2024 promises some significant changes in the energy and compliance policies that affect UK businesses. Here’s what you need to be aware of.
Corporate Sustainability Reporting Directive (CSRD)
This EU directive applies to any non-EU businesses that have at least one subsidiary or branch in the EU and meet other turnover and size criteria (see our quick guide for details). If your business is currently in scope, you will have to start reporting from 1 January 2024. The scope of the directive is set to expand in the next couple of years, so if your business has EU operations it’s wise to familiarise yourself with what compliance involves.
The EBDS is ending
The government’s Energy Bills Discount Scheme (EBDS) ends on 31 March 2024. For eligible businesses, it has been providing a per-unit discount when the wholesale price of electricity and gas rises above a certain level. Since wholesale prices remained below the EBDS threshold in the second half of 2023, most businesses will not have received any discount for some months anyway. But the end of this support is a nudge to be proactive about finding the best possible deal at contract renewal time.
EU Green Claims Directive
If your company trades in the EU, you will need to be aware of the EU Green Claims Directive, which is currently going through the European Parliament and may come into force this year. This means stricter rules on claims such as “wildlife-friendly” or “recycled”. Any claims about your product’s environmental credentials will need to be independently verified before you make them, and there will be “dissuasive” fines for non-compliance.
ESOS Phase 3 deadline
The final deadline for compliance with Phase 3 of the Energy Savings Opportunity Scheme (ESOS) is 5 June 2024. If your business is in scope, you should either have finished gathering your data for ESOS reporting or be over halfway through it. It is also important to appoint a lead assessor as soon as possible – again, if you haven’t already done this.
The requirements for the current phase, Phase 3, have been strengthened since the phase began in December 2019. It is important to stay on top of the current changes. This applies even if your organisation is using ISO 50001 as its route to ESOS compliance.
Check out our guide to ESOS Phase 3 for more detail on what you should be doing right now and keep checking the Energy Advice Hub for the latest ESOS updates.
UK Sustainability Disclosure Standards (SDS)
At some point in 2024 the government will be endorsing a UK-specific set of standards on how companies report sustainability-related risks and opportunities. These will be closely based on international standards already created by the International Sustainability Standards Board (ISSB) and will only differ “if absolutely necessary for UK specific matters”.
The plan is for the UK SDS to be in place by July 2024. They won’t be mandatory straight away; the government says that “decisions to require disclosure will be taken independently by the UK government, for UK registered companies and limited liability partnerships, and by the Financial Conduct Authority (FCA) for UK listed companies”.
You can view the international standards for free by registering with the International Financial Reporting Standards (IFRS) website. This will give a very good idea of what to expect from the UK SDS.
TCFD scope expands
In the meantime, UK-registered large companies and financial institutions are already required by law to do climate reporting in line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). This requires organisations in scope to disclose their climate targets and how they plan to reach them. The TCFD itself has now been disbanded and its responsibilities transferred to the ISSB, as of this year.
The official gold standard for climate transition plans was published in October 2023. In 2024, it is likely that the rules around sharing transition plans will tighten, requiring businesses to create plans more closely in line with this gold standard.
Reporting ahead of carbon border tax
The EU’s carbon border adjustment mechanism (CBAM) is currently in an early and transitional stage where importers to the EU have to report on their emissions but not actually pay a tariff on them. It is currently acceptable to calculate your reported emissions using the default values published by the European Commission. But from July 2024 this will no longer be allowed.
If your business exports carbon-intensive goods to the EU, now is the time to get familiar with the EU’s new methodology for calculating the carbon emissions of goods, because this will be the only acceptable method from 2025 onwards.
Anti-greenwash rules from the FCA
The Financial Conduct Authority is bringing in a set of measures requiring businesses to back up their sustainability claims. Collectively they are known as the Sustainability Disclosure Requirements (not to be confused with the SDS).
- From 31 May 2024, all FCA-authorised firms will have to ensure that their sustainability claims can be backed up by solid evidence. At the time of writing (January 2024), the FCA is still consulting on guidance for meeting the anti-greenwashing rule, but it is very likely that the basic principles of “correct, capable of being substantiated, clear, complete and aiding informed comparison” will remain.
- From 31 July 2024, firms can begin to use four labels for their products, if they meet the qualifying criteria: Sustainability Focus, Sustainability Improvers, Sustainability Impact and Sustainability Mixed Goals.
- From 2 December 2024, UK asset managers will have to meet anti-greenwash rules around how they name and market financial products.
Potential changes to the UK ETS
As we reported in October 2023, the UK Emissions Trading Scheme (ETS) will have a lower number of emission allowances available in 2024 compared to previous years. It is all part of a push to make the UK ETS work harder at delivering our net zero goals.
The government is currently conducting an evaluation of the UK ETS and reported in December 2023 that the scheme does not appear to be functioning as intended. There is a concern that UK businesses are not prepared to make big investments towards decarbonisation because of low confidence in the UK’s “direction of travel” – perhaps unsurprising given recent backtracking on key green measures.
Phase 1 of the evaluation ends in March 2024 and we may see some changes to the UK ETS once this is complete.
