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UK Disclosure Framework for Net Zero Transition Plans in short

What is UK Disclosure Framework for Net Zero Transition Plans?

The UK Disclosure Framework for Net Zero Transition Plans is a set of guidelines that companies can use to report on their efforts to transition to net zero emissions and support the transition to a low-carbon economy. The framework was developed by the Taskforce on Climate-related Financial Disclosures (TCFD), an organisation established by the Financial Stability Board (FSB) to promote consistent and transparent reporting of climate-related risks and opportunities by companies.

The framework consists of four pillars: governance, strategy, risk management, and metrics and targets. The governance pillar focuses on how a company is managing its transition to net zero, including its governance structures, policies, and processes. The strategy pillar covers a company's long-term plans for transitioning to net zero, including its goals and strategies for decarbonising its operations and products or services. The risk management pillar covers a company's efforts to identify, assess, and manage the risks and opportunities associated with the transition to net zero. The metrics and targets pillar covers the metrics and targets that a company is using to track and report on its progress towards net zero.

The UK Disclosure Framework for Net Zero Transition Plans is voluntary, but it is intended to provide companies with a consistent and transparent way to report on their efforts to transition to net zero and support the transition to a low-carbon economy. It is also intended to provide investors, customers, and other stakeholders with the information they need to understand a company's efforts to address climate-related risks and opportunities.

Who needs to report on UK Disclosure Framework for Net Zero Transition Plans?

The UK Disclosure Framework for Net Zero Transition Plans will become mandatory for the following organisations:

  • UK listed companies
  • UK financial institutions

As stated before, the UK Disclosure Framework for Net Zero Transition Plans is voluntary, so companies are not required to report under the framework. However, the framework is intended to provide a consistent and transparent way for companies to report on their efforts to transition to net zero emissions and support the transition to a low-carbon economy. As such, it is likely that companies that are actively working to decarbonise their operations and support the transition to a low-carbon economy may choose to report under the framework to demonstrate their commitment to addressing climate-related risks and opportunities.

It is also possible that investors, customers, and other stakeholders may encourage companies to report under the framework in order to have a consistent and transparent way to understand a company's efforts to address climate-related risks and opportunities. In addition, some regulatory bodies or industry groups may encourage or require companies to report under the framework as part of their efforts to promote sustainable and responsible business practices.

What are the framework requirements?

  • Companies in scope are required to define and publish their net-zero transition plan.
  • The TPT recommends that a good practice transition plan should cover:
    ○ A company’s targets to mitigate, manage and respond to the changing climate and to leverage opportunities of the transition to a low GHG economy (including GHG reduction targets);
    ○ Short, medium and long-term actions the company plans to take to achieve its targets;
    ○ Measures to address material risks to, and leverage opportunities for, environment and stakeholders (i.e. workforce, supply-chains or customers) which arise as part of these actions;
    ○ Periodic reporting on transition plan.

What are the next steps?

  • The Disclosure Framework and Implementation Guidance is open for public consultation until February 2023.
  • The UK government plans their implementation within 2023.

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