New guidance published on the development of the UK SRS: Confirmation that, so far, the UK is staying the course with ISSB implementation

The Department for Business and Trade has published new guidance on the Government’s framework to create UK Sustainability Reporting Standards (UK SRS) by assessing and endorsing the sustainability and climate-related disclosure standards published by the International Sustainability Standards Board (ISSB) in June 2023. The new guidance follows on from a suite of guidance published in May, and although little has changed since the May guidance, it provides helpful confirmation of the new Government’s approach to the UK SRS. We have set out the most significant takeaways below.

Overarching intent and timings appear to remain unchanged 

The guidance reiterates that the Government has long been a supporter of the ISSB, which was launched at COP26 with the goal of creating a global baseline for sustainability reporting, and that it plans to introduce disclosure requirements (in the form of UK SRS) for UK-listed and other UK companies based on the first two ISSB standards (known as IFRS S1 and IFRS S2), subject to an affirmative endorsement decision being made by the Government. 

This endorsement decision is expected to be made by Q1 2025, remaining on course with the timeline set out in the May guidance; the May guidance adds that the UK SRS will be published in Q1 2025 if a positive endorsement decision is made. Given this, any legislative changes that may be introduced are highly unlikely to come into effect before accounting periods beginning on or after 1 January 2026, meaning that the first reports would be due in 2027.

Following a positive endorsement decision (if one is made), the Financial Conduct Authority (FCA) will be able to use the UK SRS to introduce reporting requirements for UK-listed companies. According to the guidance, this will be subject to a consultation process – listed companies may find this a useful opportunity to voice particular concerns or suggestions. 

Balancing burdens with benefits for non-listed companies

Separately, the guidance states that the Government will decide on reporting requirements for companies that fall outside the FCA’s regulatory perimeter, following, and subject to, an affirmative endorsement decision. The guidance states that that decision will take into account various factors, “including costs for reporting companies and benefits for investors that may wish to use this information”. This restates the language used in the May update, suggesting that the new Government is mindful of the need to balance reporting burdens on companies with the benefits that reporting can bring to investors. The May guidance further notes that any decision that the Government takes will involve consultation and will require Parliamentary approval for the introduction of new legislation.  

No further clarity on interoperability with other reporting standards

The guidance does not address the question of interoperability between the UK SRS and other reporting standards, most notably the EU’s Corporate Sustainability Reporting Directive (CSRD), which is relevant to UK companies caught by both the CSRD and the UK SRS. Despite this, we expect the Government will be following conversations around interoperability closely, particularly given the ongoing high-profile work in this area to demonstrate areas of alignment between the ISSB standards and the European Sustainability Reporting Standards (mandated under the CSRD).