The committee responsible for assessing the suitability of IFRS S1 and IFRS S2 for adoption in the UK has submitted its endorsement recommendations for consideration by the Secretary of State. 

In its final report, the UK Sustainability Disclosure Technical Advisory Committee (TAC) recommended the UK endorsement of IFRS S1 and IFRS S2, with the committee having unanimously voted that these standards are conducive to the long-term public good in the UK. 

It proposed a few minor amendments from the International Sustainability Standards Board’s (ISSB) standards that would be beneficial for future UK standards, or UK Sustainability Reporting Standards (UK SRS) as they will be known. These include:

• a proposed extension of IFRS S1’s ‘climate-first’ transition relief – this would permit in-scope UK entities to disclose only climate-related risks and opportunities for its first two years of reporting in comparison with the ISSB’s standard, which permits this only in the first year of reporting;
• removing the transition relief in IFRS S1 that permits an entity to report its annual sustainability-related financial disclosures after it has published the related financial statements in the first year of reporting;
• a proposed amendment to the requirement in IFRS S2 relating to the use of Global Industry Classification Standard (GICS) when disaggregating gross financed emissions.

The publication of the recommendations marks the end of months of deliberations by the TAC. Topics such as the application of materiality, sources of guidance, references to the GHG Protocol Corporate Standard and the requirements relating to transition plans were debated significantly.

The TAC recommended further engagement with the ISSB to help gain clarity on certain technical matters and improve the quality of any future reporting within the UK. 

The application of IFRS Sustainability Disclosure Standards will be an evolutionary process, says the committee. It also urges regulators to consider ways to support stakeholders and recognise the learning this process will entail.

The next steps towards UK endorsement lie with the government, which is also responsible for implementation decisions, including those around scoping and effective dates. Any draft UK Sustainability Reporting Standards will be published for public consultation before being finalised and endorsed.

“We are pleased that the TAC is recommending endorsement – a key step towards implementing ISSB standards in the UK,” says Kate Beeston, Technical Manager in ICAEW’s Corporate Reporting Faculty. “It’s also encouraging to see that the TAC does not propose significant amendments from the ISSB’s original standards. ICAEW has been voicing support for adopting unamended standards in the UK to provide the consistency and comparability across global markets that investors are calling for.”

ICAEW will be watching developments closely and will consult with members accordingly.