FRC Lab offers tips for net zero disclosures
The UK Financial Reporting Council’s FRC Lab has released a new report on net zero disclosures, offering companies tips and questions to consider in communicating their net zero commitments. It also comes with a related example set.
As the Lab observes, companies are increasingly making commitments to reduce greenhouse gas emissions, including net zero targets. “Investors and other stakeholders want to understand these commitments, and companies’ abilities to deliver against targets. However … reporting is too often aspirational and high level. It frequently fails to provide users with sufficient information. Investors also continue to call for better information in financial statements, including connecting net zero targets to relevant disclosures.”
The Lab therefore spoke with investors, companies and other stakeholders to understand the current reporting landscape and how disclosures are used. They identified three elements of net zero commitments that investors want to understand from disclosures: commitments, including level of ambition, scope, nature and timing, impacts on strategy and business model, and performance and its measurement in the short, medium and long term. What we particularly enjoyed about the report is the detailed advice on each of these elements, based on the needs and expectations identified by talking to investors.