What the new UK SDRs mean for corporates

The long-awaited Green Finance Roadmap was published, in October 2021, by the UK government outlining the UK’s strategy for new sustainability-related disclosures. This roadmap was brought in due to a lack of common definitions around environmental sustainability which has resulted in investors and consumers being misled about how sustainable an organisation or product is.

It was announced by Rishi Sunak, the UK Chancellor, that these Sustainability Disclosure Requirements (SDR) were intended to become mandatory for all corporations in the UK by 2025. This roadmap set outs the UK’s intention to become a world leader in attracting green investment. The UKs target to cut down greenhouse gas emissions by 78% by 2035 and reach net zero by 2050 is a major driving factor for these new requirements becoming mandatory.

This roadmap brings together, under the SDR regime, existing sustainability-related disclosure requirements under one framework. Therefore, this framework is building on already existing global standards and best practices and will apply to UK premium listed companies, standard listed companies, large private owned companies and Limited Liability Partnerships, pension schemes and asset managers and owners. Additionally, it implements a ‘Green Taxonomy’ in order to assess environmental behaviour of corporates as well as counter ‘greenwashing’.

Implementing these requirements ensures that reliable information will be available to enable financial decisions to factor in and be assessed by objective ESG criteria as corporates will have to publish climate transition plans. Some organisations have already begun publishing climate transition plans to layout their progress towards their own net zero goals. Certain firms will be expected to publish transition plans that align with the UK government’s net zero commitment or provide an explanation for why they have failed to do so.

As these new SDRs are not set to become mandatory until 2025, it is expected that a staggered approach will be taken in regard to its implementation. This means that ‘economically significant’ organisations will be targeted within the first two years of these requirements becoming part of legislation.

The new SDRs are expected to broadly cover the following types of disclosure:

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