UK real estate businesses should consider reporting under TCFD, even if there is no legal requirement… yet


A raft of sustainability disclosure requirements is coming, and the Taskforce on Climate-Related Financial Disclosures (TCFD) has been leading the way in the UK. Understanding your organisation’s climate-related risks and opportunities has never been more critical.

The first mandatory TCFD-aligned disclosures were introduced by the FCA in 2021, affecting premium listed companies, banks, building societies, insurance companies, and large occupational pension schemes.

Requirements for large UK registered companies and large Limited Liability Partnerships (LLPs) were introduced by BEIS and came into effect from 6 April 2022. This requirement brings the greatest number of organisations into scope of mandatory TCFD reporting.

All measures are part of a government drive to introduce TCFD-aligned disclosures across the economy by 2025, as part of the UK’s wider net zero commitment.

The number of companies that disclose information compliant with the TCFD framework has increased, but their disclosure levels still failed to meet recommendations, according to the latest Status Report published by the task force. The main issue with disclosures is you need the metrics and data in a format for reporting. Many businesses have only recently started to quantify their emissions, so there is not a lot of historical data available. The Bank of England is aware of this and therefore the expectation is to provide qualitative risk assessment and scenario analysis for the time being.

The best disclosures will be based on the best quality data. Businesses will need to provide up-to-date, credible and detailed data to conduct meaningful risk analysis and scenario analysis. They will also need accurate emissions data for all scopes. Getting reliable data has always been an issue particularly when looking at scope 3 emissions as you are at the mercy of your supply chain. However, there are strategies you can implement to minimise this risk such as using a supplier-spend method as an initial step in prioritising which suppliers to focus and probe for activity-based data. 21st Century technologies such as Blockchain, IoT, automation and digital cloud-based platforms, have a key role in minimising human error, and ultimately improving data accuracy, transparency, and trust. It is also important to capture all data – scopes 1, 2 and 3 – into a single centralised system to better manage your data, identify hotspots, build a trajectory, and showcase your carbon footprint to a range of stakeholders in a relatable manner.

Companies should look to go above and beyond the TCFD mandate. Disclosure should not be seen as a tick-box exercise when there is more value to be created from real engagement. When embedded properly into an organisation, it is a strategic planning tool designed to drive internal change and allow better decision making in the transition to net zero.

The TCFD framework provides an excellent opportunity to test the resilience of an organisation’s strategy and business model. By testing multiple climate-related scenarios, organisations can make more informed strategic plans to manage risks and opportunities and build a resilient business.

Every UK real estate business, even if not legally required to do so, should consider TCFD-aligned reporting. From an institutional theory point of view, peer pressure will at some point turn into normalised pressure. Do you as an organisation want to be mandated and forced to shift with everyone else, or do you want to take appropriate actions in your own time and make that transition as smooth as possible? You could wait for the government to legislate, or you could be proactive and make those changes now and use that as part of your competitive advantage. Not forgetting the reputational risk of doing nothing. You only need to look at the news and social media to see that there is a much greater level of awareness around the impacts of climate change. This has been largely driven by the younger generations who will publicly shame businesses that are not doing their bit, which can have a damaging impact on a brands reputation and share value.

It is important to point out, reporting is an essential aid to the decarbonisation process, but it cannot bring about decarbonisation all on its own. If companies are to meet their ambitious net zero targets, they need to close the disconnect between the disclosures they are making under the TCFD framework and their own net zero journeys. Having a robust net zero strategy is essential, and the TCFD recommendations can be used to uncover climate-related risks and opportunities to help shape your strategy and drive meaningful action.

By applying a common set of requirements aligned with the TCFD recommendations, real estate businesses will be able to benchmark operating assets to assess their environmental impact. The real estate industry has a history of leading on sustainability initiatives, and often sets the standards by which other industries become measured, so let’s continue along this path and encourage all businesses to disclose and facilitate a unified standard for all.

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Dr Seyed Ebrahim

Dr Seyed Ebrahimi joined Alfa Energy (an Edison Energy company) in January 2022 as a principal consultant within the sustainability division. Ebrahimi has extensive research and consultancy experience in sustainable operations, data science, and technology applications in the real estate, energy, finance, aviation, agro-food and automotive sectors. He is well-versed in GHG emissions mapping scopes 1, 2 and 3, green supply chain strategies, net zero business strategies, life cycle assessments, the circular economy, industrial-urban symbiosis and environmental mitigation strategies.