ESG – environmental

The E in ESG stands for environmental. For businesses, it relates to the impact their activities have on the environment – and vice versa – and this is now taking centre stage as pressure mounts from all directions to address the climate crisis.

Governments are introducing environmental legislation aimed at driving progress towards climate targets. At the same time, stakeholders – including regulators, investors, lenders, employees, customers and supply chains – are increasingly demanding both action and transparency from businesses over their policies, processes and long-term sustainability.

The risks to businesses from failing to manage their environmental impact are huge but so too are the opportunities and competitive advantages for those that get it right.

Understanding the reporting and regulatory landscape in relation to your specific business and industry is key.

There is a growing multitude of environmental standards, regulations, policies, and taxes focusing on businesses and the environment. You must establish which apply to your business and what you need to do to comply, whether that’s gathering specific data, fulfilling reporting obligations or adapting the way you operate.

Unfortunately, this does come with obstacles because, like any fast-evolving area, you’re having to deal with moving targets, patchy available information and inconsistent terminology.

Challenges include:

• The complexity of standards and regulations – for example which standards and regulations apply to which sectors, and how these should be interpreted and applied
• How frequently standards and regulations are emerging, changing or evolving
• A lack of straightforward, practical advice together with limited expertise within many businesses

The UK Government has also introduced several incentives for business, for example R&D tax relief for environmental innovations, capital allowances with deductions for environmental projects and business rates with environmental deductions.

Net zero transition plans are now a focal point of ESG strategies. They’re how businesses move from defining their environmental commitments to acting on them. A net zero transition plan is a credible strategy for reducing carbon emissions, improving energy efficiency and aligning with wider net zero targets.

While transition plans are currently not mandatory within UK law, many businesses are proactively developing them as stakeholder expectations grow. The CSRD will require disclosure of transition plans on a phased basis from 2025 depending on business size.

Businesses must also consider the tax implications of transition plans as net zero driven business models change the way they operate. This is particularly relevant in innovative sectors such as energy and waste where tax law wasn’t written to accommodate new activities and business models. 

In addition to managing risks and building resilience, a net zero strategy can help unlock value, increase competitiveness and demonstrate that yours is a sustainable business with a long-term future.

Whether its in relation to environmental taxes, reporting requirements, net zero transition plans or stakeholder demands, ESG is driving a need for complex operational data that goes beyond traditional financial metrics.

There are now growing requirements for businesses to track, gather and accurately report on their environmental impact, governance practices and wider ESG initiatives – and often across complex, global supply chains.

Transparency over supply chains and managing potential risks are critical to ESG as businesses become increasingly accountable for the behaviour and practices of their suppliers. This can include everything from compliance with emissions regulations and waste management laws to responsible sourcing of materials, products and services.

Due diligence, control and visibility are vital to procurement. They are also essential in managing joint and several liability tax risks, particularly in relation to waste and packaging.

Our expert teams can help you navigate current and upcoming reporting requirements and regulations, ensuring you understand what’s relevant to your business, what you need to report on and what this involves.

We’ll support you in identifying key risks to your business and putting in place processes to manage these. We’ll help you understand reporting requirements and set up the systems to collect and analyse the data needed to make key decisions and fulfil your obligations. And we’ll work with you to  establish robust compliance processes.

We can help you understand the impact of new taxes, implement these and establish robust processes and controls for new and existing taxes. Our team is experienced in handling HMRC enquiries and audits and where necessary can support you in resolving disputes and with litigation. 

As part of your wider ESG strategy, we can help you develop and articulate your ESG strategy and net zero transition plans. These will align with recommendations from the Transition Plan Taskforce, linking investment requirements with cost savings potential, highlighting the payback period and expected carbon reduction. We can also help in translating this along with wider sustainability KPIs into ongoing reporting frameworks such as the TCFD. 

To give you the opportunity to discuss your business’ environmental journey and find out more about how our expert team can support you, we are offering you a free workshop-style ESG health check.

During your ESG health check, we’ll help you:

• Define your challenges and opportunities
• Establish your key ESG priorities, whether that’s responding to regulation, managing environmental taxes, developing a transition plan or more
• Identify the next steps on your ESG journey