What’s new for sustainability legislation in 2023

Corporate sustainability has become an immediate priority and 30% of Europe’s largest companies have committed to reaching Net-Zero by 2050. Following COP27 and in the context of the climate crisis, we are seeing more and more sustainability legislation coming into place. Here we summarise some key legislation changes and look into what is in store for 2023.

EU reporting

The Corporate Sustainability Reporting Directive (CSRD) is the new common reporting framework on environmental and social impact for companies with EU operations. The reporting directive applies to companies with over 250 employees, a turnover of over €40 million and €20 million total assets. Though CSRD doesn’t come into force until January 2024, the new legislation will affect over 50,000 companies – meaning 2023 will be crucial for preparing the necessary data to comply. The CSRD will replace the existing EU Non-Financial Reporting Directive (NFRD).

UK requirements

No longer part of the EU, the UK has its own upcoming sustainability reporting requirements to look out for. The Task Force on Climate-related Financial Disclosure (TCFD) is a set of guidelines to help companies disclose climate-related financial risks and opportunities to stakeholders. While it is currently used by large companies across the world, TCFD has become compulsory in annual reporting for over 1,300 of the UK’s largest corporations (those with over 500 employees and £500 million in turnover).

The Sustainable Disclosure Requirements (SDR) are yet to be finalised, but are expected to be officially implemented as the UK sustainability reporting standard in 2023 that ties together SECR, TCFD and ESOS reporting. They will include reporting on scope 3 emissions, non-climate sustainability targets, and a detailed net zero plan — all helping to avert greenwashing by companies.

With regards to transport and infrastructure, there is a new government mandate to ensure that electric vehicle (EV) charging infrastructure is built into new homes, non-residential buildings, and some renovations. This will create over 145,000 charging points a year by the end of the decade and encourage the transition from fossil fuel vehicles.

Biodiversity reporting

Following the recent COP15 UN biodiversity summit in Montreal, nations have agreed to protect a third of the planet for nature by 2030. In line with this agreement and the Environment Act, the UK has set legally binding biodiversity targets to tackle problems such as air pollution and species loss. This has become urgent as the UK has been reported as one of the most nature-depleted countries, in the bottom 10% globally and last among the G7 nations. Companies are increasingly encouraged to set targets and report on biodiversity and could be surprised by the nature-related dependencies within their value chains. The Taskforce for Nature-related Financial Disclosures (TNFD) is a biodiversity reporting framework that is due to be finalised and released in September 2023. It is currently voluntary but there is a push to make it mandatory like TCFD.

Waste reporting

In order to reduce environmental impact, businesses producing waste have a legal Duty of Care to follow the DEFRA Waste Hierarchy. As well as diverting waste from landfill, the Waste Hierarchy has proven cost-saving benefits and increases awareness of business impact on the environment. It is also important to be aware of industry-specific regulations such as Waste Electrical and Electronic Equipment (WEEE).

A Plastic Packaging Tax now exists for businesses that manufacture or import 10 or more tonnes of plastic packaging within a 12-month period, and from January 2023 the new Extended Producer Responsibility (EPR) for packaging will come into effect. It is also likely that the UK will follow Scotland in implementing commercial food waste recycling legislation in 2023.

Moving forward into 2023

Much of the new legislation coming into place, such as CSRD, is focused on the principle of double materiality, so it is important to understand what this means in the context of your business. It is recommended to create a materiality assessment when doing sustainability work to identify and understand the topics that are of great importance or consequence to your organisation. Double materiality involves looking at both the impact the company has on sustainability matters (inside-out perspective) and how sustainability matters affect business performance and development (outside-in perspective). Even if your business is not large enough to report on CSRD or TCFD it is a good idea to get ahead in preparation for reporting in a similar way, and if possible, aligning with the Global Reporting Initiative (GRI).

Don’t hesitate to get in touch if you would like any advice on existing or upcoming reporting requirements.

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