The UK could soon adopt international climate and sustainability reporting standards following recommendations by the FRC Sustainability Disclosure TAC.
According to Business Green, the TAC has advised the Business Secretary to implement the International Financial Reporting Standards Foundation’s (IFRS) first two global sustainability reporting standards, IFRS S1 and IFRS S2, with minor amendments, to strengthen the UK’s position in sustainability leadership.
The advisory group suggests that while adopting these standards, the UK should allow additional time for firms to comply with some of the sustainability-related disclosures, recommending a two-year extension over the initial “climate-first” relief period. This adjustment aims to help businesses prioritise climate-related reporting without overwhelming them with immediate, full-spectrum sustainability disclosures.
Moreover, the TAC has called for the development of specific guidance to aid businesses in integrating these new international standards with existing national disclosure requirements. It also proposes that the UK should eliminate restrictions that limit the sectors in which investors and banks can report emissions, to broaden the applicability of these standards across different industries.
Sally Duckworth, chair of the UK Sustainability Disclosure TAC, highlighted the extensive review conducted by the TAC, noting the proposal to endorse these standards is pivotal for aligning UK businesses with global practices and enhancing transparency in sustainability reporting. Duckworth’s remarks underline the committee’s commitment to a practical and effective adoption of the IFRS guidelines, aiming to support the UK’s transition towards a sustainable economy.
Fiona Donnelly, director of sustainability at the Institute of Chartered Accountants of Scotland, supports the endorsement but suggests the standards should eventually expand to cover a broader range of sustainability impacts. She advocates for a “double materiality” approach that considers the effects of organisations on both the environment and society, thereby offering a more comprehensive framework for stakeholders.
The recommendations follow the UK’s Green Finance Strategy and are in line with global trends where over 30 jurisdictions, accounting for 57% of global GDP, are moving towards these standards. The UK government plans to consult on these proposed standards as part of a broader sustainability disclosure reporting framework, spearheaded by HM Treasury, with potential formal adoption by early next year.
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