The Task Force on Climate-related Financial Disclosures (TCFD) is a global initiative that was established by the Financial Stability Board in 2015 to develop a set of recommendations for companies to disclose information on the financial risks and opportunities posed by climate change.
TCFD reporting is mandatory for some businesses, but it is also a useful planning, strategy and communication tool to understand how your business is responding to the climate crisis. Interested to understand what this regulation is, and how it applies to you? Read on…
To learn more about other reporting regulations and how they may affect your organisation's carbon accounting, check out our Ultimate guide for understanding your carbon footprint.
Who is required to report under TCFD in the UK?
UK companies with more than 500 employees that have either transferable securities admitted to trading on a UK regulated market or are banking/insurance companies (Relevant Public Interest Entities (PIEs))
UK registered companies with securities admitted to AIM with more than 500 employees
Large Limited Liability Partnerships (LLPs), which are not traded or banking LLPs, and have more than 500 employees and a turnover of more than £500m
Traded or banking LLPs which have more than 500 employees
UK registered companies not included in the categories above, which have more than 500 employees and a turnover of more than £500m
If your company falls under any of the above categories, you are required to report under TCFD.
It is worth noting that even if you don’t meet the above criteria, you should still understand the TCFD UK requirements and consider voluntarily reporting under them. Doing so allows you to:
Demonstrate your company’s commitment to sustainability and transparency
Benefit from improved governance processes
Future-proof your organisations against climate change risks
Identify opportunities for your business
Respond to the demands, and concerns, of investors and clients to respond to climate change
Prepare your organisation to meet future mandatory regulations
TCFD is not just applicable to UK organisations - it is a global initiative and is being rolled out in other countries too. Regulators in the European Union, Japan, New Zealand, Switzerland, Hong Kong, Singapore and Brazil have already started mandating TCFD reporting for certain companies, and it’s likely that more countries will follow suit in the near future.
What is included in a TCFD report?
TCFD reporting focuses on four key areas:
Companies are expected to disclose their governance arrangements for climate-related risks and opportunities. This includes describing their board’s oversight of climate-related risks and opportunities and detailing management’s responsibilities in assessing and resolving these risks and opportunities.
Companies should describe their strategy for transitioning to a low-carbon economy. This includes detailing how short, medium and long-term risks and opportunities will be addressed and how it will impact the business’ strategy, and financial planning.
TCFD Risk management
Companies will assess the potential impact of climate-related risks on their business. This includes describing the processes followed for identifying and managing these risks, and how these processes will be included in the organisation’s overall risk management system.
TCFD Metrics and targets
Businesses need to provide metrics and targets to measure progress towards their goals. They also need to disclose their Scope 1 and 2 emissions, as well as when appropriate their Scope 3 emissions.
How should you stay ahead of the TCFD reporting game?
Start early and plan ahead. It takes time to appropriately assess risks and opportunities and gather the required information, such as the data needed to quantify your greenhouse gas emissions
Take advantage of the data you already collect for carbon reporting to inform other environmental Indicators. You will already be collecting data on waste and water as part of measuring your carbon emissions
Use TCFD reporting as an opportunity to improve any existing sustainability strategy or initiatives, and to communicate your progress to internal and external stakeholders
Be transparent and honest in your reporting. Be clear on your risks and articulate the opportunities with care
Engage with stakeholders, including investors, employees, customers, and suppliers, to understand their expectations and concerns
Don’t treat TCFD reporting as a tick box exercise. Use it as a chance to drive positive change in your business
Don’t ignore the risks of climate change. Even if you are not required to report under TCFD, it is still important to understand the potential impact of climate-related risks on your business. This will help you future-proof your organisation against risks such as flooding, drought, extreme rainfall, storms, and heatwaves
Don’t be complacent. Climate change is a rapidly evolving issue, and companies need to stay up-to-date with the latest developments and trends. Check out our useful links section for useful resources to stay up-to-date on latest trends
Don’t underestimate the importance of TCFD reporting. Investors and other stakeholders are increasingly looking for companies to demonstrate their commitment to sustainability and transparency, and TCFD reporting is a key way to do that
In conclusion, TCFD is an important initiative for businesses to stay ahead of the curve and respond to the climate emergency. Even if your business is not required to report, voluntary reporting can still be a useful tool for improving climate-related risk management and communicating with stakeholders your sustainable aspirations.
Are you required to complete a TCFD reporting? Or are you just interested in learning more about it? Get in touch with our expert team to see how we can help support you with expert data analytics you can trust to decarbonise with confidence.