New Reporting Rules Impacting Sustainability Reporting

• 46 of the FTSE 100 made restatements on their sustainability metrics this year;

• Most related to changes in methodology (44%), but over a quarter (29%) related to errors;

• Of these total restatements, 89% related to greenhouse gas metrics;

• With the introduction of new EU reporting rules upcoming, which will also impact a lot of UK corporates, an increasing number of restatements are likely to become more commonplace and cover a broader range of sustainability topics.

  
  

Almost half of companies (46) in the FTSE 100 made prior year adjustments to their previously reported climate and sustainability metrics this year, according to analysis by Deloitte.

Deloitte’s analysis looked at the climate and sustainability disclosures in the most recently published annual and/or sustainability reports as of 31 December 2023.

Of the restatements made, 89% related to greenhouse gas emissions (GHG) metrics, with the remainder (11%) comprised of a variety of other sustainability topics (including waste, water, diversity & inclusion, and health & safety). 32% of all restatements related to Scope 3 metrics – indirect emissions that occur in the activities of an organisation (including business travel, commuting, purchased goods and waste disposal).

The most frequent reason for restatements related to a change in method or measurement approach (44%), which is an acceptable practice for GHGs under the GHG protocol, whilst the second most frequent reason was the correction of errors (29%).

Steve Farrell, partner and head of sustainability assurance at Deloitte, said:

“From greenhouse gas emissions to food waste, workforce diversity to pay gaps – companies must increasingly report metrics beyond their financial information and, crucially, those figures must be trusted by investors, employees and other users of this information."

“Our analysis shows that a significant number of environmental, social and governance (ESG) metrics reported and published last year by the UK’s largest companies have since been updated, either because measurements have evolved, or worryingly, because they were incorrect to begin with. This is notable because prior year restatements are comparatively rare in the world of financial reporting and indicate a material change to previously reported figures."

“While this could indicate that quality and rigour around non-financial reporting is improving, it equally demonstrates the volatility of ESG reporting in the market today. With the introduction of a new regulatory framework for sustainability reporting – which some firms will report against in December 2024 – the market should expect to see even more adjustments, across an even broader range of metrics, appearing in UK plc reports.”

Known as the Corporate Sustainability Reporting Directive (CSRD), impacted companies will be expected to report on a wide range of material qualitative and quantitative environmental, social and governance disclosures from financial years starting as early as on or after 1 January 2024. The regulation is mandatory for impacted firms, and its reach encompasses large PLCs down to private UK companies with operations in the EU.

Katherine Lampen, partner and climate and sustainability lead at Deloitte, added:

“Accurate and transparent sustainability data in annual disclosures is not just good practice, it's becoming a business imperative. Investors, regulators, and consumers are increasingly demanding this information to make informed decisions, and advanced organisations are using this information to drive corporate strategy. Companies that proactively address this trend will position themselves for long-term success."