Government announces next steps for UK Sustainability Reporting

Background

The International Sustainability Standards Board (ISSB) published the first IFRS Sustainability Disclosure Standards (IFRS SDS) in June 2023. It is for individual jurisdictions to consider how and when to adopt the IFRS SDS and the UK Government has been considering adoption of UK sustainability reporting requirements.

The Government released an update on 16 May 2024 on the steps taken to date and, importantly, the process and timelines to be followed in endorsing the IFRS SDS for use in the UK and the introduction of requirements for companies to report using those standards.

Adoption of sustainability reporting standards based on the IFRS SDS is a two-step process:

1. Endorsement of IFRS SDS and creation of UK Sustainability Reporting Standards
2. Implementation of UK Sustainability Reporting standards through FCA rules and legislation

The government published its framework setting out the process and the advisory committees which will support it in completing the two stages of endorsing and implementing the standards. 

Endorsement of IFRS SDS and creation of UK Sustainability Reporting Standards

The UK Sustainability Disclosure Technical Advisory Committee has been established to support the Department for Business and Trade (DBT) in making recommendation to the Secretary of State for the endorsement of the IFRS SDS. An outline of the process is provided in the Government’s framework.

The TAC assessment of IFRS SDS will commence soon and it is intended that the assessment and recommendations regarding endorsement will be provided to the Secretary of State by the end of 2024. The Government then intends to make UK-endorsed ISSB standards available in Q1 2025.

Implementation of UK Sustainability Reporting standards through FCA rules and legislation

Once UK Sustainability Reporting Standards (UK SRS) have been endorsed:

• The Financial Conduct Authority (FCA) will consult on the introduction of requirements for UK Listed companies to report sustainability related information, and
• The Government will decide on disclosure requirements using UK SRS for UK companies that are not within the FCA's regulatory remit. Any such requirements will balance the cost and benefits associated with reporting.

The government expects decisions regarding the future requirements to be taken in Q2 2025.

Effective date

Given the above timeline, any UK SRS will not be effective until accounting periods commencing on or after 1 January 2026 at the earliest.

Our comment

Paul Winrow, Partner in Sustainability Reporting & Assurance, and our Global Leader for IFRS SDS said “Many jurisdictions around the world have already taken steps to implement sustainability reporting based on the IFRS SDS and it is disappointing that the Government has not acted more quickly to endorse and implement the standards in the UK. However, we do now have a timeline for implementation of sustainability reporting requirements and listed companies should now be able to plan for the implementation of UK SRS, most likely for the financial year commencing 1 January 2026, with those standards being based on the IFRS SDS.”

It is notable that there is no comment from the government at this stage on any potential assurance over UK Sustainability Reporting, although experience elsewhere suggests that we may expect a requirement for Limited Assurance over sustainability reports in the short term. 

How can we help? 

If you have any questions, or would like to discuss how we may be able to support you in the implementation of UK SRS, please contact Paul Winrow (Global Leader, IFRS Sustainability Disclosure Standards) or Christopher Fuggle (Global Head of Sustainability Services).