The UK Department for Business and Trade (DBT) has today (25 February) issued the final versions of the ISSB-aligned UK Sustainability Reporting Standards (UK SRS), following an eight-month consultation.
Having been endorsed by the government, UK SRS S1 (general requirements for sustainability disclosures) and UK SRS S2 (climate) are now available for voluntary adoption.
The DBT has clarified that public companies reporting in accordance with UK SRS S2 will meet their legal requirements to disclose climate-related financial information under the Companies Act.
The Financial Conduct Authority proposed earlier this month an update to its listing rules, which would phase in mandatory reporting under the government-endorsed standards from 2027.
Furthermore, the government announced that it will “consider whether to require private companies to report information in accordance” the standards, as part of its upcoming consultation on a programme to modernise the UK corporate reporting regime.
The UK standards are adapted from IFRS S1 and IFRS S2 and broadly mirror the international standards, with some minor amendments.
One key distinction is that the UK standards state that companies ‘may’ refer to SASB standards for industry-specific metrics, whereas the ISSB standards require preparers to refer to and consider the applicability of the SASB standards.
This amendment was recommended by the UK Sustainability Disclosure Policy and Implementation Committee (PIC), which noted that the SASB disclosure requirements are generally US-focused and the materials had not been the same level of due process compared with IFRS S1 and S2.
Notably, the UK Sustainability Disclosure Technical Advisory Committee (TAC) did not recommend making this amendment. However, the government chose to pursue the PIC’s recommendation in the exposure drafts and 70% of the respondents to the consultation supported the removal of the obligation to consider the SASB standards.
Many of the consultation respondents that disagreed with this amendment raised concerns over the potential loss of consistency and comparability with the international standards.
The ISSB is currently undertaking a project to make the SASB standards more internationally applicable, and the DBT has indicated that it will review the amendment in the UK SRS once this project has been completed.
Another PIC recommended amendments, which has been adopted, allows companies voluntarily reporting under the standards to use the transitional reliefs indefinitely until disclosure requirements takes effect.
This aims to encourage voluntary adoption before the introduction of mandatory reporting, and was supported by 83% of the consultation respondents.
Entities using all the available reliefs can assert compliance with UK SRS S2. However, they will not have complied with UK SRS S1 if they use the provision which allows them to only disclose climate-related information.
In line with the TAC’s recommendations, the UK has removed the transitional relief provided in IFRS S1 which allows entities publish sustainability-related information at a different time to their financial statements in the first year of reporting.
According to the DBT, most consultation responses agreed with this amendment on the basis that investors value integrated disclosures and UK companies have experience in reporting climate information, as TCFD-aligned disclosure requirements have been in place since 2021.
In addition, the effective date clauses have been removed from the standards, as these will be established in legislation and regulation. Similarly, UK regulators and policymakers will determine how long the reliefs from reporting Scope 3 GHG emissions and non-climate sustainability information are available for.
Finally, the government has incorporated the TAC’s recommendation of adding a requirement for financial institutions to explain why they have not been able to comply with the financed emissions disclosure requirements in UK SRS 2.
Firms that do not report financed emissions will therefore have to explain they approaches to measuring these emissions and how they plan to meet the requirements in full.
