Government outlines new corporate sustainability reporting rules to tackle greenwashing

19 October 2021

The Treasury has set out new plans which will require some large businesses to disclose their environmental impact, in a bid to weed out greenwashing.

The new Sustainability Disclosure Requirements (SDR) will ensure investors have the information they need to make informed decisions, and also set out expectations for certain firms around the publication of net zero transition plans.

The new requirements will also apply to pension schemes, investment products and asset managers and owners, and are part of the Chancellor’s plan for the UK to lead the world in green finance and sustainable investing.

Following the publication of a report – Greening Finance: A Roadmap to Sustainable Investing – which explains how SDRs will work, Chancellor Rishi Sunak commented: “We are already a world leader in green finance, and the roadmap will give us the opportunity to set new global standards for sustainability that will boost the economy, protect the planet and support our net zero goals. We want sustainability to be a key component of investment decisions, and our plans will arm investors with the right information to make more environmentally-led decisions.”

Greenwashing crackdown

Around 70% of the UK public want their money to go towards making a positive difference to people or planet. But the lack of common definitions around environmental sustainability has lead to greenwashing, misleading investors and consumers about how green a product really is.

First announced at the Chancellor’s Mansion House speech earlier in the year, the new integrated regime will bring together and streamline existing climate reporting requirements – such as the UK’s commitment to implement mandatory reporting aligned with the Task Force on Climate-Related Financial Disclosures (TCFD) – and go further. The government’s goal is to ensure consumers and investors have all the information they need to make investment decisions that drive a positive environmental impact.

Mandatory net zero roadmap reporting

An increasing number of organisations are making commitments to reach net zero emissions, and many organisations publish roadmaps, or transition plans which set out concrete actions and targets to achieve their ambition. To support organisations in this process, SDR will also require the disclosure of transition plans that align with the government’s net zero commitment, or provide an explanation if they have not done so.