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Government delivers timeline for S1 and S2 endorsement

Author: ICAEW Insights

Published: 20 May 2024

Dates for endorsement of the International Sustainability Standards Board’s IFRS S1 and IFRS S2 standards announced, ending speculation over timescales for new reporting requirements.

The UK will make endorsed International Sustainability Standards Board (ISSB) standards available in Q1 2025, according to the government’s Sustainability Disclosure Requirements: Implementation Update 2024, published on 16 May. 

The endorsement process will assess the standards and will conclude with the publication of UK Sustainability Reporting Standards, subject to a positive endorsement decision. Following that endorsement and a consultation process, the Financial Conduct Authority (FCA) will be able to use the standards to introduce sustainability-related reporting requirements for UK-listed companies.

The government will also decide on disclosure requirements for non-listed companies, taking into account the costs for reporting companies and the benefits for investors wishing to use sustainability-related information. A decision on future requirements is expected in Q2 2025.

Considerations around exemptions from pre-existing requirements in the Companies Act 2006 for companies that are using the standards on a voluntary basis will also be taken into account in the second quarter of 2025. Given timelines for consultation and the introduction of new legislation, any requirements are unlikely to be introduced earlier than accounting periods beginning on or after 1 January 2026.

Speculation over

The announcement ends speculation about the UK’s endorsement of the IFRS S1 and IFRS S2 standards. Initially, an endorsement decision was expected by June this year, but due to the lack of communication on progress questions were starting to be raised about the likelihood of the June 2024 commitment.

As part of its consultation on introducing UK-endorsed ISSB standards, the FCA will consult on strengthening expectations for transition plan disclosures by listed companies. How the UK’s largest companies can most effectively disclose their transition plans will be the subject of a government consultation over the summer. The government also said it expects to consult on its green taxonomy “in due course”.

While there is no definitive plan around nature-based disclosures, the government has indicated in the paper a desire to bring in standards in the future, and welcomes the ISSB’s announcement to commence a research project in this area. 

Laura Woods, ICAEW’s Technical Manager, Corporate Reporting Faculty, says: “This is a welcome update from the government that helps alleviate some substantial uncertainty around the anticipated timescales for new sustainability reporting requirements. We continue to support bringing the ISSB standards into the UK reporting framework as we believe there are considerable benefits in doing so.” 

Company employee threshold

Alongside this announcement, the government announced proposals to increase the medium-sized company employee threshold, from up to 250 employees to up to 500, and to exempt medium-sized companies from strategic report requirements. This consultation follows on from the announcement in March of plans to change monetary company size thresholds – legislation for which is expected to be brought forward in Summer 2024. All of this is part of a drive to streamline regulation as outlined in the government’s Better Regulation Framework, which was issued last year.

As inflation has not affected employee numbers in the same way as company turnover, the government is considering both sets of thresholds separately. It is looking for consultation respondents to answer the following questions:

  1. Do you agree or disagree with the uplift of the employee threshold from 250 to 500 employees for medium-sized companies?
  2. Do you agree or disagree with exempting medium-sized private companies from having to prepare a strategic report?
  3. Please provide any evidence you have regarding the usefulness of the information medium-sized private companies provide to their shareholders or other stakeholders in their strategic reports.

Members with views on these questions are invited to contact ICAEW’s Corporate Reporting Faculty with their views. The consultation closes on 27 June 2024.

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