UK corporate reporting is under pressure again, with companies once more being asked to up their game on climate disclosures.

UK regulator the Financial Reporting Council (FRC) says improvements are needed to meet the demands of investors on the climate crisis following a review. It also encourages companies to adopt reporting guidelines drafted by the G20’s Task Force on Climate-related Financial Disclosures (TCFD), a reporting system plugged by chancellor Rishi Sunak this week, who said they would be mandatory for companies by 2025.

With the UK hosting the COP26 summit on climate change next year there is mounting pressure to be seen as leading the way in confronting the crisis. Corporate reporting has become a key weapon in the fight.

The report also comes at a time when companies are being asked to open and frank about their survival prospects in the current coronavirus crisis.

According to Sir Jon Thompson, the FRC’s chief executive, expectations are growing. He says the review found good practice but it also found shortfalls in reporting and auditing. “I know this is a difficult time to ask for more,” says Thompson, “but now is the time for all of us to raise the bar.”

Lack of detail

The FRC has made in clear previous reports that it is the responsibility of boards to take into consideration the “impact” of their companies on the environment and report on it. The UK Corporate Governance Code tells boards to “promote the long-term sustainable success” of their charges.

That said the FRC has a number of criticisms. It says “there is little evidence that business models and company strategy are influenced by integrating climate considerations into governance frameworks,” adding that it is “unclear” how climate issues inform decision-making.

And while governance structures have adapted in a number of ways—with board committees and responsible directors—disclosures about their work were undermined when companies failed to reveal any detail about the level of expertise or skills of the personnel involved. Some boards failed to say how boards received information from dedicated climate committees.

There was also concern whether enough board time had been given to climate change, while many companies failed to say in climate disclosures how often their projects to achieve “net zero” are reviewed.

‘The board doesn’t get it’

That all leaves the FRC wanting more. It calls for better reporting on the selection process for board-level climate experts or committee members and explanation of how boards receive climate information.

According to one investor speaking to the FRC, board-level understanding of climate risks needs to improve.

“There are too many conversations where the board doesn’t get it. We don’t necessarily need a climate expert in every boardroom—it should be that every board member is accountable for the company’s long-term strategy and the climate aspects of that.” Another investor said: “In an ideal world the baseline knowledge would be higher than it is.”

Auditors came in for criticism too, with the FRC calling on them to up their game in when it comes to looking at climate risks. But it will be corporate boards that need to reflect at length on this report.