Upcoming Sustainability Legislation

In June 2023, the release of the International Sustainability Standards Board (ISSB), known as IFRS S1 and IFRS S2 marked a pivotal moment in global reporting, establishing a common language and baseline for sustainability reporting across jurisdictions. Comprised of representatives from Europe, the UK, USA, Japan, and China, the ISSB has diligently developed standards that are set to become globally accepted and adopted by 2024.

This blog will outline what you can expect from UK SRS and how to prepare for the upcoming legislation. However, for a more detailed explanation including reporting requirements, you can download our full UK SRS e-book here.

Why now?

Investors are increasingly prioritising ESG metrics, and so are more frequently demanding reporting. The issue now however is that a lack of standardisation globally has led to incomparable ESG scores misleading investors and stakeholders globally.

Intervention has been needed to standardise and regulate the process of determining company performance, and this move will aim to do that.

So what is happening in the UK?

The UK government has been actively supporting the International Sustainability Standards Board (ISSB) since its introduction. In line with its commitment to green finance, outlined in the Mobilising Green Investment: 2023 Green Finance Strategy

The International Sustainability Standards Board (ISSB) created the IFRS S1 and IFRS S2 standards to address the growing need for consistent and transparent sustainability reporting across global organisations.

The UK government is in the process of evaluating IFRS S1 and IFRS S2 for adoption in the UK. The Government aims to make the UK-endorsed ISSB standards available in Q1 2025 - they'll be known as "UK Sustainability Reporting Standards" (Note these were previously referred to as “UK Sustainability Disclosure Standards”). The Government will also decide on disclosure requirements for UK companies which are not listed - it expects to make a decision in Q2 2025, with any changes required to company reporting to be effective from accounting periods beginning on or after 1 January 2026.

UK SRS are anticipated to be integrated into an upcoming UK Sustainability Disclosure Reporting (SDR) framework. This framework is set to encompass various elements, such as a UK Green Taxonomy and mandatory disclosure of climate transition plans for specific entities.

While the specific requirements of the upcoming UK SRS are not yet known, we can gain insight by examining the ISSB standards and the already published Corporate Sustainability Reporting Directive (CSRD), which is based on the ISSB.

You can read more about CSRD by downloading this eBook.

GET AHEAD!

Preparing now for the changes that UK SRS might bring is essential to navigate the transition.

By proactively assessing current practices and anticipating the requirements of the upcoming standards, businesses can position themselves ahead of the curve. This not only ensures compliance but also facilitates the integration of sustainability principles into corporate strategies, fostering long-term resilience and competitive advantage.

This blog will outline what we know so far about the SRS and the requirements of IFRS S1 and S2, helping you stay ahead and prepare effectively.

What to expect?

As mentioned, the ISSB approved two new inaugural standards in June 2023. These standards are designed to provide a global baseline of sustainability-related disclosures for the capital markets.

The two standards are:

• IFRS S1 - General requirements for Disclosure of Sustainability-related Financial Information
• IFRS S2 - General requirements for Disclosure of Climate-related Financial Information

Both standards follow similar structures, outlining four Core Content areas that organisations must include within sustainability and climate reporting, which are:

• Governance - the governance processes, controls and procedures that organisations put in place to manage and monitor risks & opportunities
• Strategy - the approach organisations use to manage risks & opportunities
• Risk management - the processes used to identify, assess, prioritise and monitor risks & opportunities.
• Metrics and targets - how organisations are performing in managing and controlling risks & opportunities, including progress towards any set targets or those required by law.
  • We outline all the specific data points included in the metrics and targets in our e-book, you can download that here.

We strongly recommend you read the two standards in more details, you can read them in their entirety here. We also have an e-book you can download here which goes into more detail.

Do I have to disclose all data points?

For UK companies preparing for the upcoming sustainability reporting standards, reporting under IFRS S1 and IFRS S2 may not necessitate disclosure of all data points, as this will depend on factors such as materiality, company size, turnover, and industry-specific considerations.

The new standards will likely require companies to conduct materiality assessments to identify which sustainability and climate-related issues significantly impact their business and stakeholders. Smaller companies or those with lower turnover might face reduced reporting obligations compared to larger entities.

How do I prepare?

All this might seem overwhelming, but don’t worry, we have resources to help you.

• Download our UK Sustainability Reporting Standards full e-book here
• Download our 6-step guide to ESG reporting here
• Read some of our case studies featuring clients who have already started their ESG reporting journey.

Complying with the SRS may be a complex challenge for your business if you have limited processes or data in place. Never worry - we're here to help.

Book a demo with our team, and we'll have a quick chat about your challenges and priorities for the future, and ensure you are on track for compliance with the SRS.