The United Kingdom is setting out to create its own sustainability disclosure standards that will be helpful to investors and can be globally comparable.
The U.K. Sustainability Disclosure Standards (SDS), which are intended to be created by July 2024, follow other efforts to create sustainability standards. The International Sustainability Standards Board (ISSB) created two new standards, IFRS S1 and IFRS S2, in July with the same intent to create a common language for climate-related risks and opportunity disclosures. The U.K.’s own standards will be based on the IFRS standards by the ISSB.
In fact, the secretary of state for business and trade in the U.K. will consider the endorsement of the IFRS standards to create the SDS for 2024. Once endorsed, the SDS may be referenced in any legal or regulatory requirements for U.K. entities.
“U.K. endorsed standards will only divert from the global baseline if absolutely necessary for U.K. specific matters,” the government said.
The U.K. is not the only entity following in the steps of the ISSB.
The SDS comes after business leaders called for government support and mandated sustainability reporting standards. U.K. executives recently agreed on a survey that there is a growing need for concrete actions from the U.K. government to prioritize sustainability practices in the corporate sector.
“By using the IFRS Sustainability Disclosure Standards as a baseline, the aim is for the information companies disclose under SDS to be globally comparable and decision-useful for investors,” the U.K. government said in its statement. “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.”
Before endorsing the standards, the U.K. Sustainability Disclosure Technical Advisory Committee (TAC) will assess the IFRS standards on a technical basis and provide independent recommendations for endorsements to the Business and Trade Secretary via the Department for Business and Trade. TAC will have an appointed chair and members from relevant professional backgrounds.
In addition, the U.K. Sustainability Disclosure Policy and Implementation Committee (PIC) will analyze the interactions between IFRS Sustainability Disclosure Standards and existing legislation and regulation. PIC will be overseen by DBT, and PIC will coordinate the implementation of SDS by the government and the Financial Conduct Authority if the business and trade secretary endorses the standards.