Last updated: 06 Jan 2025 10:00 Posted in:
The UK’s accounting watchdog has recommended the government move to roll out the International Sustainability Standards Board’s (ISSB) first two global climate and sustainability-related reporting standards for use by UK firms following a lengthy review.
The Sustainability Disclosure Technical Advisory Committee’s (TAC) recommendations, published in December by the Financial Reporting Council (FRC), urge Business Secretary Jonathan Reynolds to adopt the International Financial Reporting Standards Foundation's general sustainability (IFRS S1) and climate (IFRS S2) reporting standards.
An assessment of both standards, which were first released in June 2023, concluded UK Sustainability Reporting Standards based upon IFRS S1 and IFRS S2 should be delivered with just a number of “minor amendments”.
For example, though the ISSB introduced ‘climate-first’ relief offering firms an extra year to provide disclosure on some sustainability-related risks in order for companies to prioritise climate-related reporting, the TAC suggests a two-year extension for firms in the UK.
The Committee also recommended the UK Sustainability Disclosure Policy and Implementation Committee develop guidance on implementing IFRS S1 to clarify how businesses can align standards with existing sustainability-related disclosure requirements. And the TAC suggested removing restrictions on which sectoral categories investors and banks can use to report emissions.
The update comes after the TAC was commissioned by the previous government in May to provide advice on whether the UK government should endorse the new international standards. The Committee’s final recommendations were agreed at a meeting of the TAC earlier this month.
“The TAC has conducted an extensive and thorough review over several months, carefully evaluating the IFRS Sustainability Disclosure Standards,” said Sally Duckworth, chair of the UK Sustainability Disclosure TAC. “Our report, as presented to the Secretary of State, recommends that the UK endorse these standards to reinforce its leadership in sustainability reporting.
“While we endorse their use, we have proposed minor amendments and requested additional guidance to ensure practical and effective implementation. This is a crucial step in aligning UK businesses with global reporting practices, promoting transparency, and supporting the transition to a sustainable economy.”
The recommendations follow the release of the UK Green Finance Strategy by the then Conservative government last year and subsequent commissioning of the TAC to advise on the potential endorsement of global standards.
More than 30 jurisdictions representing 57% of global GDP have already moved towards adopting the ISSB’s first two global climate and sustainability-related reporting standards.
The UK government aims to consult on draft UK standards which will form part of a wider sustainability disclosure reporting framework led by HM Treasury in the first quarter of 2025.
Following the assessment process, and subject to an endorsement decision by government early next year, the Financial Conduct Authority (FCA) will then use new UK standards to introduce requirements for UK-listed companies to report sustainability-related information to investors.
“The TAC has conducted an extensive and thorough review over several months, carefully evaluating the IFRS Sustainability Disclosure Standards. Our report, as presented to the Secretary of State, recommends that the UK endorse these standards to reinforce its leadership in sustainability reporting."
Sally Duckworth, Chair of the UK Sustainability Disclosure TAC