The Environmental Matters To Be Considered In Your Large Private Company’s Strategic Report

by Liz Seyi Digital marketing manager

In our previous blog post, we began to explore the subject of large private firms’ requirements with regard to energy and carbon reporting, including what must be stated in the directors’ report and how their corporate governance disclosures can best account for climate change risk.           

Today’s article represents a continuation of this theme, on this occasion focusing on the strategic report and section 172(1) statement for the benefit of the users of our Company Compliance Services.

What must your large private firm’s strategic report contain?

While the below is by no means an exhaustive rundown of what should be included in this important document, your organisation’s strategic report is required to consist of a description of the principal risks and uncertainties that the company faces, as well as analysis using key performance indicators (KPIs), including environmental KPIs.

Such analysis should be to the extent necessary so that the development, performance or position of the company’s business can be understood.

Explaining the section 172(1) statement

For financial years beginning on or after 1 January 2019, it is also necessary for large private companies to include a separate section 172(1) statement in their strategic report, with this statement also being published on their website.

The purpose of this statement is to describe how the directors have considered the matters in section 172(1)(a) to (f) of the Companies Act 2006 when performing their section 172 duty. All large private companies are required to provide such a statement, including subsidiaries, even if the parent company is obliged to produce a consolidated group strategic report.

 Section 172 requires a director to act in the way that he or she considers, in good faith, to be most likely to promote the success of the company for the benefit of its shareholders, with regard (among other matters) to the likely long-term consequences of any decision, as well as the impact of the company’s operations on the community and the environment.

 The actions that we would recommend you to take

 The steps that we would advise you to take in relation to the topics we have covered in our latest two blog posts, include ensuring that structures and systems are in place to obtain the energy and carbon data and information for the directors’ report.

 It is also recommended that you ensure the board has in place an internal control framework, reporting approach and risk management systems for the identification of climate change risks, as well as procedures to deal with managing and mitigating this risk, together with monitoring and reviewing processes.

 You may also consider whether responsibility for climate change risk should be delegated to a committee, with terms of reference covering the Wates principles’ recommendations or another adopted code on risk management.

 It should be considered, too, whether there are any principal or emerging climate change-related risks for the company. May your business operations face risks, for example, from the transition to a low carbon economy, or as a consequence of legislative requirements? Or perhaps your company’s business model depends on natural resources, thereby contributing to climate change risk, or there are certain reputational risks to your firm related to climate change issues?

 Your firm is also advised to consider whether a strategy should be developed specifically for addressing any climate change risks – in which case, it is also important for any such strategy and policies to be fully communicated throughout the company and integrated into your business’s decisions and operations.

 Finally, have you also ensured that there is a system for recording the directors’ consideration of section 172 and its impact on decisions taken by the company, so that a meaningful and informative section 172(1) statement can be provided in the strategic report?

 Don’t be afraid to ask London Registrars for further guidance

 Is your large private company looking to refine and enhance its corporate governance procedures as we head into the second half of 2019? If so, we will always be delighted here at London Registrars to provide the highest standard of Company Compliance Services to organisations such as your own; email info@london-registrars.co.uk or call 020 7608 0011 for more information.

 

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Created on Nov 2nd 2019 02:46. Viewed 211 times.

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