In this article, we’ll explore everything you need to know about REACH – from its key objectives and processes to its impact on businesses and the environment.

Everything you need to know about the REACH regulation

Chemicals are everywhere – from the cleaning products under your sink to the materials used to manufacture your favourite gadgets. But have you ever stopped to think about the risks these substances might pose to human health or the environment? For years, these concerns went unaddressed on a broad scale, leaving significant gaps in regulation. That’s where the EU’s REACH Regulation comes in.

REACH, which stands for Registration, Evaluation, Authorisation, and Restriction of Chemicals, is one of the most comprehensive chemical safety regulations in the world. Since its introduction in 2007, it has been pivotal in ensuring that chemicals are used safely, all while building innovation and sustainability across industries.

👉 In this article, we’ll explore everything you need to know about REACH – from its key objectives and processes to its impact on businesses and the environment.

The REACH Regulation, short for Registration, Evaluation, Authorisation, and Restriction of Chemicals, is the cornerstone of the European Union’s approach to managing the risks posed by chemical substances. Effective since June 1, 2007, REACH was designed to protect human health and the environment while simultaneously promoting innovation and competitiveness within the EU chemicals industry.

At its core, REACH shifts the responsibility for chemical safety onto the companies that manufacture, import, and use these substances. This means businesses must proactively gather data on the properties and potential hazards of the chemicals they work with and submit this information to the European Chemicals Agency (ECHA) for assessment.

But REACH doesn’t stop there. It goes beyond merely identifying risks – it requires companies to implement measures to manage these risks effectively. The regulation also encourages the phase-out of hazardous substances by promoting the development and use of safer alternatives.

One of REACH’s most significant achievements is the creation of a centralised database managed by ECHA. This database not only helps regulators assess chemical risks but also provides consumers and professionals with access to hazard information, ensuring transparency across the board.

REACH applies to all chemical substances manufactured or imported into the EU in quantities of one tonne or more per year.

It ensures a high level of protection for human health and the environment.

By encouraging safer alternatives, it supports innovation in green chemistry.

👉 REACH is more than just a set of rules – it’s a proactive approach to safeguarding our future while driving sustainable progress across industries.

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The Regulation for Registration, Evaluation, Authorisation and Restriction of Chemicals, also known as REACH came into force on 1st June 2007. 

REACH  was put into play to improve the previous EU legislative framework for chemicals and also to improve the protection of human health and the environment.

In essence, any chemical which you import to any country in the EU needs to comply with the REACH regulation. 

The chemicals could be for example liquid or gas form, and may be active or not active.

This regulation doesn’t only apply to huge industrial processes but also to the chemicals which are used in our daily lives. 

Like cleaning products or paints or in items such as clothing or furniture.

There is a lot of information which pertains to the REACH regulation. 

But for the scope of this course we'll touch on the basics which you might need to know. 

So, what is the significance of this regulation? How does it apply?

Well, to comply with this regulation, companies need to check and manage the risks involved with their products that contain or use chemicals.

They then need to DEMONSTRATE to the European Chemicals Agency, also known as ECHA, that they understand the risks. They will also be required to prove how the product can be safely used while also communicating the risk management measures to the downstream users. 

Chemicals which are already regulated by other legislations, like medicines or radioactive substances, may be partially or completely exempted from the REACH requirements.

Now, let's look at the various processes under REACH. 

The registration process applies to chemicals which are imported at amounts greater than 1 tonne a year (that is from the 1st January to the 31st December). 

You’ll need to aggregate the volume of your substance as a substance on its own, in a mixture, and in a product intended to be released.

These substances will need to be registered, if it was not already registered by a different entity. 

There may be cases where some of the ingredients of your substance might still be under review. 

Like for example with our client MyAirShield, one of the active components in their product was still under review when we were trying to register the product. 

We therefore had to register the product in each member state individually.

In order to register, you’ll be required to prepare a registration dossier. This is composed of a technical dossier and, where applicable, a chemical safety report if you manufacture or import more than 10 tonnes of a substance per year. 

How much would this cost?

REACH calculates the price based on two main factors:
How many tonnes are sold in the EU per calendar year, and
The turnover of the company that is registering the substance.

The more tonnage and the larger the income of the company trying to register the substance, the more costly registration will be. 

Next let's look at the EVALUATION process.

This process covers two areas:
Dossier evaluation and
Substance evaluation

The dossier evaluation is where ECHA checks that the registration dossiers contain information of chemicals required by the legislation applicable to your product.

The SUBSTANCE evaluation involves member states which evaluate the substances AFTER they have identified specific concerns.

So the evaluation phase involves an assessment phase where your testing proposals are examined, IF you are looking to do tests. 


The whole point of this evaluation phase is to avoid unnecessary animal testing, especially when involving vertebrate animals. 

You’ll need to wait for ECHA’s decision before you can perform any testing. 


Now, let's look at the AUTHORISATION process.

Okay, so this process is to ensure that the risks related to substances of very high concern (also called SVHCs) are correctly controlled throughout their life cycle. 

A substance can be classified as an SVHC if one or various hazardous properties are identified in it.

These hazardous components are:
Substances that meet the criteria for classification as carcinogenic, mutagenic or toxic for reproduction also called CMRs
Substances which are persistent, bioaccumulative and toxic (or PBT) or VERY persistent and VERY bioaccumulative (vPvB) according to REACH Annex 13
And 3 , substances on a case-by-case basis that cause an equivalent level of concern as a CMR or PBT/vPvB substance 

If a substance is identified as an SVHC, it is included in what is called the Candidate list. 
There are some immediate obligations for suppliers whose substances are on this list.
Transcript
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REACH: Understanding Chemical Regulations for a Safer World

Before REACH, chemical regulations across Europe were fragmented and often inadequate. Many substances were in widespread use without proper evaluation of their risks to human health and the environment. Action was typically reactive – problems were addressed only after evidence of harm emerged, often too late to prevent damage. 

REACH was introduced to change this. It aimed to take a proactive approach, ensuring that the risks of chemicals are identified and managed before they can cause harm. By requiring companies to collect data on the safety of their substances and submit it for review, REACH set a new standard: no data, no market.

Beyond safety, REACH also sought to encourage innovation. By pushing companies to phase out hazardous substances in favour of safer alternatives, the regulation became a driver for research and development in green chemistry. This focus on sustainability not only helps protect people and the environment but also strengthens the EU’s position as a leader in the global chemicals industry.

REACH wasn’t just about fixing the gaps in regulation. It was about setting a new benchmark for chemical safety and ensuring the EU remains at the forefront of sustainable and competitive practices. It’s a regulation designed to protect and promote progress. 

Examples of banned substances under REACH and why they are banned

REACH’s stringent evaluation and restriction processes have led to the banning of numerous chemicals that pose significant risks to human health and the environment. These bans highlight REACH’s proactive approach to reducing exposure to hazardous substances and encouraging safer alternatives. Below are some examples of substances that have been restricted or banned under REACH, along with the reasons behind these decisions. 

<table>
  <thead>
    <tr>
      <th>Substance</th>
      <th>Reason for Ban</th>
      <th>Impact of the Ban</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>Chromium VI compounds</td>
      <td>Highly toxic and carcinogenic, posing risks to workers and causing soil and water contamination.</td>
      <td>Driven innovation in safer alternatives for metal finishing, significantly reducing occupational exposure and environmental contamination.</td>
    </tr>
    <tr>
      <td>Asbestos</td>
      <td>Linked to severe health impacts such as lung cancer, asbestosis, and mesothelioma. Previously widely used in construction and insulation.</td>
      <td>Phased out asbestos-containing materials, protecting workers and the public from long-term health risks.</td>
    </tr>
    <tr>
      <td>Lead in paints</td>
      <td>Highly toxic, particularly to children, causing neurological damage and developmental delays.</td>
      <td>Reduced public health risks and encouraged the development of safer, lead-free alternatives.</td>
    </tr>
    <tr>
      <td>Phthalates (e.g., DEHP, DBP)</td>
      <td>Used as plasticisers but linked to reproductive toxicity and hormonal disruptions.</td>
      <td>Encouraged the use of non-toxic plasticisers in consumer products, ensuring safer toys, packaging, and other items.</td>
    </tr>
    <tr>
      <td>PFAS (per- and polyfluoroalkyl substances)</td>
      <td>Persistent 'forever chemicals' that bioaccumulate and are linked to cancer and immune system suppression.</td>
      <td>Phasing out PFAS promotes eco-friendly alternatives and improved waste management practices.</td>
    </tr>
  </tbody>
</table>


Recent updates to REACH and related regulations

The REACH Regulation and its related frameworks are continuously evolving to address emerging concerns and improve chemical safety. The most recent update is the revised Classification, Labelling, and Packaging (CLP) regulation, which came into force on 10 December 2024. These updates are designed to enhance the identification, classification, and communication of chemical hazards, ensuring that businesses and consumers have access to clear, accurate information. 

Key changes under the revised CLP regulation:

Clearer classification rules: New guidelines ensure consistent classification for mixtures and multi-constituent substances, with a greater focus on grouping chemicals.

Improved labelling requirements: Digital labelling rules aim to make hazard information clearer and more accessible, especially for products sold at refill stations.

Expanded regulatory authority: The European Commission can now request classification proposals from ECHA or EFSA, increasing harmonised oversight.

New hazard classifications: Classes for endocrine disruptors, PBT, and PMT substances are fully implemented, targeting high-risk chemicals.

Updated reporting obligations: Companies must update REACH dossiers or CLP notifications to align with the revised rules and classifications.

💡 Companies are encouraged to review their portfolios and update classifications as needed. Proactive compliance not only ensures adherence to the new rules but also demonstrates a commitment to safety and sustainability in an increasingly regulated market.

How does REACH compare to regulations in other countries?

The EU’s REACH Regulation is often considered one of the most comprehensive and stringent chemical safety frameworks in the world. It sets a high standard for identifying, managing, and restricting hazardous substances, but how does it compare to regulations in other regions, such as the United States? 

One key distinction is that REACH operates on a “precautionary principle”. This means that substances must be proven safe before they can be marketed or used in the EU. In contrast, regulations in countries like the US often take a more reactive approach, requiring evidence of harm before action is taken to restrict or ban a chemical. For example:

Asbestos: While asbestos is heavily restricted and essentially banned in the EU, its use is still permitted in certain applications in the US.

Phthalates: The EU has strict restrictions on phthalates like DEHP due to reproductive toxicity concerns, whereas regulations in the US are narrower in scope and often specific to certain products like children’s toys.

REACH applies to nearly all chemical substances, including those in everyday products like electronics, furniture, and cosmetics. This broad applicability contrasts with the US Toxic Substances Control Act (TSCA), which focuses more narrowly on industrial chemicals, leaving some consumer goods less regulated.

Proactive substitution of hazardous chemicals

REACH places significant emphasis on phasing out Substances of Very High Concern (SVHCs) and encourages companies to adopt safer alternatives. In the US, while there is growing attention on safer substitutes, this is not yet a regulatory requirement on the same scale as REACH.

The EU’s “right to know” provisions under REACH (eg. Article 33) allow consumers to request information on whether a product contains SVHCs. Such consumer rights are not as prominently featured in other chemical safety regulations.

The EU’s leadership in chemical safety often sets a benchmark for other countries. However, these differences also create challenges for companies operating globally. A substance restricted under REACH may still be allowed in other regions, leading to discrepancies in product formulations and compliance strategies. For example, cosmetics containing certain parabens or PFAS may still be marketed in the US, despite bans in the EU.

REACH is built around four core processes – registration, evaluation, authorisation, and restriction. Together, these form a comprehensive framework to ensure the safe use of chemicals throughout their lifecycle. Here’s how each component works: 

At the heart of REACH is the principle of “no data, no market”. Any company manufacturing or importing chemical substances into the EU in quantities of one tonne or more per year must register these substances with the European Chemicals Agency (ECHA). This involves providing detailed information about the substance’s properties, potential hazards, and safe use.

The registration process requires collaboration between companies working with the same substances to reduce duplication and costs. For many businesses, this stage is resource-intensive but critical – without a valid registration, the substance cannot be legally marketed in the EU.

Once substances are registered, ECHA and the member states assess the information submitted. This evaluation phase has two main goals:

Compliance checks: Ensuring the data meets regulatory requirements.

Substance evaluation: Identifying any risks to human health or the environment that may require further investigation.

If concerns arise, ECHA can request additional testing or restrict a substance’s use.

Some chemicals, known as Substances of Very High Concern (SVHCs), pose significant risks. These include carcinogens, substances toxic to reproduction, and those that persist in the environment. Such substances are added to a list requiring authorisation for specific uses.

The authorisation process pushes companies to seek safer alternatives. While these substances can still be used in limited cases where no viable substitute exists, businesses must prove their use is justified and that risks are adequately controlled.

For substances that present unacceptable risks, REACH can impose restrictions or outright bans. This ensures that dangerous chemicals are managed effectively or removed from the market entirely, protecting both consumers and the environment.

One of the defining features of REACH is its broad applicability. It doesn’t just affect chemical manufacturers, its reach extends across a wide range of industries and companies. If your business deals with chemicals in any capacity, it’s likely you have obligations under REACH. Here’s a breakdown of who the regulation applies to:

If you produce chemical substances in the EU – whether as raw materials for other industries or for use in your own products – REACH directly applies to you. Manufacturers are responsible for identifying risks associated with their substances and providing safety information through registration with ECHA.

Importing chemicals, mixtures, or even finished goods like furniture or electronics into the EU comes with REACH responsibilities. If the substances in these products exceed the one-tonne annual threshold, it’s your duty as the importer to ensure they are registered and meet REACH requirements.

Many companies use chemicals as part of their production or professional activities without realising they may have obligations under REACH. For example:

A furniture maker applying varnishes and adhesives.

A cleaning company using chemical solutions.

While downstream users don’t need to register substances themselves, they must ensure the chemicals they use are sourced from REACH-compliant suppliers and that they follow safety guidelines provided in the registration dossiers.

If you’re based outside the EU and exporting products to the EU, you’re not directly bound by REACH. However, compliance becomes your responsibility if you appoint an EU-based “only representative” to handle registrations on your behalf. Otherwise, it’s the importer’s obligation.

The bottom line: REACH’s scope is vast and touches almost every sector – from agriculture and construction to cosmetics and electronics. Even if you’re not directly manufacturing or importing chemicals, as a downstream user, your role in the supply chain could still bring REACH obligations. Ignorance of the regulation isn’t a defence - ensuring compliance is a shared responsibility across industries.

Enforcement mechanisms for non-compliance

REACH is a regulation with serious implications, and its effectiveness hinges on robust enforcement. Ensuring compliance across the EU is critical to achieving its goals of protecting human health and the environment. This is why REACH has a well-defined enforcement framework to address instances where companies fail to meet their obligations.

Enforcement of REACH falls primarily to the national authorities of each EU member state. These bodies are responsible for monitoring compliance and taking action when violations occur. This may include:

Conducting inspections of manufacturing sites, import operations, and downstream users. 

Auditing company records to ensure accurate registration and reporting.

Verifying that restricted substances are not being marketed or used unlawfully.

Non-compliance with REACH can result in significant penalties, which vary by country. These can include:

Fines: Financial penalties can range from moderate sums for minor breaches to substantial fines for severe or deliberate violations.

Market restrictions: Companies that fail to register their substances or comply with authorisation requirements may find their products banned from the EU market.

Criminal charges: In extreme cases, where violations pose a direct threat to public health or the environment, criminal proceedings may be initiated.

❗️The "no data, no market" principle underpins REACH enforcement. Substances without valid registration cannot legally be manufactured or imported into the EU.

The European Chemicals Agency (ECHA) plays a central role in REACH enforcement by:

Managing the central database for chemical registrations.

Supporting national authorities with compliance checks.

Providing scientific and technical guidance to ensure consistent enforcement across member states.

To prevent non-compliant products from entering the EU, customs authorities work closely with national enforcement agencies. Importers must provide evidence of REACH compliance for their goods, ensuring that the regulation is upheld even for products sourced outside the EU.

REACH also includes mechanisms for public oversight. Consumers have the right to request information about whether products contain Substances of Very High Concern (SVHCs), holding companies accountable for transparency in their supply chains.

Chemicals can cause significant harm to the environment if not properly managed. Persistent substances, such as PFAS, accumulate in ecosystems, contaminating water supplies and affecting wildlife health. Heavy metals like lead and mercury can disrupt aquatic life, while certain pesticides have been linked to biodiversity loss, including the decline of pollinators like bees. The impact of hazardous chemicals isn’t just local – it can spread across ecosystems, leading to long-term consequences for soil, air, and water quality.

At its core, REACH isn’t just about managing risks – it’s about creating a safer and more sustainable future. By addressing the impact of chemicals on the environment, the regulation plays an important role in protecting ecosystems and promoting long-term sustainability.

One of REACH’s primary objectives is to minimise the release of harmful substances into the environment. Through its evaluation, authorisation, and restriction processes, the regulation ensures that substances with significant risks are either tightly controlled or removed from the market entirely. This reduces pollution in air, water, and soil, safeguarding natural habitats and biodiversity.

REACH pushes industries to innovate by encouraging the replacement of hazardous substances with safer alternatives. Substances of Very High Concern (SVHCs), for example, are subject to strict authorisation requirements, motivating companies to invest in research and development for sustainable solutions. This shift not only benefits the environment but also drives progress in green chemistry.

The public database maintained by the European Chemicals Agency (ECHA) is a powerful tool for environmental protection. By making information about chemical hazards accessible, REACH empowers businesses, regulators, and consumers to make informed decisions. This transparency creates accountability and helps to build trust in the safety of products used across industries.

REACH complements broader EU sustainability initiatives, including the European Green Deal and the circular economy action plan. By ensuring that chemicals are managed responsibly throughout their lifecycle – from production to disposal – the regulation supports the shift towards a cleaner, more resource-efficient economy.

For many businesses, REACH compliance represents a significant shift in how they handle chemicals. While the regulation has brought undeniable benefits in terms of safety and sustainability, it also comes with its fair share of challenges. From administrative complexity to financial burden, companies often face hurdles when meeting REACH’s requirements. 

<table>
  <thead>
    <tr>
      <th>Challenge</th>
      <th>Description</th>
      <th>Solution</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>Administrative burden</td>
      <td>Companies are required to gather extensive data about the properties, hazards, and uses of their substances. Registration involves detailed technical documentation and collaboration with other registrants for shared substances.</td>
      <td>Hire dedicated compliance experts or external consultants to guide the registration process. Invest in internal training programs to upskill teams on REACH requirements. Use digital tools or software to manage documentation and streamline workflows.</td>
    </tr>
    <tr>
      <td>Financial implications</td>
      <td>Compliance costs include testing, registration fees, hiring specialists, and potential updates as regulations evolve. These expenses can be particularly challenging for SMEs with limited budgets.</td>
      <td>Develop a clear budget plan that accounts for REACH compliance. SMEs can explore financial support options, such as EU grants or subsidies designed to assist with regulatory compliance. Collaborate with other registrants to share testing costs.</td>
    </tr>
    <tr>
      <td>Complex supply chains</td>
      <td>Businesses reliant on long supply chains often face difficulty ensuring that all substances meet REACH requirements. Inaccurate or incomplete information from suppliers can threaten compliance.</td>
      <td>Conduct thorough due diligence by auditing suppliers regularly. Establish clear communication channels and request documented proof of REACH compliance. Implement supply chain management software to monitor compliance across all partners.</td>
    </tr>
    <tr>
      <td>Substitution pressures</td>
      <td>REACH encourages replacing Substances of Very High Concern (SVHCs) with safer alternatives. Identifying substitutes that meet technical and economic needs can require significant R&D investment.</td>
      <td>Allocate resources for research and development into safer alternatives. Partner with industry groups or academic institutions to share knowledge. Leverage government incentives or grants for innovation in green chemistry to offset development costs.</td>
    </tr>
    <tr>
      <td>Navigating evolving regulations</td>
      <td>REACH is continually updated with new substances added to restricted or authorisation lists, requiring businesses to adapt and reassess compliance on an ongoing basis.</td>
      <td>Subscribe to updates from the European Chemicals Agency (ECHA) to stay informed about regulatory changes. Appoint a dedicated compliance officer or team to monitor updates and implement changes. Use compliance software to track and adjust processes.</td>
    </tr>
  </tbody>
</table>


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Transcript
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In this article, we’ll explore the legacy of TCFD, the benefits of its recommendations, and how its principles have been seamlessly integrated into the ISSB’s standards.

TCFD standards: everything you need to know

Climate change continues to pose significant risks to global financial stability, underscoring the need for robust and transparent climate reporting frameworks. For years, the Task Force on Climate-related Financial Disclosures (TCFD) served as a cornerstone, helping businesses disclose climate-related financial risks while aligning environmental responsibility with financial transparency.

In October 2023, the TCFD was officially disbanded, with its responsibilities fully integrated into the International Sustainability Standards Board (ISSB). All TCFD recommendations have been incorporated into the ISSB's IFRS S2 Climate-related Disclosures Standard, alongside IFRS S1 General Requirements for Sustainability-related Disclosures. While businesses can still use TCFD guidelines during a transition period if required by regulations, the long-term goal is a unified global standard through the ISSB.

This marks a transformative step in corporate climate responsibility, simplifying the process for companies and investors while fostering greater consistency in sustainability reporting.

👉 In this article, we’ll explore the legacy of TCFD, the benefits of its recommendations, and how its principles have been seamlessly integrated into the ISSB’s standards.

The Task Force on Climate-related Financial Disclosures (TCFD) was established by the Financial Stability Board (FSB) in 2015 as a strategic response to the growing recognition of climate change as a critical financial risk. Its purpose was to provide a structured framework for companies and financial institutions to disclose climate-related financial information transparently.

The TCFD had a twofold aim: to inform investors and stakeholders about the climate-related risks and opportunities companies face, and to foster a more sustainable, low-carbon global economy through informed investment decisions. By addressing the gap in reliable climate-related financial information, the TCFD played a pivotal role in elevating climate considerations in financial decision-making.

The objective of the TCFD was to facilitate consistent climate-related financial disclosures that could be used by companies, banks, and investors to provide information to stakeholders. 

💡 The TCFD framework places significant importance on assessing the financial impacts of climate-related risks and opportunities. This involves quantifying how these factors might influence key financial metrics, such as operating costs, revenue streams, asset valuations, and access to capital. By linking risks (eg, transition risks from policy changes or acute risks from extreme weather) to potential financial outcomes, organisations can provide stakeholders with a clear picture of their financial resilience and strategic priorities. Similarly, opportunities such as efficiency improvements or low-carbon product development can be evaluated for their potential to drive cost savings and revenue growth.

Having fulfilled its remit, the TCFD succeeded in driving significant improvements in corporate climate disclosure practices globally. Its recommendations set the foundation for standardised, comparable climate-related reporting, paving the way for the development of the International Sustainability Standards Board (ISSB) framework, which now incorporates all the TCFD’s principles. Additionally, the TCFD’s influence is evident in the European Union’s Corporate Sustainability Reporting Directive (CSRD), which mandates detailed sustainability disclosures for in-scope companies. Together, these frameworks reflect a unified push toward greater transparency and accountability in corporate sustainability reporting, ensuring consistency across jurisdictions and sectors. 

Confused about the TCFD? We’ll, you’re not alone. In this video, we explain what it is, when it is used, why it is helpful, and how it helps small and medium sized businesses like yours position themselves for risk migration and opportunity gain. Watch and learn. 
Special thanks to Michael Milewski for his knowledge sharing, script writing and overall support.

What is the Task Force on Climate-Related Financial Disclosures (TCFD)?

The Task Force issued its ‘Final Report’ in 2017, laying out 11 voluntary recommendations collectively known as the TCFD framework. While this report established the foundation of the TCFD’s work, the Task Force continued to release supplementary reports and updates in subsequent years, reflecting ongoing developments and best practices in climate risk reporting. These recommendations quickly gained global recognition, reflecting the urgent need for greater transparency in climate risk reporting.

👉 Since its inception, the TCFD has garnered support from over 4,900 organizations across 103 jurisdictions, underscoring a growing global consensus on the importance of climate-related disclosures in financial decision-making. 

💡 The TCFD's influence extended well beyond voluntary adoption. Its principles served as the foundation for regulatory frameworks in many jurisdictions, including the European Union, Singapore, Japan, New Zealand, and the United Kingdom, where climate risk disclosures are progressively becoming mandatory. In the United States, California enacted Senate Bill 261 in 2023, mandating that companies with annual revenues over $500 million doing business in the state disclose climate-related financial risks in alignment with the TCFD framework. This shift from voluntary guidelines to regulatory requirements reflects the global financial sector's commitment to integrating climate accountability into decision-making processes.

This shift from voluntary guidelines to regulatory requirements reflects the global financial sector's commitment to integrating climate accountability into decision-making processes.

The 2023 TCFD Status Report, released in October 2023, highlights the significant progress made in climate-related financial disclosures while also identifying areas where further work is needed. The report reflects a substantial increase in the adoption of TCFD recommendations across industries and geographies, driven by growing regulatory support and investor demand for transparent climate-related information.

Increased disclosure: 58% of companies disclosed information aligned with at least five of the eleven recommended disclosures for fiscal year 2022, up significantly from just 18% in 2020. This increase reflects the growing adoption of TCFD recommendations as companies respond to regulatory pressures and market expectations.

Full alignment remains low: Despite improvements, only 4% of companies fully aligned with all eleven TCFD recommendations. This highlights ongoing challenges in achieving comprehensive climate disclosures, particularly in areas such as scenario analysis and the financial quantification of climate-related risks and opportunities.

Enhanced reporting practices: The report observed notable progress in key areas such as reporting on climate-related risks and opportunities, board oversight of climate issues, and setting climate-related targets. Between 2020 and 2022, there were significant strides in integrating these elements into corporate disclosures, particularly among leading firms in regulated jurisdictions.

Geographical and sectoral disparities: While adoption rates are increasing globally, the report highlights variations in progress between regions and industries. Developed markets, particularly in jurisdictions with mandatory reporting requirements, show higher alignment compared to emerging markets where such mandates are less common.

The TCFD successfully laid the groundwork for standardised, comparable climate-related disclosures. Its principles have now been fully incorporated into the ISSB's IFRS S2 Climate-related Disclosures Standard, ensuring that its legacy continues through a unified global framework.

The TCFD standards were built around four core areas: governance, strategy, risk management, and metrics and targets - designed to provide a structured and transparent approach to climate-related financial disclosures. These standards formed the foundation for how companies reported on climate risks and opportunities, enabling consistent and comparable information for investors and stakeholders.

One of the TCFD's core principles is its focus on financial materiality, which examines how climate-related risks and opportunities impact a company's financial performance, such as revenues, cash flows, and asset valuations. This focus contrasts with the double materiality approach adopted by the European Union's Corporate Sustainability Reporting Directive (CSRD), which considers not only how sustainability issues affect financial performance but also how a company's activities impact the environment and society. This difference underscores the complementary but distinct objectives of the TCFD and CSRD, reflecting varying global approaches to sustainability reporting.

With the disbandment of the TCFD in 2024, these principles have been fully incorporated into the International Sustainability Standards Board’s (ISSB) IFRS S2 Climate-related Disclosures Standard. This ensures that the TCFD’s recommendations remain central to the global framework for sustainability reporting.

How climate risks and opportunities were defined

The TCFD emphasised the importance of translating climate change impacts into measurable financial risks and opportunities. To foster a shared understanding between companies and investors, the task force developed a taxonomy that organisations were encouraged to reference in their disclosures.

The TCFD categorised climate-related risks into two main types:

Transition risks: Risks stemming from the shift to a low-carbon economy, including changes in policy, legal frameworks, market conditions, and technological advancements.

Physical risks: Risks directly linked to the physical impacts of climate change, which can be categorised as chronic or acute. Chronic risks refer to long-term changes such as rising sea levels and increasing average temperatures, while acute risks involve short-term, extreme events like hurricanes, floods, and heatwaves.

By addressing these risks, companies provided transparency on how climate change could disrupt operations or create financial vulnerabilities.

The TCFD also highlighted opportunities that organisations could leverage to address climate change while deriving financial benefits. Key areas included:

Improving resource efficiency to lower costs and emissions.

Transitioning to low-emission energy sources to mitigate environmental impact.

Developing and distributing climate-friendly products and services to meet evolving market demands.

Organisations adhering to the TCFD framework were encouraged to disclose the potential current and future financial impacts of these risks and opportunities. This critical element helps stakeholders better understand how climate change might affect revenues, cash flows, and balance sheets over time.

❗  Recognising the uncertainty surrounding global warming's full scope, the TCFD emphasised the critical role of forward-looking scenario analyses in refining sustainability strategies and financial assessments over time. These scenarios allow organisations to evaluate how different climate futures - such as a 1.5°C or 2°C warming scenario - might impact their operations, financial performance, and resilience. By incorporating forward-looking scenario analyses, companies can:

Assess vulnerabilities in their business models under various climate pathways.

Identify strategic opportunities to adapt to or mitigate potential risks.

Strengthen long-term decision-making by aligning with climate goals and stakeholder expectations.

Forward-looking scenario analyses are now a cornerstone of the ISSB's IFRS S2 Climate-related Disclosures Standard, ensuring that this vital practice continues to shape corporate climate strategies in a rapidly changing world.

Climate risk is fundamental to today’s decisions. The Financial Stability Board formed TCFD to detect what insight is needed.

Are You Aligned with TCFD Reporting?

The TCFD framework consists of four key pillars (governance, strategy, risk management, and metrics and targets) which are further broken down into 11 specific recommendations. These recommendations provided a detailed roadmap for companies to structure their climate-related disclosures effectively. 

The TCFD also distinguished between those relevant for all sectors and those tailored to specific sectors. This approach ensured that disclosures remained both comprehensive and adaptable to the unique challenges and opportunities faced by different industries.

Governance focuses on how a company’s board and management oversee and manage climate-related risks and opportunities. The TCFD emphasised transparency in leadership structures. For example, companies are encouraged to disclose how the board integrates climate considerations into overall governance practices, such as through dedicated committees or oversight mechanisms.

Strategy addresses the actual and potential impacts of climate-related risks and opportunities on a company's business, strategy, and financial planning. This includes scenario analysis to assess resilience under different climate futures, such as a 2°C or lower scenario. Today, IFRS S2 builds on this by requiring companies to disclose how climate-related risks and opportunities influence their strategic and financial planning.

Risk management is centered on how companies identify, assess, and manage climate-related risks. The TCFD emphasised integrating these processes into broader risk management frameworks. Under IFRS S2, these principles are expanded to ensure companies articulate how climate risks are embedded in overall enterprise risk management practices.

Metrics and targets detail the specific indicators and goals companies use to manage climate risks and opportunities. This includes mandatory reporting of greenhouse gas (GHG) emissions for Scope 1 (direct emissions) and Scope 2 (indirect emissions from energy use), while Scope 3 (indirect emissions across the value chain) is required only when deemed material to the organisation's operations and impact. Under the ISSB standards, these metrics remain crucial, with IFRS S2 mandating the disclosure of emissions data and the targets used to address climate-related risks.

By incorporating the TCFD framework into the ISSB’s IFRS standards, the principles of governance, strategy, risk management, and metrics and targets now serve as the backbone of a unified global approach to climate-related financial disclosures. This ensures that the TCFD’s legacy continues to shape how companies navigate and disclose climate risks and opportunities, aligning with global sustainability goals.

<table>
  <thead>
    <tr>
      <th>Core element</th>
      <th>Recommendation</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>Governance</td>
      <td>Describe the board’s oversight of climate-related risks and opportunities.</td>
    </tr>
    <tr>
      <td></td>
      <td>Describe management’s role in assessing and managing climate-related risks and opportunities.</td>
    </tr>
    <tr>
      <td>Strategy</td>
      <td>Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term.</td>
    </tr>
    <tr>
      <td></td>
      <td>Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning.</td>
    </tr>
    <tr>
      <td></td>
      <td>Describe the resilience of the organisation’s strategy, considering different climate-related scenarios, including a 2°C or lower scenario.</td>
    </tr>
    <tr>
      <td>Risk management</td>
      <td>Describe the organisation’s processes for identifying and assessing climate-related risks.</td>
    </tr>
    <tr>
      <td></td>
      <td>Describe the organisation’s processes for managing climate-related risks.</td>
    </tr>
    <tr>
      <td></td>
      <td>Explain how these processes are integrated into the organisation’s overall risk management framework.</td>
    </tr>
    <tr>
      <td>Metrics and targets</td>
      <td>Disclose the metrics used to assess climate-related risks and opportunities in line with the organisation’s strategy and risk management process.</td>
    </tr>
    <tr>
      <td></td>
      <td>Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and associated risks.</td>
    </tr>
    <tr>
      <td></td>
      <td>Describe the targets used by the organisation to manage climate-related risks and opportunities, and provide performance against these targets.</td>
    </tr>
  </tbody>
</table>


TCFD’s Fundamental Principles for Effective Disclosure

While the four key pillars of the TCFD framework (governance, strategy, risk management, and metrics and targets) and the 11 specific recommendations provided a detailed roadmap for climate-related disclosures, the Fundamental Principles for Effective Disclosure ensured these disclosures were actionable, reliable, and aligned with stakeholder needs. These principles served as a guide to help companies implement the recommendations effectively and produce high-quality, decision-useful information.

The TCFD outlined these principles to enhance the usefulness and reliability of climate-related financial information. They include:

Relevance: Disclosures should provide insights that are important to investors, lenders, and other stakeholders for decision-making.

Specificity and Consistency: Information must be specific enough to be actionable and consistent over time to allow for comparability.

Completeness: Disclosures should comprehensively address all relevant climate-related risks and opportunities.

Clarity and Understandability: Reports must avoid technical jargon and be accessible to a wide range of stakeholders.

Forward-looking Orientation: Include projections and scenario analyses that demonstrate how the organisation plans to address future risks and opportunities.

Alignment with Existing Standards: Leverage existing financial reporting standards to ensure disclosures align with broader financial statements.

By adhering to these principles, companies can enhance transparency and ensure their climate disclosures meet the needs of stakeholders while aligning with global reporting frameworks.

The Task Force on Climate-related Financial Disclosures (TCFD) has officially concluded its work, following the successful integration of its recommendations into the International Sustainability Standards Board (ISSB) framework. This marked the end of the TCFD as an active task force but solidified its legacy as the foundation for global climate-related financial disclosures.

The TCFD was disbanded to streamline and simplify sustainability reporting standards for companies and investors. With the ISSB established to oversee global sustainability disclosure standards, the TCFD’s recommendations were fully incorporated into the ISSB’s IFRS S2 Climate-related Disclosures Standard. This transition ensures a single, unified framework for climate-related financial disclosures, reducing complexity and enhancing comparability across jurisdictions and industries.

The ISSB’s IFRS S2 Climate-related Disclosures Standard, along with IFRS S1 General Requirements for Sustainability-related Disclosures, has effectively replaced the TCFD framework. These standards incorporate all 11 recommendations of the TCFD and expand upon them, providing a comprehensive and globally accepted structure for sustainability reporting.

Transition period: Companies that previously reported under the TCFD framework can continue to do so during a transition period if required by specific jurisdictions or regulations. However, organisations are encouraged to adopt the ISSB’s IFRS S2 and IFRS S1 standards for their sustainability disclosures.

Unified standards: By aligning with the ISSB standards, companies can meet the requirements of the original TCFD recommendations while benefiting from the enhanced clarity and consistency provided by the new global framework.

Legacy of the TCFD: The principles established by the TCFD remain central to climate-related disclosures, ensuring that its work continues to shape sustainability reporting and decision-making worldwide.

Companies and investors alike will benefit from this new streamlined framework, which is designed to meet the growing demand for transparency and accountability in the face of climate change.

The ISSB standards - IFRS S2 Climate-related Disclosures and IFRS S1 General Requirements for Sustainability-related Disclosures - fully integrate the TCFD’s foundational principles while addressing areas where the original recommendations could be enhanced. This new framework is designed to deliver greater specificity, clarity, and global consistency in sustainability and climate-related financial reporting. 


IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information

IFRS S1 mandates that companies disclose material information about sustainability-related risks and opportunities that could reasonably be expected to affect the entity's cash flows, access to finance, or cost of capital over the short, medium, or long term. This includes details on governance, strategy, risk management, and metrics and targets related to sustainability.

<h3>IFRS S1: General requirements for sustainability-related disclosures</h3>
<table>
  <thead>
    <tr>
      <th>Requirement</th>
      <th>Details</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>Materiality assessment</td>
      <td>Identify and disclose sustainability-related risks and opportunities that could reasonably influence investor decisions.</td>
    </tr>
    <tr>
      <td>Integration with financial statements</td>
      <td>Explain how sustainability-related risks and opportunities impact financial performance, position, and cash flows.</td>
    </tr>
    <tr>
      <td>Interconnected disclosures</td>
      <td>Ensure sustainability information is consistent and connected with the financial statements for comparability.</td>
    </tr>
    <tr>
      <td>Comprehensive scope</td>
      <td>Cover all relevant environmental, social, and governance (ESG) factors, not limited to climate-related issues.</td>
    </tr>
    <tr>
      <td>Forward-looking focus</td>
      <td>Include forward-looking information, such as strategic responses and potential future financial impacts.</td>
    </tr>
    <tr>
      <td>Consistency and comparability</td>
      <td>Apply consistent metrics and methodologies to allow comparisons across reporting periods and with peers.</td>
    </tr>
  </tbody>
</table>


Building upon IFRS S1, IFRS S2 focuses specifically on climate-related risks and opportunities. It requires companies to provide information on governance, strategy, risk management, and metrics and targets concerning climate-related issues. This includes disclosures on greenhouse gas emissions and the potential financial impacts of climate change on the organisation. 

The ISSB builds on the TCFD by expanding its scope and introducing new requirements aimed at addressing gaps and improving usability for investors and stakeholders:

Linking sustainability and financial reporting: A notable addition is the requirement to connect sustainability disclosures with financial statements. Companies must explain how climate and other sustainability risks and opportunities impact their current and future financial performance, helping stakeholders see the financial implications more clearly.

Industry-specific guidance: The ISSB provides tailored guidance for different industries, offering specific disclosure requirements relevant to sectors such as energy, transportation, and agriculture. This improves comparability and ensures disclosures reflect sector-specific risks and opportunities.

Detailed financial impact quantification: The ISSB places greater emphasis on the quantification of climate-related risks and opportunities in monetary terms. Companies are required to explain how these factors impact revenues, costs, and overall financial performance, providing investors with more actionable insights.

Integrated reporting of broader sustainability issues: While TCFD focused solely on climate-related disclosures, IFRS S1 introduces a broader scope of sustainability risks and opportunities, encouraging companies to consider interconnected environmental, social, and governance (ESG) issues. For example, biodiversity loss, water scarcity, and workforce sustainability can now be included where relevant.

Strengthened forward-looking disclosures: The ISSB expands on TCFD’s scenario analysis by providing more structured requirements for forward-looking metrics. This includes a greater focus on climate-related targets, timelines for achieving them, and the strategies companies will use to ensure resilience in the face of future climate scenarios.

Mandatory alignment for listed companies: Unlike the voluntary nature of TCFD, the ISSB framework is expected to be widely adopted as a mandatory standard for listed companies in many jurisdictions. This shift ensures consistency and enforces accountability across global markets.

<table>
  <thead>
    <tr>
      <th>Requirement</th>
      <th>Details</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>Climate risk and opportunity identification</td>
      <td>Disclose climate-related risks and opportunities relevant to the organisation’s business and financial planning.</td>
    </tr>
    <tr>
      <td>Financial impacts of climate change</td>
      <td>Quantify and disclose how identified climate risks and opportunities affect revenues, costs, and overall performance.</td>
    </tr>
    <tr>
      <td>Scenario analysis</td>
      <td>Provide resilience assessments under different climate scenarios, including those aligned with limiting warming to 2°C.</td>
    </tr>
    <tr>
      <td>GHG emissions reporting</td>
      <td>Report Scope 1, Scope 2, and, where relevant, Scope 3 greenhouse gas emissions.</td>
    </tr>
    <tr>
      <td>Climate-related targets</td>
      <td>Disclose climate targets, strategies to achieve them, and progress over time.</td>
    </tr>
    <tr>
      <td>Sector-specific guidance</td>
      <td>Include industry-specific disclosures where applicable, ensuring relevance and comparability.</td>
    </tr>
  </tbody>
</table>


The ISSB framework not only retains the core strengths of the TCFD, but also elevates its usability and relevance. These enhancements mean companies must now:

Clearly articulate how climate and sustainability risks and opportunities influence their financial outlook.

Provide sector-specific data that enables more precise benchmarking by investors.

Adopt a holistic approach to sustainability reporting that extends beyond climate to other material ESG factors.

By addressing these areas, the ISSB creates a unified global standard that eliminates inconsistencies in sustainability reporting, ensuring disclosures are more comprehensive, comparable, and decision-useful.

👉 For a deeper dive into the specifics of IFRS S1 and IFRS S2, including detailed guidance on their application and implications, check out our comprehensive article on the ISSB standards.

The Task Force on Climate-related Financial Disclosures (TCFD) laid the groundwork for transparent and consistent climate-related financial disclosures worldwide. Its recommendations, structured around governance, strategy, risk management, and metrics and targets, were widely adopted and formed the backbone of climate disclosure standards in numerous jurisdictions, including the UK and the US. The TCFD's legacy continues as its recommendations are fully incorporated into the International Sustainability Standards Board’s (ISSB) IFRS S1 and S2 standards.

The ISSB’s IFRS S1 (General Requirements for Sustainability-related Disclosures) and IFRS S2 (Climate-related Disclosures) build on the TCFD framework by providing a more comprehensive and globally applicable approach to sustainability and climate reporting. These standards are effective for annual reporting periods beginning on or after January 1, 2024. However, their adoption is jurisdiction-specific, with national authorities determining whether companies must apply them.

The UK has formally endorsed the adoption of ISSB S1 and S2 standards, reinforcing its commitment to enhancing the quality and consistency of sustainability reporting. These standards will complement the UK’s Sustainability Disclosure Requirements (SDR), introduced in late 2023, and are expected to provide a comprehensive framework for sustainability reporting.

Planned adoption timeline: The ISSB standards will be incorporated into the UK’s regulatory framework by 2025, with sustainability reports expected for reporting periods beginning on or after January 1, 2026.

Government endorsement and integration: The UK government, alongside the Financial Reporting Council (FRC) and the Department for Business and Trade, is working to align ISSB standards with existing corporate reporting frameworks, ensuring a seamless transition for businesses.

Phased implementation: A phased approach will be adopted to give companies adequate time to adapt to the new requirements. The UK government is expected to provide detailed guidance and timelines by early 2025.

How ISSB standards support the UK’s framework:

The new UK Sustainability Reporting Standards (SRS) will incorporate ISSB S1 and S2 while aligning with SDR. This integration minimizes regulatory overlap and provides companies with a unified structure for sustainability disclosures.

The transition from TCFD to ISSB in the UK:

The UK was the first G20 country to mandate TCFD-aligned disclosures for large companies and financial institutions in April 2022. This mandate will transition to ISSB standards, preserving the TCFD’s foundational principles while expanding reporting to include broader sustainability-related financial information.

The EU adopted mandatory European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD) on July 31, 2023. These standards require in-scope companies to disclose sustainability information aligned with ESRS, addressing environmental, social, and governance (ESG) issues.

To avoid duplicative reporting, the EU and ISSB are collaborating to ensure compatibility between ESRS and IFRS S1 and S2. This harmonisation effort supports the global comparability of sustainability reports while meeting regional regulatory requirements.

Mandatory ESRS reporting: Companies under the scope of CSRD must comply with ESRS for reporting periods beginning on or after January 1, 2024.

Collaborative approach: The EU is working closely with the ISSB to integrate shared principles, such as the TCFD’s framework, into both ESRS and IFRS standards. This ensures that companies operating across jurisdictions can streamline their disclosures and avoid double reporting.

Impact on companies: Organisations operating within the EU must comply with CSRD requirements while ensuring consistency with IFRS standards for international reporting. This dual compliance necessitates robust reporting systems.

The US has not adopted IFRS standards, with domestic companies continuing to report under Generally Accepted Accounting Principles (GAAP). However, the Securities and Exchange Commission (SEC) is advancing its own climate disclosure rules, heavily influenced by the TCFD framework.

SEC proposals: The SEC’s proposed rules emphasise governance, strategy, risk management, and metrics and targets, closely mirroring the TCFD recommendations. These rules are not yet finalised, but they reflect a growing emphasis on standardised climate-related disclosures.

Voluntary IFRS adoption: While US domestic companies are not required to use IFRS, foreign private issuers may file financial statements prepared under IFRS.

Although the ISSB standards are not mandatory in the US, multinational corporations operating across jurisdictions may choose to adopt them voluntarily to align with global practices and meet investor expectations.

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