How to report on climate risk in my business
Which businesses are required to report under TCFD and which businesses may benefit from voluntary climate risk reporting.
The Task Force on Climate-related Financial Disclosures (TCFD) focuses on integrating climate-related risks into business strategies. This approach enables investors and other stakeholders to evaluate climate-related risks and opportunities.
To achieve this objective, TCFD has a reporting framework with disclosure recommendations so companies can understand and report their climate-related risks to investors, lenders, and insurance underwriters. The TCFD framework considers both ‘physical’ and ‘transition’ risks like legal liability and insurance. The framework has recognition as the benchmark for businesses to use to identify, assess and report on climate-related impacts.
Who must report under TCFD?
Since April 2022, reporting climate-related risks and opportunities has been mandatory for large companies and financial institutions in the United Kingdom.
Climate-related financial disclosure reporting is mandatory for:
- all companies currently required to produce a non-financial information statement annually, eg listed companies, banks and insurers with more than 500 employees
- UK-based Alternative Investment Market (AIM) companies with 500 or more employees
- limited liability partnerships (LLPs) with 500 or more employees and a turnover of more than £500 million
- non-listed companies with 500 employees or with a turnover of more than £500 million
These compulsory climate reporting categories are expected to expand to include more businesses in coming years.
How TCFD can benefit SMEs
Although climate reporting is only mandatory for large businesses, small and medium-sized businesses (SMEs) may be asked to report on these issues as part of their larger supply chain.
SMEs can use TCFD reporting to show their value in the supply chain by demonstrating they have considered climate-related risks and opportunities. Following the TCFD framework is an opportunity for SMEs to show investors and lenders that they are measuring and monitoring their climate risk in a structured and consistent way.
What are the TCFD themes and main disclosures?
TCFD has a set of recommendations for reporting across four key areas, which are:
To help identify your current and potential future impact in these areas, alongside accessing guidance to plan business actions, Climate NI has developed four step-by-step checklists, which you can find in this guide.