Footwear legislation – reporting and transparency

We continue this series by considering the important aspect of correct reporting as required by many laws around the world.

by Nicola Pichel-Juan

The previous two articles in this series focused primarily on sustainability-related legislation relating to products in terms of obligations for the disposal of both the actual items and their packaging. In addition, the articles explained how products should be labelled to provide pertinent information to consumers, and how the sustainability credentials of a product should be communicated.

However, there is also legislation for reporting and transparency that applies at an organisational level, and that is the focus of this article.

Legislation exists in different parts of the world that is intended to achieve the following at an organisational level: i) greater business accountability and transparency relating to sustainability and reducing environmental impacts, ii) improving sustainability reporting to support the creation of a more sustainable and circular economy, iii) encouraging the implementation of energy-efficient measures with both economic and environmental benefits, and iv) the disclosure of climate-related financial information that considers the risks and opportunities being faced as a result of climate change.

Effects being felt across the supply chain

At the moment, much of the legislation is only applicable to very large organisations. However – as is often the case – this will indirectly affect smaller organisations as larger organisations seek to gain a better understanding and increased transparency of their upstream supply chains.

In 2018, the European Union implemented the Non-Financial Reporting Directive (NRFD), which applies to large public interest companies with more than 500 employees, including listed companies, banks and insurance companies. Those companies are required to report on non-financial key performance indicators and policies in relation to social responsibility and treatment of employees, respect for human rights, anti-corruption and bribery, and diversity on company boards.

The NRFD will be replaced in 2024 with the Corporate Sustainability Reporting Directive (CSRD). This will introduce much more detailed reporting obligations and standards covering environmental, social and governance considerations, which are commonly referred to by the abbreviation ‘ESG’.

A key change from the NRFD is that any information reported under the CSRD must be audited. While this will still only directly impact very large organisations – more than 250 employees and more than EUR 40 million turnover and/or more than EUR 20 million in total assets – more organisations will meet the CSRD criteria than for the NRFD.

An example – UK legislation

The UK has a number of corporate-level, sustainability-related items of legislation – ‘Streamlined Energy and Carbon Reporting’ (SECR), the ‘Taskforce on Climate-related Financial Disclosures’ (TCFD) and the ‘Energy Savings Opportunity Scheme’ (ESOS).

SECR affects large organisations which consume more than 40,000 kWh of energy in their reporting period and that meet or exceed the following criteria: i) annual turnover/gross income of more than GBP 36 million, ii) balance sheet assets of GBP 18 million or more, and iii) 250 employees or more. Companies meeting the criteria to report to SECR must include energy and carbon information (such as annual greenhouse gas emissions) within their published director’s reports.

A phased implementation of the TCFD began in April 2022. This initially affected organisations with more than 500 employees and a turnover of over GBP 500 million. They are obliged to incorporate TCFD-aligned climate disclosures in their annual reports, to cover such areas as how climate-related risks and opportunities are identified, how they are managed and what targets have been put in place relating to them. Resilience of the business to different climate-related scenarios is also an important consideration.

Finally, ESOS is a mandatory energy assessment scheme for organisations which employ more than 250 people, have an annual turnover in excess of GBP 44 million, and a balance sheet in excess of the same figure (although there are exemptions if the organisation is compliant with the ISO 50001 Energy Management Systems standard). Organisations meeting the thresholds for the scheme must carry out an assessment every four years considering energy use, business processes and transport to identify cost effective energy-saving measures.

Be prepared

While the legislation highlighted in this article only directly affects the very largest organisations, that does not mean that it can simply be ignored by smaller companies. There are two main reasons for this. Firstly, requirements for information will be passed through the supply chain to smaller companies, which will be required to provide details needed to larger organisations to allow them to meet their obligations. Secondly, over time, the thresholds on the legislation will be reduced. this means that an increasing number of companies will be directly affected. In fact, most of the legislation already has phased thresholds in place for the next few years.

SATRA recommends that all organisations take steps to be prepared ahead of any enforcement by beginning now to collect data and carrying out the analysis that would be needed to comply with the legislation. At SATRA, we published our first sustainability report earlier this year and are continuing to work to gain a greater understanding of our environmental impacts and what we can do to reduce them.

Publishing Data

This article was originally published on page 10 of the September 2023 issue of SATRA Bulletin.

Other articles from this issue »

---