United Kingdom Unveils Draft Sustainability and Climate Reporting Standards
The UK government has announced a series of consultations aimed at enhancing competition in the sustainability assurance sector and promoting long-term sustainable growth. The consultations, which are part of the UK government's Plan for Change, focus on the development of new UK Sustainability Reporting Standards (UK SRS) and the introduction of a voluntary registration regime for providers of assurance of sustainability reporting.
The new UK SRS, based on the sustainability and climate-related standards developed by the IFRS Foundation's International Sustainability Standards Board (ISSB), will replace the current IFRS Sustainability Disclosure Standards (IFRS S1 and S2) from mid-2025. The UK SRS closely follows the ISSB’s IFRS standards but introduces important UK-specific timing and scope adjustments.
Under the new standards, UK companies would initially report only on climate-related issues in the first two years, with broader sustainability-related risks and opportunities to be reported in year three. This phased reporting focus contrasts with the IFRS S1, which requires comprehensive sustainability disclosures from the outset. The UK SRS also maintains certain transition reliefs and allows more flexibility around industry standard references, such as the optional use of SASB industry-specific standards.
In addition, the UK SRS removes a relief from the IFRS standard that allows companies to publish sustainability-related disclosures at a later date than their financial statements in the first year of reporting. The government is committed to mandating transition plans for specified entities, including banks, asset managers, and pension funds, and aims to release finalized standards later this year.
The consultations also include discussions on climate-related transition plan requirements and assurance of sustainability reporting. The UK government is considering whether to introduce mandatory sustainability reporting requirements for some companies, based on the new standards, and is launching a consultation on a voluntary registration regime for providers of assurance of sustainability reporting.
The consultations do not specify a date for the release of finalized standards for the voluntary registration regime or the transition plan requirements, nor do they provide details on potential penalties for non-compliance with the proposed transition plan requirements. All consultations will remain open to responses until September 17, 2025.
UK Minister for Competition and Markets Justin Madders made a statement regarding the release of the new standards, emphasizing the government's commitment to promoting a sustainable and competitive economy. The consultations are an important step towards achieving this goal and enhancing the UK's position as a global leader in sustainability reporting and assurance.
- The new UK Sustainability Reporting Standards (UK SRS), based on science and following the guidelines set by the International Sustainability Standards Board (ISSB), focus on climate-change and will replace the current IFRS Sustainability Disclosure Standards.
- The UK government is considering implementing mandatory sustainability reporting requirements for certain companies, based on the UK SRS, and is also launching a consultation on a voluntary registration regime for providers of assurance of sustainability reporting, aiming to encourage environmental-science and finance-based business growth.
- The consultations include discussions on climate-related transition plan requirements, emphasizing the importance of long-term sustainable growth in various industries and encouraging competition in the sustainability assurance sector.
