UK government to launch consultation on Sustainability Reporting Standards

The UK government is expected to begin a 12-week consultation on Sustainability Reporting Standards in March. The consultation will be based on the standards set by the International Sustainability Standards Board (ISSB), according to Responsible Investor (RI).

UK endorsement of ISSB standards

An advisory committee established by the Department for Business and Trade (DBT) submitted its final recommendations in December to Jonathan Reynolds, the Secretary of State for Business and Trade. The committee advised adopting the ISSB standards with only slight modifications for UK implementation.

According to RI, the DBT is expected to propose that the government proceed with the consultation next month. This process will primarily concern the approval of UK Sustainability Reporting Standards, without making immediate changes to laws or regulatory requirements. The UK Financial Conduct Authority (FCA) will handle any necessary regulatory amendments once the endorsement process is completed.

FCA consultation expected this summer

The FCA intends to begin its own consultation later this year to update corporate reporting rules in line with UK-endorsed ISSB standards. In January, the FCA reaffirmed its commitment to shifting from the current Task Force on Climate-related Financial Disclosures (TCFD) framework to the ISSB standards once the government finalises its endorsement.

The government originally planned to reach its final endorsement decision by July 2024, but in May, the DBT announced a delay, pushing the timeline to early 2025. This postponement led to frustration among investors in the UK, who had expected quicker action.

Transition plans and assurance

The consultation may also include discussions on transition plans, although this aspect remains under review.

In 2023, the ISSB assumed responsibility for the UK Transition Plan Taskforce’s guidance. It has stated that new materials on transition plans should be available within the first half of this year.

The FCA is also planning a review this summer to strengthen reporting requirements for transition plans among listed companies.

On the assurance side, RI reports that the government aims to align the endorsement consultation with another consultation on sustainability assurance providers. Similar to the EU’s approach, this scheme is expected to be “profession-agnostic,” allowing both auditors and independent assurance providers to offer assurance services.

A recent market study by the Financial Reporting Council found that the UK’s sustainability assurance market is generally functioning well. However, concerns have been raised about the consistency and quality of assurance services as demand grows.

Developments in EU Sustainability Reporting

The UK’s approach to sustainability reporting is evolving alongside changes in EU regulations under the Corporate Sustainability Reporting Directive (CSRD). Some UK businesses will still need to comply with these EU standards.

RI has reported that the European Commission may significantly revise the CSRD through an upcoming Omnibus package. One key change under consideration is a shift from the directive’s current “double materiality” principle to a single focus on financial materiality, which aligns more closely with ISSB standards.

The ISSB has urged the EU to align its regulations with its own sustainability reporting standards, and RI indicates that the UK government is also engaging with both the ISSB and the EU on this matter.

As the regulatory landscape changes, businesses operating in the UK will need to keep a close watch on evolving sustainability reporting requirements. If you’d like advice on your current or future obligations, get in touch with Sustainable Energy First’s ESG team on hello@sefirst.com, or via the form below.