UK government advisors have today published their recommendations for how global sustainability reporting standards should be adopted into national law.
The country’s Sustainability Disclosure Technical Advisory Committee, known as the TAC, was convened by the Department for Business and Trade earlier this year and tasked with advising it on how to endorse the work of the International Sustainability Standards Board (ISSB).
The UK was one of the first countries to publicly declare support for ISSB when the body was launched in 2021, but at the time it had not yet developed any standards.
Last year, it published the first two: IFRS S1 and S2. The former prescribes how an entity should prepare and report its sustainability-related financial disclosures, and the latter focuses specifically on climate risks and opportunities.
TAC has assessed whether companies and financial institutions in the UK should have to report against the two standards, and presented its findings to the Department for Business and Trade.
It advised the government to adopt both standards, but with a few proposed tweaks.
Some of the changes are around being more explicit about the timeframes over which investors and other financial institutions should collect the data used to calculate their annual financed emissions.
The TAC also wants to remove restrictions around which sectoral categories investors and banks can use to report emissions: ISSB requires the use of the Global Industry Classification Standard (GICS), but TAC said any classification system should be permitted under the UK’s rules.
One of the biggest proposed changes in the report is about how quickly different environmental and social disclosures should be phased in.
Under ISSB’s standards, entities are expected to disclose their Scope 1 and 2 emissions in the first year of adoption, with Scope 3 emissions and all other sustainability metrics to follow in the second year.
The TAC has said that sustainability metrics should wait until the third year, partly because ISSB hasn’t produced any standards for those topics yet.
The government will use today’s recommendations to help it develop an official set of UK Sustainability Reporting Standards (SRS).
The Financial Conduct Authority is expected to launch a consultation in the first few months of 2025 on how it should update its existing sustainability disclosure requirements for listed companies and regulated asset managers to reflect the development of the SRS and the guidance published in 2023 by the UK’s Transition Plan Taskforce.
The regulator’s current requirements are based on the Taskforce on Climate-related Financial Disclosures, but are likely to be broadened in topic and scope.
The Department for Business and Trade is also expected to update the Companies Act to introduce SRS-based reporting requirements into rules for non-listed companies.
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