Comparing TCFD Reporting with Other Climate Disclosure Frameworks in the UK

As the global climate crisis continues to affect economies, societies, and industries, businesses in the UK are increasingly being called upon to disclose their climate-related risks and opportunities. Climate disclosure is an essential part of ensuring businesses can address environmental challenges, meet regulatory requirements, and maintain investor confidence. One of the most prominent frameworks for climate disclosure is TCFD reporting (Task Force on Climate-related Financial Disclosures). However, it is not the only framework available for businesses seeking to report their climate risks and sustainability efforts.

In this article, we will compare TCFD reporting with other key climate disclosure frameworks, highlighting the benefits, differences, and challenges each presents for businesses in the UK.

Comparing TCFD Reporting with Other Climate Disclosure Frameworks

While TCFD is one of the most widely recognised frameworks for climate-related disclosures, several other frameworks provide guidelines for businesses in the UK. These include the Global Reporting Initiative (GRI), CDP (formerly Carbon Disclosure Project), and SASB (Sustainability Accounting Standards Board). Let's explore the key differences and similarities between these frameworks.

1. TCFD vs. GRI (Global Reporting Initiative)

The Global Reporting Initiative (GRI) is one of the most established sustainability reporting frameworks globally. GRI focuses on a broad range of sustainability issues, including environmental, social, and governance (ESG) topics, while TCFD is specifically focused on climate-related risks and opportunities.

• Scope: While TCFD focuses on climate-related disclosures (governance, risk management, strategy, metrics), GRI provides a more comprehensive approach, covering topics such as human rights, labour practices, supply chain issues, and more.

• Audience: TCFD is primarily aimed at financial markets and investors, focusing on risks that can affect a company’s financial performance. GRI, on the other hand, targets a broader range of stakeholders, including customers, employees, and the public.

• Mandatory vs. Voluntary: In the UK, the GRI framework is voluntary, but some sectors and businesses opt to use it for comprehensive sustainability reporting. TCFD has been gaining traction due to increasing regulatory pressure, and it will become mandatory for UK-listed companies by 2025.

While both frameworks can complement each other, GRI reporting is broader in scope, while TCFD is specific to climate-related financial risks.

2. TCFD vs. CDP (Carbon Disclosure Project)

The Carbon Disclosure Project (CDP) is another widely used climate reporting framework that focuses on environmental impacts, particularly greenhouse gas emissions, water usage, and deforestation. CDP has a strong emphasis on measuring and managing environmental data.

• Scope: While TCFD reporting focuses on the financial implications of climate risks and opportunities, CDP provides a platform for companies to report their environmental data in detail, particularly on emissions and sustainability performance. The CDP questionnaire covers both direct and indirect environmental impacts, such as Scope 1, Scope 2, and Scope 3 emissions.

• Alignment: Many companies that report to CDP can integrate TCFD recommendations into their responses, as CDP asks for information about climate-related risks, governance, and strategies that align with the TCFD framework. This makes CDP an effective tool for companies looking to implement TCFD reporting, especially when it comes to metrics and emissions tracking.

• Global Reach: CDP is widely used across the globe, with an extensive database of environmental disclosures, while TCFD has gained traction more recently, particularly in the financial sector.

In summary, CDP focuses heavily on data collection and reporting of environmental impacts, while TCFD encourages companies to take a more strategic, risk-based approach to climate-related disclosures. These frameworks can work in tandem, especially for companies looking to align their environmental data with financial risks.

3. TCFD vs. SASB (Sustainability Accounting Standards Board)

The Sustainability Accounting Standards Board (SASB) provides industry-specific standards for disclosing financial material sustainability information. SASB focuses on financially material issues that are relevant to investors, much like TCFD.

• Scope: SASB standards are tailored to specific industries and focus on financially material ESG topics, such as water usage, waste management, and supply chain sustainability. TCFD, by comparison, is broader and focuses specifically on climate-related risks, including transition risks (e.g., regulatory changes) and physical risks (e.g., extreme weather events).

• Alignment: SASB standards can align with TCFD reporting in many areas. For example, companies reporting to SASB on environmental risks can use TCFD to guide disclosures on the financial implications of those risks. While SASB provides more industry-specific guidance, TCFD offers a holistic view of how climate change may affect a company’s bottom line.

For companies in the UK, SASB provides valuable sector-specific details that align with TCFD's broader focus on financial risk, making them complementary tools for reporting.

Benefits of TCFD Reporting in the UK

As the UK moves towards mandatory TCFD reporting, businesses can benefit from using this framework to:

• Enhance Transparency: Disclosing climate-related risks and opportunities in line with TCFD can increase transparency, demonstrating a commitment to sustainability.

• Build Investor Confidence: TCFD reporting is widely recognised by investors, helping companies gain access to capital by demonstrating a clear understanding of climate-related risks and opportunities.

• Ensure Regulatory Compliance: The UK government is moving towards making TCFD reporting mandatory for large businesses, so getting ahead of the curve can help companies stay compliant.

Conclusion

TCFD reporting is a crucial framework for businesses in the UK to disclose climate-related risks and opportunities. While GRI, CDP, and SASB offer complementary reporting frameworks, TCFD’s focus on the financial impact of climate risks makes it particularly valuable for businesses looking to meet investor expectations and align with regulatory requirements. By understanding the strengths of each framework, businesses can adopt a comprehensive approach to climate disclosures, ultimately enhancing their resilience in the face of climate change.