Sustainability reporting in 2024

With the development of so many fast-moving and potentially overlapping requirements, the challenge of identifying and collating the data required, and applying the necessary materiality judgements on what to disclose, can be daunting.

Those acting now, with an informed strategy, will be well positioned to navigate upcoming changes as well as creating the agility to respond with ease over the years ahead. A clear plan that considers the bigger picture will allow you to implement and track the data you need to underpin your overall sustainability journey, and create value for your organisation.

Here, we explore what reporting developments are on the horizon for 2024 and 2025 and the transformative actions business can take to not only navigate compliance, but also secure immediate and long-lasting value.

Timeline for key UK and EU sustainability reporting regulations

1. Take a strategic approach to your reporting

The varied nature of new regulations means it is tempting to address them in isolation. However, identifying the interoperability of forthcoming regulations is critical to unlocking robust reporting alongside business value. You’ll be able to identify critical changes that address the regulations holistically. Instead of making multiple changes over the next few years, a more strategic approach will enable agility as well as cost and time efficiencies.

Reporting disclosure requirements are annual. The format you use in your first year of reporting forms the basis to replicate each year. Taking time to embed the right strategy that considers both the short and long-term requirements is critical. The insight and data gathered should then be reviewed to identify areas for improvement and drive continual change. Gaps can be closed and clear actions identified, unlocking long-term value.

2. Ensure your whole organisation is behind the reporting transformation

It pays off to invest the time early on in the sustainability reporting process, to engage the right people across the business, to establish clear ownership and accountability, and to upskill staff. Businesses that take a collaborative approach make the most progress.

A powerful illustration here is how the Corporate Sustainability Reporting Directive (CSRD) could require over 1,000 data points. Alongside this, there are a number of requirements where we don’t yet have finalised rules, but by getting your data in order now you’ll be able to welcome these with ease. For example, while the corporate components of the UK Sustainability Disclosure Requirements (SDR) are not yet finalised, organisations can start implementation work by applying what we already know about the International Sustainability Standards Board standards, as the UK Government has committed to incorporating these within the UK SDR framework.

The data collection process will require input and engagement from teams across the whole organisation and cannot be tackled from just one part of the business. Framing the project as cross-function, high priority, and with a defined leader can improve the likelihood of success. Your workforce will then have the skills and resources to navigate the evolving reporting landscape over the next few years.

Our experience with similar regulatory requirements, such as the Task Force on Climate-Related Financial Disclosures, is that implementation can take several years, and preparing early puts organisations in a strong position.

3. Tackle the data challenge head-on

Gathering reliable data is essential to meeting your reporting requirements. What regulators and standards bodies are ultimately trying to achieve is to raise the quality of non-financial data to be on a par with financial data - that is clearly a huge task. It’s therefore unsurprising that many businesses are struggling with a range of data-related challenges.

The starting point on data will vary depending on the organisation. Some businesses don’t have the data required, some have the data but don’t know where it is or who owns it, and others may have the data but find it’s not of sufficient quality or consistency to stand up to robust assurance requirements.

The key to approaching the data challenge is to break it down and start with one clear data set. You can then take a step-by-step approach to clean up the data for that metric, automate it and re-house it in a way that is secure and reportable - and repeat the same approach for all key metrics. Moving away from spreadsheets and towards a tech-powered approach with fully embedded, automated processes and controls is critical to unlocking commercial value, and meeting the higher standards demanded by stakeholders. Use of the cloud will allow easy aggregation of centralised data sets, and form that crucial agility that will give organisations the advantage. It also lays the groundwork to facilitate the use of powerful new technology, such as GenAI.

4. Consider materiality and report on what matters most

Underlying all sustainability reporting requirements is the need for a clear materiality assessment. It would be very easy for organisations to want to give as much information as possible about their sustainability efforts but this would be unwise for two reasons:

1. It gives the impression of greenwashing. Our recent PwC Global Investor Survey 2024 found that 94% of investors believe that corporate reporting on sustainability performance contains at least some unsupported claims, highlighting the importance of providing investors with balanced disclosures to avoid claims of greenwashing.
2. It obscures the key information. The definition of financial materiality for both the European Sustainability Reporting Standards (ESRS) and International Financial Reporting Standards (IFRS) standards is “Information is material if omitting, misstating or obscuring it could reasonably be expected to influence investor decisions.”

Getting this right requires careful and considered judgement, and will require input from across the organisation. It also means that the scale of the task at hand may not be as daunting as you might think, and you’ll be focused on the most important information.

5. View reporting as a way to drive business-wide value

Scrutiny of what organisations report and the commitments they make has never been greater. This is due to demands for transparency from a range of stakeholders, and a growing focus on greenwashing. Getting a clear reporting strategy will allow you to meet compliance, but also unlock wider value, from cost-efficiencies to increased brand reputation and more investment opportunities.

Stakeholders want to see genuine commitment. Your reporting says a lot about your brand and organisation as a whole. It’s ok to not have all the answers straight away - be transparent on your current position, and set stretching but achievable targets. Your reporting efforts will showcase your move to net zero and you’ll have the data needed to turn your climate ambition into action. Use this data to make continuous improvement, set constant review processes in place, and drive a culture that wants to change and deliver sustainable outcomes.

Time to act

Over time, sustainability will become embedded within the wider business strategy, enabling a continuous, evolving method of both reacting to regulations while accelerating decarbonisation and wider sustainability goals.

A clear reporting strategy forms the backbone of sustainability progress, allowing you to highlight areas of improvement and showcase your impact. The sooner you act, the sooner you will have the systems embedded to achieve compliance and gain competitive advantage.

Timeline for key UK and EU sustainability reporting regulations

In the UK, three important developments coalesce from periods beginning on or after 1 January 2025. This is when:

• The EU Corporate Sustainability Reporting Directive (CSRD) and EU Taxonomy will impact those UK companies caught by having EU subsidiaries over a certain size;
  
• The FCA has finalised its UK SDR requirements for asset managers, which come into force from 2024. The corporate components of UK SDR are expected to be based on UK-adapted versions of the ISSB Standards, which the Government committed to publishing by July 2024, and the UK Transition Plan Taskforce (TPT) outputs;
• The UK Corporate Governance Reform (the ‘Code’) proposals will apply, and from periods beginning 1 January 2026 the provision requiring a declaration from the Board to sign off on internal controls for non financial reporting (as well as financial reporting) will apply.