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UK Defines Scope of Sustainability Reporting Standards Consultation

Senior business and trade department official stresses the need for international “comparability” on ESG reporting.

The UK’s imminent consultation on Sustainability Reporting Standards (SRS) has been confirmed to solely focus on gleaning views on the proposal endorsed by the government, with further consultation on its application to company reporting to follow.

Led by the Department for Business and Trade (DBT), the UK will commence a consultation on the standards later this quarter. The SRS will align with the majority of the International Sustainability Standards Board’s (ISSB) global reporting standards following endorsement by the UK Sustainability Disclosure Technical Advisory Committee (TAC) last month.

The ISSB’s IFRS S1 standard outlines general sustainability reporting requirements, whereas S2 focuses on climate-focused disclosures. There are some proposed changes to the ISSB standards to ensure the new disclosure requirements fit within existing UK domestic rules and norms.

“ESG and sustainability reporting is becoming an increasingly important area [and] it is increasingly important to have comparability of that reporting across the world, and we think that the standards the ISSB board has produced achieved that comparability,” said Andrew Death, Deputy Director of Corporate Reporting, Assurance and Governance at the DBT, speaking at an Investment Association-hosted (IA) event.

“We have gone through that process of scrutiny. We want to put through what we intend to endorse for use in the UK consultation this year [and] seek your views on how that works for the UK.”

UK government consultations usually run for 12 weeks, meaning the consultation should be completed by the start of H2 2025, and industry can expect further movement before the end of this year.

“We look forward to seeing the UK government swiftly consulting on the adoption of the ISSB’s standards, following a period of uncertainty,” Oscar Warwick-Thompson, Head of Policy and Regulatory Affairs at the UK Sustainable Investment and Finance Association, told ESG Investor. “This is a critical measure we have long been calling for.”

A year of listening

Death’s responsibilities at the DBT include leading a comprehensive review of corporate reporting for UK companies and leading the implementation of the ESG reporting commitments made in the green finance strategy, including the endorsement of ISSB standards.

He stressed that the SRS consultation will focus on the standard the government intends to endorse for use in the UK, and is not consulting on whether companies should be required to report against the standards at this stage.

“We will consider the question of whether we should mandate the use of international sustainability standards in a separate consultation, but first we want to get your views on how the standards work,” said Death.

The UK government previously stated that, subject to a consultation process, the Financial Conduct Authority will be able to use UK SRS to introduce requirements for UK-listed companies to report sustainability-related information to their investors. The standards will form part of a wider Sustainability Disclosure Reporting framework led by HM Treasury.

“Adopting ISSB in the UK, with clear envisaged implementation timeframes for application of the standards across the economy, would be a very positive step for our members while the UK progresses as a leader in sustainable finance,” said Warwick Thompson.

As of last May, more than 20 jurisdictions, including the UK, have opted to use or are taking steps to introduce ISSB Standards in their legal or regulatory frameworks. The jurisdictions, which also includes Australia, China, the EU and Japan, accounts for nearly 55% of global GDP and more than half of global greenhouse gas (GHG) emissions.

“The adoption of ISSB by countries, importantly with minimal divergence, can promote high quality, consistent sustainability disclosures from companies, further empowering investors and clients with the greater visibility that confers [and] allow[ing] organisations to more clearly disclose their climate risks and opportunities,” said Warwick Thompson. “Crucially, as an international ‘baseline’, it will promote international interoperability and comparability which should help minimise the reporting burden over time on institutions and corporates.”

Last month, the International Organization of Securities Commissions introduced a new network with representatives from 31 jurisdictions to support the global adoption and usage of the ISSB standards.

Days earlier, the Canadian Sustainability Standards Board published its finalised sustainability disclosure standards, which were largely aligned with the ISSB global standards, further strengthening international alignment.

Diverging from the ISSB standards, Canada has added more time for companies to prepare for some key elements of reporting, including value chain GHG emissions. The UK’s TAC also suggested the UK stretch the introduction of reporting requirements over three years to provide some reporting relief.

While not everyone sees too many reporting requirements as a significant hurdle to stewardship, Death said that in introducing the SRS the government was “very conscious that there is a lot of reporting requirements that companies are required to produce and investors need to scrutinise”.

“It’s going to be quite a busy year for us in terms of seeking your feedback and listening to your views on a number of areas where policy is involved, especially around corporate reporting, […] but it’s a real opportunity to reform the system effectively,” said Death.

The post UK Defines Scope of Sustainability Reporting Standards Consultation appeared first on ESG Investor.

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