As the combined effort to prevent excessive climate change gathers momentum at the highest level of business, a greater onus and responsibility is being placed on companies across the United Kingdom to report their own environmental impact.
Following the creation of the International Sustainability Standards Board at COP26 in 2021, the UK government has been working to create a framework that will hold businesses accountable for their sustainability levels. This has been called the UK Sustainability Reporting Standards (UKSRS), and it is set to be fully rolled out in the coming months.
Companies will be expected to disclose industry-specific metrics for sustainability, material risks and potential future opportunities, as well as climate related information around their carbon footprint or reusable goods rates. It is set to be integrated within financial reporting, so will likely appear alongside a business’ end of year monetary accounts.
For those who might not be familiar, here is some background information on what the UK Sustainability Reporting Standards framework is and what it will mean for businesses.
The origin story of the UK Sustainability Reporting Standards dates back to an economy-wide government framework published in 2021, called ‘Greening Finance: A Roadmap to Sustainable Investing’. In this paper, the UK government outlined its vision to “kick-start a green industrial revolution” as the-then Chancellor of the Exchequer put it in the roadmap’s foreword.
It would coincide with the UK’s commitment in law to achieving net zero greenhouse gas emissions by 2050, and called upon investors, business giants and everyday consumers to contribute towards this goal in a collective effort of environmental consciousness.
This was publicly released in the same year that the International Sustainability Standards Board was formed. This is a combination of United Nations member states that are focused on accurate and responsible sustainability reporting within a large corporation or business.
The International Sustainability Standards Board (ISSB) was quickly recognised as a worldwide benchmark and guidance tool for sustainability reporting: It outlined a package of measures designed to reduce greenwashing, and was seen as a global commitment to the collective effort of fighting climate change. To this day it develops standards that should provide a high-quality baseline on what is expected of investors, large companies and financial markets when it comes to sustainability.
Its other key objectives are to meet the information needs of investors and to enable companies to provide more comprehensive reports and information on how they are maximising their sustainability performance and potential.
Currently, all medium and large-sized companies must provide business overviews in a strategic report, including principal risks and uncertainties, and it is done to provide shareholders with a wider picture of the business as a whole. Sustainability concerns can be included in this if they are deemed to be a principal risk, but at the moment it is only quoted companies and public interest entities with over 500 team members that are required to do specific reporting on environmental matters.
This is set to change with the introduction of the UK Sustainability Reporting Standards, reportedly opening the umbrella to include both listed and unlisted companies, but the details still need to be finalised before this becomes official.
The standards are not just about reporting results around sustainability, but also implementing restrictions on the use of terms related to sustainability within marketing or product naming. It requires and calls for authentic and accurate representations of sustainability within a business, so as to properly hold companies to account if they fall shy of the standards set in the UKSRS guidelines.
Following the laying of the foundations for the UK Sustainability Reporting Standards framework, a round of public consultation will take place to analyse the government’s vision and gauge feedback on its proposed impact. Following this, it is expected that the official finalised standards will be published in the Spring of this year, with the government and regulators offering full endorsement later in 2025. It is currently expected that this “endorsement” refers only to creating the standards, rather than implementing any legislation, as this will be managed by the UK Financial Conduct Authority.
It is important to note, however, that these standards will apply no earlier than accounting periods beginning on or after January 1 2026, so businesses and their accounts teams have ample time to wait for the key announcements from the government, and prepare readily for what the framework will bring.
