Three consultations from the Department for Business and Trade (DBT) and the Department for Energy Security and Net Zero (DESNZ), covering sustainability assurance, transition planning and sustainability reporting, have laid the groundwork for a more robust and globally aligned sustainability disclosure regime in the UK. ICAEW has welcomed the publication of the consultations and submitted detailed responses to each. 

ICAEW considers the consultations to be a vital step in restoring the UK’s position as a leader in sustainability reporting, with ICAEW’s Chief Policy and Communications Officer Iain Wright describing them as “critical to the resilience of businesses and the growth of the wider economy”. 

“We urge the UK government to act with conviction and proceed at pace to ensure globally comparable, sustainability-related financial information is delivered to the UK financial markets,” Wright says. “By advancing proposals on sustainability reporting standards, transition plan requirements and the development of an appropriate oversight regime for assurance, the UK can strengthen trust, support investment, and reinforce its position as a leader in corporate reporting and sustainable finance.”

Developing an oversight regime for assurance 

The consultation on assurance outlined proposals for a voluntary registration regime for sustainability assurance providers. ICAEW, while supporting this, has urged the government to set out a clear path to mandatory registration. This would create a level playing field for all assurance providers, it said in its response. “The same high bar should be applied to all with respect to professional standards, training, quality management, ethics and independence, plus monitoring and oversight.”

ICAEW strongly supports adoption of ISSA 5000 General Requirements for Sustainability Assurance Engagements for the UK market and calls for its use to be mandatory for all sustainability assurance engagements (irrespective of whether undertaken on a voluntary or mandatory basis).

Sustainability assurance providers, regardless of their profession, should apply the same assurance standard and be subject to equivalent regulatory requirements in order to promote consistent quality across the market.

“ICAEW agrees in principle that both individuals and firms should be able to be registered as sustainability assurance providers. This will ensure consistency and accountability by requiring firms and individuals to meet relevant registration and qualification requirements”, ICAEW said in its response.

Transition plan requirements 

ICAEW supports a phased introduction of transition plan requirements, starting with a ‘comply or explain’ approach to the development and disclosure of transition plans, moving towards mandatory requirements over time.

The consultation invited views on whether UK SRS S2 Climate-related disclosure should serve as the baseline for transition plan disclosures in annual reports. In its response, ICAEW supported this approach, alongside flexibility for entities to publish standalone plans. “Transition planning must not become a compliance exercise; it should be a strategic exercise, as part of an entity’s strategy cycle. Therefore, entities may choose to publish a standalone transition plan outside of the annual report.”

The consultation also suggested using the FTSE 100 as a threshold for mandatory disclosures. ICAEW does not support this, citing misalignment with emissions and economic significance. Instead, ICAEW recommends thresholds based on UK SRS and emissions criteria.

The consultation considered the introduction of a regulation that mandates entities to implement transition plans. ICAEW believes that market mechanisms, such as investor pressure and stakeholder scrutiny, are more effective and less burdensome than regulation. 

The greatest challenge, when it comes to transition planning, is developing credible plans, rather than disclosures around those plans. ICAEW is pushing for more guidance and support around the development of plans. 

ICAEW encourages the government to consider a vision for a whole economy transition plan. This would include sector pathways and policy conditions to allow all organisations, both public and private, to transition to net zero by 2050.

However, a mandated 1.5ºC pathway for individual businesses would be challenging and unreasonable, particularly as we may have already surpassed 1.5ºC of warming. This is a broader issue and impossible for businesses to reach alone. 

UK Sustainability Reporting Standards S1 and S2 

This consultation sought views on endorsing UK SRS S1 General requirements for disclosure of sustainability-related financial information and UK SRS S2, which would align the UK with the global baseline set by the International Sustainability Standards Board (ISSB). 

In its response, ICAEW welcomed the ambition to endorse UK SRS S1 and UK SRS S2, stating that this would establish a high-quality, globally aligned framework for sustainability disclosures, and urged the government to act quickly to endorse the standards. “Endorsing UK SRS will help increase the flow of capital to those businesses disclosing sustainability-related risks and opportunities and ensure that UK markets remain attractive to investors.”

ICAEW has pushed for proportionate implementation of the standards, by starting with the largest entities and phasing in other sizes of business over time. Once the government endorses UK SRS, the standards should be made available for voluntary use without delay. 

Any divergence from ISSB standards should be guided by clear principles and subject to regular review, with a view to realignment where possible. ICAEW provided suggestions for such principles in its response.

The consultation included a proposed amendment to remove the mandatory requirement for entities to use Global Industry Classification Standard (GICS). ICAEW supported this amendment, noting that mandating GICS could create unnecessary complexity and cost, particularly for smaller entities. “The proposed amendment offers a more proportionate approach and gives entities the flexibility to present disclosures in a manner that is appropriate to their business model and operations.”

Regarding the Sustainability Accounting Standards Board (SASB) Standards, the consultation suggests changing the requirement from “shall consider” to “may consider”. ICAEW supported this change, noting that while SASB materials offer useful industry-specific guidance, they have not undergone the IFRS Foundation’s full due process. ICAEW encouraged the government to monitor the ISSB’s enhancement project and re-align UK SRS wording when appropriate.

“We welcome these important consultations from DBT and DESNZ, which mark a significant step forward in shaping the UK’s sustainability disclosure landscape and restoring its position as a leader in corporate reporting,” says Wright. “Transparency on the risks and opportunities faced by entities is essential. The right information leads to better pricing of assets and avoids sudden, major collapse. 

ICAEW supports the direction of travel and has made targeted recommendations to ensure the proposals are proportionate, effective and capable of restoring the UK’s role as a global leader in sustainable finance, he adds.

“ICAEW looks forward to continued engagement with the government and the Financial Reporting Council to help take forward action to shape the future of sustainability reporting and assurance and help realise the government’s ambition for the UK to be a world leader in sustainable finance.”