 supplier emissions, SDR is expected to require it.)
  2. Answers to other non-climate ESG questions, including impact on nature more broadly.
  3. A detailed transition plan outlining the submitter’s path to net zero emissions.

For items 1 and 2, SDR will mandate “double materiality"—ie. not just how climate change may affect a business, but how that business’ operations are likely to affect the climate.

How is the SDR going to be submitted?

While the formatting requirements and supporting guidance for these disclosures have yet to be finalised:

What's next for the SDR?

While SDR is moving forward with initial rulemaking and will emerge as the definitive UK standard, its also working to stay aligned with two parallel efforts:

In the interim, large UK businesses will mostly be asked to report on climate via a mix of SECR, ESOS, and the existing TCFD-based programmes covered in the next section.

The TCFD Roadmap

As SDR (see prior section) continues its development, various government agencies have put forward interim requirements for organisations to submit TCFD-aligned disclosures as part of a push to make said disclosures mandatory across the British economy by 2025.

1. FCA - Financial Conduct Authority

FCA requirement: Companies with UK-listed shares or global depositary receipts. All FCA-regulated asset managers and asset owners, including life insurers and pension providers. File in 2022.

Companies that issue UK-listed shares or global depositary receipts must answer TCFD’s core questions in their annual financial reports. These disclosures must also now include Scope 3 emissions—ie. from supply chains, unless said emissions are so small as to be “immaterial”. This is applicable as of accounting periods beginning on or after 1 January 2022.

FCA-regulated asset managers and owners must publish a pair of annual TCFD reports in a prominent place on their websites: one entity-level report covering the firm’s operations, and one covering their products and portfolios. Phase 1 applied starting 1 January 2022.

2. BEIS - Department for Business, Energy and Industrial Strategy

BEIS requirement: Public interest entities, and UK-registered companies (public or private) with 500+ employees and £500m+ in revenue. File in 2022.

Covered organisations must disclose answers to eight TCFD-esque questions via the non-financial and sustainability (NFIS) statement within their Strategic Report, else via the Energy and Carbon Report section of their standard Annual Report. Applicable to accounting periods starting on or after 6 April 2022.

SECR - Streamlined Energy and Carbon Reporting

SECR Requirements: All listed companies, plus any private orgs (including non-profits) that meet 2-of-3 of: (a) 250+ employees, (b) £36m+ revenue, (c) £18+ balance sheet. File in 2022.

Formerly known as the Energy Efficiency Scheme or Carbon Reduction Commitment, SECR is the main programme by which UK companies have reported their emissions to date. It’s expected to eventually fold into the more comprehensive Sustainable Disclosure Requirement (SDR) regime.

Learn more about Watershed's approach to SECR.

What is required for the SECR?

  1. Total energy consumption and all Scope 1+2 greenhouse gas emissions
  2. One intensity ratio (eg. emissions relative to a fixed business measure like revenue)
  3. Brief commentary about anything done recently to increase energy efficiency

For publicly-listed companies, this extends to their global footprint, while private organisations need only report on UK operations. Unquoted firms and LLPs must also disclose fuel purchased for all business travel beginning and ending in the UK.

How do I submit the SECR?

As a templated subsection in annual reports to Companies House.

What's next for the SECR?

While there were planned 2022 consultations about collapsing SECR into SDR (see above). this is still an open discussion as of January 2023.

ESOS - Energy Savings Opportunity Scheme

ESOS requirement: Listed or private orgs with either 250+ employees or both of €44m+ revenue and a balance sheet of €38m+. File in 2023.

A legacy programme inherited from the EU that requires an energy audit every four years (next in 2023).

What is required for the ESOS?

Covered organisations must measure and document their total energy consumption across their buildings, industrial processes, and transportation use—along with commentary on:

How do I submit the ESOS?

There is no set audit format and no submission requirement for any findings. Companies are merely asked to send notice that an audit has been completed, and to keep whatever records they have for potential inspection.

What's next for the ESOS?

As ESOS isn't a homegrown UK programme, its future beyond the 2023 reporting cycle is unclear. There was talk of a post-Brexit revamp involving:

Whether or when this expansion will take place is still uncertain. ESOS may alternatively be rolled up into SDR (covered above) in coming years. But for now it remains an active filing requirement for 2023.

A note on taxonomies

A green taxonomy is a definitive scoring system that assigns a pass/fail green value to various business inputs—like energy sources and a building's efficiency ratings. It allows for a fixed legal answer to the question “can I claim to customers or investors that this thing is actually green”.

Watercolor-style gauge from green to yellow to red with a needle pointing at light green

EU Green Taxonomy

All EU financiers will soon be looking at their portfolios through the lens of this new taxonomy to determine what’s green enough to meet various regulations and climate goals. And as regulators want to get tougher on emissions, they’re likely to adjust what qualifies as green and/or demand that funds have a higher concentration of green assets.

The system starts with six environmental objectives that truly green activities should support:

Alongside three mandatory conditions:

If an activity passes all three conditions, it’s EU green, or “taxonomy-aligned”. Though if it fails, it may still qualify as a transitional or transition-enabling activity, which would secure it a three-year temporary green rating (eg. a wind turbine manufacturer that’s reliant on dirty power would have that grace period to green their operations).

Some practical notes:

Though companies largely aren’t required to respond to the Green Taxonomy directly, an increasing number—whether directly or through an investor—will be subject to ESG programmes that mandate disclosure of how taxonomy-aligned various business inputs are.

UK Green Taxonomy

The UK is currently working on its own taxonomy, which will take the EU’s structure and apply a separate scoring thresholds based on the UK’s priorities and political context (ie. where it will be easier or harder for locally controversial activities to get a green rating).

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