Government seeks feedback on corporate reporting regime in move that will spark fears of further regulatory roll back
The government has today opened up a new front in its review of the UK's regulatory landscape, with the formal launch of a Call for Evidence on the future of non-financial reporting, including climate-related corporate reporting.
The Department for Business and Trade said the Call for Evidence would shape the Smarter Regulation Non-Financial Reporting Review, which it is conducting in conjunction with the Financial Reporting Council.
The wide-ranging review is to assess the non-financial reporting requirements UK companies need to comply with to produce their annual report and meet broader requirements that sit outside of the Companies Act. It will also consider if current company size thresholds that determine certain non-financial reporting requirements remain fit for purpose.
"Our departure from the EU allows us to shape rules and processes so that they work for the UK's specific circumstances, including for non-financial reporting," the government said.
The Call for Evidence stressed that the government has an ambition for the UK to become the world's first net zero-aligned financial centre. And as such it reiterated plans to consult on extending rules requiring the publication of Net Zero Transition Plans to large firms and assess new international corporate reporting standards that are being developed by the International Sustainability Standards Board (ISSB).
However, it also argued that "the time is right for the government to take a fresh look at the body of requirements companies need to comply with to ensure that the UK's corporate reporting framework continues to deliver what investors and other stakeholders need to support economic growth and long-term value creation".
The Call for Evidence specifically asks for feedback on how easy, or hard, it is to comply with current requirements, whether there are any difficulties in relation to data collection and what more could be done to make the production and distribution of information easier.
It also requests input on whether requirements are leading to the production of decision-useful information for use by investors, wider stakeholders and by the board of directors of companies themselves, and the degree to which stakeholders believe requirements within company law align with regulatory rules set by other regulators such as the Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA).
The exercise is likely to prompt a range of views. Some investors and campaigners have long-argued more detailed and comparable environmental disclosures and Net Zero Transition Plans are needed to help investors better gauge risks and opportunities, and drive companies to accelerate decarbonisation efforts. However, some businesses and commentators have complained about the scale sand breadth of non-financial reporting requirements and the administrative costs they impose.
As such, the Review will fuel fears that it could provide the government with an opportunity to row back on plans for more stringent environmental reporting rules and the proposal to extend mandatory Net Zero Transition Plans to large non-listed firms.
The Call for Evidence comes on the same day as MPs prepare to vote on the latest wave of amendments to the Retained EU Law Bill, which campaigners fear could enable the rolling back of a raft of crucial environmental rules and regulations.
The House of Lords last week backed a series of amendments designed to enhance parliamentary scrutiny over future changes to regulations and entrench environmental protections campaigners fear could be rolled back. But the government is today expected to reject many of the amendments put forward by peers.
The Wildlife Trusts today warned that the bill could lead to the revocation or dilution of The Conservation of Habitats and Species Regulations 2017 and The Water Environment (Water Framework Directive) (England and Wales) Regulations 2017 that protect hundreds of wildlife sites and set standards for limiting water pollution and over-abstraction.
As such, the group called on MPs to back an amendment put forward last week by Lord Krebs, which inserts a non-regression clause into the Bill that would ensure environmental protections and food safety standards cannot be weakened.
"It's crunch time for this dangerous piece of legislation that threatens nature and much-loved wild places," said Craig Bennett, chief executive of The Wildlife Trusts. "We're urging MPs to vote for amendment 48 which would require the Bill to maintain or improve existing levels of environmental protection and meet UK's international environmental law obligations.
"Without it, we could see regulations weakened over time - causing rivers to become even more polluted than they already are, precious places such as the New Forest to be built upon at some point in the future, and increased use of pesticides at a time when agriculture needs to reduce its dependency on dangerous chemicals. We need amendment 48 to ensure that laws are properly and democratically scrutinised before they're altered for ever.
"The government has consistently offered us bland assurances that they will uphold environmental protections. If they mean what they say, they will have nothing to fear by enthusiastically keeping the amendment tabled by Lord Krebs."
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You can read more on the UK's Mandatory Net Zero Transition Plans and wider environmental reporting regime in our recent Policy Briefing.
