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Sector Focus: Reporting on environmental sustainability in your financial statements and reports

01 Feb 2023 Expert insight

This content has been supplied by a commercial partner.

Currently, there are limited reporting requirements for the vast majority of charities in relation to their environmental impact. There is nothing related to environmental impact or sustainability included in the Charities Statement of Recommended Practice (SORP), and only those charities that meet the “large company” criteria are required to provide comment in their trustees’ report on the impact their organisation has on the environment; their policies in relation to this, alongside disclosures about their greenhouse gas emissions and energy consumption data.

However, additional reporting may be on the horizon as the public and stakeholders become increasingly interested in organisations’ environmental impact. Could this be an opportunity for faith charities to lead the way in displaying their environmental credentials? So far, many have embraced sustainability in various ways, such as installing energy saving devices and solar panels in their offices and other properties; joining the Climate Coalition; and setting targets for net-zero.

There is nothing to prevent you from providing additional disclosures in your trustees’ report to highlight your organisation’s commitment to combat the global climate emergency. Although environmental sustainability may not be a defined part of your charity’s objectives, the SORP requirement to disclose in the trustees’ report “the main achievements of the charity…and if practicable, explain any wider benefits to society as whole” provides the basis for including such disclosures.

New SORP

A new charities SORP will be issued to coincide with a revised FRS 102 and is likely to take effect for accounting periods commencing 1 January 2025 onwards. While we don’t yet know what new disclosure requirements will be included in this revised SORP, we have some insight into potential changes through the “engagement strand” briefings that have been published by the SORP Committee. These cover topics selected for consideration in the redrafting – one of which is sustainability reporting. It is therefore, distinctly possible that some environmental-related disclosure requirements will be included in the new SORP, although I believe it is too early to try to predict what form these might take.

The briefing acknowledges that the various reporting frameworks that currently exist are very detailed, and have substantial reporting requirements. The guidance published by various organisations, such as the Taskforce for Climate-Related Disclosures, are understandably focused on the activities of large multi-national organisations and may prove difficult to “scale down” to smaller charities in a meaningful way. It may take a number of years, or be unduly burdensome on staff or volunteers, to build up detailed reporting data on matters such as carbon reporting.

The current lack of defined reporting requirements about sustainability for charities presents an opportunity for faith charities to create their own tailored and focused reporting to showcase the actions that they are taking. Areas that you could consider including in your trustees’ report to highlight the work you are doing include listing any positive adaptions you have made to your offices and properties; noting any sustainable approaches you have towards business travel and the conduct of your business – for example, moving governance meetings to be held remotely to save on the impact of travel; and, if you have an investment portfolio, any actions you have taken to review the environmental impact of the organisations that you are investing in. You can also comment on any strategy that has been put in place to identify and manage the climate-related risks and opportunities that your charity faces.

Before you start drafting your disclosures, one thing that should be considered is how “public-facing” you consider your financial statements to be, and whether your beneficiaries and the wider public will have easy access to your reporting on sustainability if it is delivered in this form. It may be that, until any potential reporting requirements come into force, the information is more suitably distributed through your charity’s website or through other literature – or, a combination of all three channels. No matter how the information is publicised, I urge you to consider sustainability reporting and data collection in some format, so that through sharing your positive actions you can encourage others to do the same. 

Jane Askew is director and member of the faith charities team at haysmacintyre

 

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