UK government unveils groundbreaking sustainability disclosure standards


The UK government will establish UK Sustainability Disclosure Standards (SDS) that will enable firms to report on sustainability and climate-related risks.

These new standards are designed to provide a foundation for future sustainability reporting laws or regulations within the nation.

Drawing inspiration from the sustainability and climate-related reporting standards issued by the IFRS Foundation’s International Sustainability Standards Board (ISSB), the UK SDS will be founded on principles recently published by the ISSB.

The ISSB, which was launched at the UK-hosted COP26 climate conference in November 2021, had the goal of developing IFRS Sustainability Disclosure Standards to provide a global baseline for consistent understanding of sustainability risks and opportunities for businesses.

The newly introduced IFRS standards were publicly published in June 2023, and in the following month, the International Organization of Securities Commissions (IOSCO) urged regulators to integrate these standards into their sustainability reporting regulatory frameworks.

The DBT emphasised the importance of aligning the UK SDS with the IFRS standards to ensure global comparability and investor utility. Divergence from the global baseline will only occur if it is deemed essential for UK-specific concerns.

The statement revealed the government’s aim, saying: “By using the IFRS Sustainability Disclosure Standards as a baseline, the aim is for the information companies disclose under UK SDS to be globally comparable and decision-useful for investors. The disclosures required by these standards will help investors to compare information between companies, thereby aiding decision making; supporting the efficient allocation of capital, and smooth running of the UK’s capital markets.”

This initiative follows the UK’s Green Finance Strategy update, which included an assessment of the new IFRS sustainability standards once published. The DBT also noted that decisions regarding mandatory disclosures will be made independently by the UK government and the Financial Conduct Authority (FCA).

With this move, the UK continues to lead in climate-related reporting requirements for large companies. The DBT’s statement indicates that the Secretary of State for Business and Trade will consider the endorsement of the IFRS Sustainability Disclosure Standards to officially create UK SDS by July 2024.

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