What is happening?
The TPT has published a draft disclosure framework and implementation guidance for private sector entities to transition to a net zero economy, making recommendations for companies and financial institutions to develop gold-standard transition plans. The TPT also intends to publish a range of “sector-specific” guidance in 2023.
Why does it matter?
Climate change poses risks to companies, financial institutions and individuals alike, and the retail sector is already taking steps to address the challenge.
Over 80 leading retailers have committed to following the BRC Climate Action Roadmap, which aims to bring the CO2 emissions of the industry and its supply chains down to net zero by 2040. The Roadmap has three key decarbonisation milestones: stores by 2030, deliveries by 2035 and products by 2040.
The government has also introduced rules to encourage the transition to net zero. Mandatory climate-related financial disclosure requirements were initially introduced for premium listed companies in 2020 following recommendations of the Task Force on Climate-related Financial Disclosures. The requirements were then extended to standard listed companies in 2021 and to large private companies and LLPs in 2022.
By the end of this year, the UK government expects to consult on requiring large UK private companies, including retailers that meet the yet-to-be confirmed size requirements, to disclose how they will cut their climate emissions to net zero by 2050, in what are known as transition plans.
Transition plans will show investors how an organisation will reach net zero by 2050 across the organisation’s operations and value chains. HM Treasury set up the TPT to make sure that these are the ‘gold standard’, leaving no room for greenwashing.
What action should you consider?
Listed retailers should already be working on their transition plans. The FCA has urged companies not to wait for the introduction of formal rules but to use the TPT’s draft guidance to write draft plans which can be submitted for feedback.
In anticipation of the extension of the requirement to disclose transition plans to large UK private companies, non-listed retailers may also benefit from putting together transition plans since:
- mandatory requirements for non-listed companies to publish transition plans are expected to closely follow the existing requirements for listed companies
- companies publishing transition plans will be required to consider the carbon emissions of their suppliers and other companies in their value chains (whether listed or not)
- consumers are increasingly looking to reduce the environmental impact of their purchases.