UK Sustainability Reporting Standards: A potential change in UK reporting

With international sustainability standards like the CSRD and ISSB dominating the landscape of mandatory reporting requirements, the UK is set to establish its own regional framework to align with the global baseline.  

In this article, we’ll unpack what the UK Sustainability Reporting Standards (UK SRS) are, how they developed, how companies should prepare, and what the adoption of these standards could mean for the UK and EU.  

What are the UK SRS?

The UK’s Sustainability Reporting Standards are designed to enable UK companies to report on sustainability and climate-related risks, based off the International Sustainability Standards Board (ISSB).
 

Developing the UK SRS 

The creation of sustainability reporting standards was announced at the 2021 UN Climate Change Conference (COP26), with the ultimate objective of creating a global baseline for reporting in the UK.  

In 2021, the International Financial Reporting Standards (IFRS) created the International Sustainability Standards Board (ISSB) to provide comparable data and useful information on sustainability-related risks for investors and stakeholders.  

Concerned only with single materiality  — the impact of social and environmental factors on business operations — and voluntary rather than mandatory requirements (as of the time of writing), the ISSB’s standards aim to help investors compare companies, support allocation of capital, and maintain the smooth functioning of capital markets. 

In June 2023, the ISSB published two new standards: 

• IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information 

• IFRS S2: Climate-related Disclosures  

The UK has since established a new framework to assess the suitability of those IFRS standards for their own reporting. In the Mobilising Green Investment: 2023 green finance strategy, the government confirmed that, if endorsed, this decision would: 

• Create the first two UK Sustainability Reporting Standards, based on IFRS S1 and IFRS S2 

• Would form part of a wider Sustainability Disclosure Reporting framework by HM Treasury 

• Would allow the Financial Conduct Authority (FCA) to introduce requirements for UK companies to report sustainability-related information to investors 

• Would also allow the government to decide on disclosure requirements against the standards for any UK-based companies that don’t fall within the FCA’s perimeter
   

What would UK SRS do? 

If endorsed and implemented in the UK, the Sustainability Reporting Standards would have a number of impacts.  

Firstly, any UK businesses who also operate in the EU would need to ensure they adhere to both the UK SRS and the EU’s Corporate Sustainability Reporting Directive (CSRD). The difference between CSRD and ISSB is distinguishable by their materiality, scope, and enforceability. While the CSRD mandates double materiality, the UK SRS, based on the IFRS standards, would only mandate single materiality on a narrower topical scope. The release of the ESRS-ISSB Standards Interoperability Guidance will help UK reporting businesses stay in compliance with the CSRD for their EU activities.  

The adoption of UK SRS would mandate sustainability reporting for UK companies, allowing stakeholders to make more informed decisions than ever before. The standards would also stand to support the UN Sustainable Development Goals and the UK’s Green Finance Strategy.  

What is the UK doing to prepare?

While companies and stakeholders wait for the proposed date of the first quarter of 2025 for an endorsement decision, the UK government has established two committees to aid in the assessment of IFRS S1 and S2, and any implementation of UK SRS.
 

UK Sustainability Disclosure Technical Advisory Committee 

The Technical Advisory Committee (TAC) is responsible for assessing the IFRS standards on a technical basis, to anticipate and evaluate how effective they would be for UK usage. The committee will also provide endorsement recommendations to the Business and Trade Secretary.  

Responses to the IFRS S1 and S2, closed in October 2023, will be considered by the TAC as they make their technical assessment. The call for evidence was to identify if the UK believed the IFRS Sustainability Disclosure standards would be understandable, relevant, and comparable in the UK.
 

UK Sustainability Disclosure Policy and Implementation Committee 

The Policy and Implementation Committee (PIC) is responsible for coordinating the implementation of UK SRS, if it’s approved. Additionally, they’ll deliberate on whether the IFRS Sustainability Disclosure Standard has “significant interactions with the remits of their respective organisations.”  

Thirdly, the PIC will allow different members to share information on activities influenced by the standards, to assist the Department for Business and Trade (DBT) officials, and on any relevant matters the DBT should share with the TAC. 

What should UK companies do to prepare?

To prepare for the possibility of new UK sustainability standards, companies can complete a number of internal assessments on their operations to anticipate how close, or far, they are from meeting these new requirements.  

• Complete a materiality assessment to analyze your company’s impact on human health and the environment, compliance gaps, and areas for improvement 

• Assess existing sustainability frameworks to see if your current processes would still align with future mandatory or voluntary requirements 

• Establish new and stronger sustainability methods, if necessary, to maintain compliance 

• Begin reporting according to IFRS S1 and S2 to get a head start 

• Enhance your supply chain transparency by announcing any new business practices associated with the potential adoption of UK SRS 

What you need to know: A summary

• If endorsed, implementation of UK SRS would begin no earlier than January 2026 

• UK committees are currently assessing the suitability of IFRS standards, with a decision anticipated in the first quarter of 2025 

• UK and EU companies would have to comply with both the CSRD and UK SRS