United Kingdom Presents Draft Sustainability and Climate Reporting Guidelines
The UK government has announced the release of exposure drafts of new UK Sustainability Reporting Standards (UK SRS), which are based on the sustainability and climate-related standards developed by the IFRS Foundation's International Sustainability Standards Board (ISSB). The new UK SRS include drafts of "UK SRS S1" and "UK SRS S2," which correspond to the IFRS Foundation's ISSB's S1 (sustainability-related) and S2 (climate-related) standards.
The key amendments in the new UK SRS compared to the IFRS standards primarily involve a phased and extended approach to climate and broader sustainability disclosures. The UK SRS closely follow the IFRS S1 and S2 from the ISSB but include several targeted changes to reflect domestic requirements and ease transition for reporting entities.
Key Amendments in UK SRS Compared to IFRS Standards:
- Extension of the "Climate-First" Reporting Relief:
- Under IFRS S1, entities are allowed a one-year transition relief to report only on climate-related risks and opportunities in their first year before expanding disclosures to other sustainability topics.
- The UK SRS extend this "climate-first" relief to two years (from one year under IFRS S1). Entities must report on climate risks except Scope 3 emissions in year 1, add Scope 3 emissions in year 2, and include wider sustainability topics only in year 3.
- Elimination of ISSB’s One-Year Grace Period for Timing of Disclosures:
- IFRS S1 permits sustainability disclosures to be published later than financial statements by one year. The UK SRS remove this grace period, requiring sustainability disclosures to be published alongside or with the financial statements without delay.
- Other Minor Technical Amendments:
- The UK government has made six minor amendments beyond the extended transition relief to tailor the standards for UK market and regulatory context, based on expert recommendations from the UK Sustainability Disclosure Technical Advisory Committee (TAC) and Policy and Implementation Committee (PIC). These reflect differences in policy, regulatory systems, and practicality for UK companies.
The extension of the "climate-first" relief to two years aims to provide a phased and manageable approach for companies transitioning to the more comprehensive sustainability disclosure regime. It recognizes the complexity and breadth of sustainability reporting beyond climate-related matters. Gives entities additional time to develop robust systems to disclose wider sustainability risks and opportunities after focusing initially on climate. Aligns with UK policy considerations to support a smoother implementation path and enable companies to build capacity before mandatory full sustainability disclosures are required.
The consultations for the new UK SRS will remain open to responses until September 17, 2025. The government aims to release finalized standards later this year. The UK government's initiatives are part of their Plan for Change and are intended to kickstart economic growth.
In addition, the UK government is launching a consultation regarding the development of a voluntary registration regime for the providers of assurance of sustainability reporting. The government is also committed to mandating transition plans for banks, asset managers, and pension funds. These initiatives aim to enhance competition in the sustainability assurance sector.
[1] UK Government Website - UK Sustainability Reporting Standards
[2] UK Government Website - Climate-First Reporting Relief
[3] UK Government Website - Technical Amendments to UK SRS
[4] UK Government Website - UK SRS Consultation Response
- The new UK Sustainability Reporting Standards (UK SRS) are based on standards developed by the International Sustainability Standards Board (ISSB) in science, climate-change, and environmental-science, but require more extensive climate and broader sustainability disclosures in business and finance.
- As part of the phased approach to climate and sustainability disclosures, the UK SRS extend the "climate-first" reporting relief to two years, allowing entities to focus on climate risks for the first two years before expanding disclosures to other sustainability topics.
- Beyond the extended transition relief, the UK government has made several minor technical amendments to the UK SRS to tailor the standards for the UK market and regulatory context, with the aim of providing a smoother implementation path and enhancing competition in the sustainability assurance sector.
