The issue of climate change is rarely far from the headlines. It is clearly one of the biggest challenges we all face and our specialist teams are constantly working with business small and large on their plans and investments for a greener future for us all.

But one element of climate change which could pose a different kind of challenge is now looming large on the horizon – the reporting requirements for listed businesses relating to the Task Force on Climate-Related Disclosures (TFCD).

This is a very different form of reporting. It is not about how businesses intend to meet their climate commitments or their green plans. This is very specifically about how climate will affect businesses and, crucially, the measures they have taken and the provisions made.

The Chancellor announced at the end of last year that TFCD reporting would be mandatory by the end of 2025 so the issue is now in sharp focus for many companies.

Planning ahead

But we are not a listed business, you may think.

Well, that means that, when it comes into effect, you will not be immediately affected but that is only a delay. Most financial reporting changes feed through from the listed sector into other businesses in due course so it is something business owners would be wise to have on their radar now and to factor into their planning, even if it will not be mandatory for some time yet.

Indeed, it could well be something that affects non-listed companies even earlier. It is now on the agenda for investors and purchasers of businesses so any business that is involved in mergers and/or acquisitions activity (M&A) or that is seeking external investment to fund future growth may well find that the investment community wants this information first.

So what might it mean for your business?

Gauging the impact of climate change

The TFCD aims to ensure there is consistent, reliable disclosure by businesses on how climate change could affect their business. It also aims to ensure businesses are better equipped to assess potential partners and their future risks.

As an example, if you are a business in a rural area, then you will need to assess whether flooding could be an issue to you in the future or whether there are other climate change-related challenges facing the business which will have a financial impact.

With COP26 on the horizon as well, being hosted in Glasgow in October and November, this is an issue which is likely to get more attention so for all business owners and executives, it is most definitely not something which should be ignored.

If nothing else, all business owners and managers should be thinking about assessing their businesses for risks from climate change and putting in place plans to deal with these. It is not a simple task but expert advice is always available.

The social housing sector has already set up its own standards, the Sustainability Reporting Standards for Social Housing, which pick up many elements of TFCD and it is inevitable that other sectors will follow suit.

As with climate itself, this is an issue we cannot ignore. Acting now will always be the best option.

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