The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 (the “SR Regulations”) come into force on 1 October 2013.

The SR Regulations both extend the scope of mandatory non-financial reporting obligations in the UK and introduce a new format for reporting.

The SR Regulations are another step in the emergence of ESG as a top-of-mind boardroom issue. This has been prompted by the conviction that companies that address ESG concerns can achieve higher growth rates and increased profitability, better stakeholder reputation and improved brand strength and an acknowledgement that ESG risks can seriously undermine investor confidence and the long-term prospects for businesses.

For some time, major companies have embraced voluntary reporting on sustainability issues, but mandatory ESG reporting presents particular liability risks.

In this update, we consider the challenges mandatory ESG reporting presents and how the risks can be mitigated, summarise the changes to be introduced by the SR Regulations and look forward to what’s in the pipeline in terms of ESG regulation.
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