On 16 May 2024, the UK Government published an Implementation Update on its Sustainability Disclosure Requirements (SDR) regime. The publication outlines what businesses can expect from UK SDR and next steps on implementation.
Alongside the Implementation Update, the Government also published its framework for developing and adopting UK-adopted versions of the ISSB Standards as part of UK SDR.
Alongside the Implementation Update, the Government published its framework for developing and adopting UK-adopted versions of the ISSB Standards, which will be called the UK Sustainability Reporting Standards (SRS). The framework outlines three phases:
development of the ISSB Standards (complete)
creation of the UK SRS
implementation of the UK SRS through legislation and FCA’s rules.
The Technical Advisory Committee will begin assessing the ISSB Standards in Q2 2024, and will provide recommendations to the Secretary of State for Business and Trade on developing UK SRS in Q4 2024. The Government will then consult on draft UK SRS in Q1 2025.
Once finalised, the FCA will consult on introducing disclosure requirements for UK-listed companies based on the UK SRS, whilst the Government will decide on disclosure requirements for other companies. The Government has established a Policy and Implementation Committee to coordinate implementation by the Government and the FCA.
The Government will consider legislative exemptions from pre-existing requirements in the Companies Act 2006 - most likely those contained in the Streamlined Energy and Carbon and the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations - for companies that voluntarily disclose against the finalised UK SRS. These changes would take effect no earlier than accounting periods beginning on or after 1 January 2026.
Existing UK TCFD-aligned regulation and the ISSB Standards require companies to disclose details about their transition plan, if they have one.
The Government intends to consult shortly on how the UK’s largest companies can most effectively disclose their transition plans. The FCA intends to consult on strengthening its expectations on transition plan disclosure with reference to the UK Transition Plan Taskforce (TPT) Disclosure Framework as part of its 2025 consultation on implementing the UK SRS for UK-listed companies.
The Government intends to consult on the UK Green Taxonomy overarching framework, use cases and activity-level criteria in due course.
Disclosure against the Taxonomy will be voluntary for at least two years before the Government explores mandatory disclosures as part of UK SDR.
In the Update, the Government is supportive of the ISSB’s commitment to research biodiversity, ecosystems and ecosystem services with a view to possibly developing additional standards. The Government encourages the ISSB to consider the TNFD’s work as part of its project.
In light of the Government’s support for the TNFD and prospective ISSB nature-related disclosure standards, it is expected that any future nature-related ISSB standard would be incorporated into UK SDR.
The FCA finalised its SDR and investment labels regime for asset managers on 28 November 2023. The final package of measures includes investment labels, naming and marketing rules, a general anti-greenwashing rule, and UK SDR rules.
On 1 May 2024, in a joint publication with the FCA, HMT set out its intention to issue a consultation in Q3 2024 on applying the FCA’s SDR and labelling regime as part of the Overseas Funds Regime. The FCA is also consulting on extending its SDR and labelling regime to portfolio management services.
The Government has published an update on the UK SDR regime.
The Government has published detail on its proposed UK SRS that will implement the ISSB Standards.
Businesses should act now by taking the ‘no regrets’ actions outlined in this article to get on the front foot ahead of formal regulation.
It is clear that UK SDR will draw heavily from the ISSB Standards. Until formal corporate reporting requirements are introduced, businesses likely to be in scope of UK SDR, i.e. listed companies and UK-registered companies in scope of UK TCFD-aligned requirements in the Companies Act 2006, should get on the front foot by considering how to implement the first two ISSB Standards.
Businesses should engage with the work of the TNFD and keep under review whether to report in line with the TNFD Framework. In line with the Government’s recommendation in its Update, businesses may want to consider joining the TNFD UK National Consultation Group, one of several consultation groups set up to help the TNFD understand national concerns around nature-related risks and opportunities, socialise the draft TNFD framework and gain feedback on the draft framework. By joining this group, businesses can shape thinking around TNFD implementation and help ensure that any future nature-related standards are appropriate for the UK.
Given the FCA and Government commitments to consult on strengthening transition plan disclosure requirements as part of UK SDR, and the likelihood that these requirements will draw on the TPT recommendations, businesses should look to the TPT outputs to guide their thinking around transition planning.
“These publications are an important step in clarifying the direction of travel on UK SDR for businesses and helping them lay the groundwork for effective and efficient compliance with incoming regulation. Businesses should take advantage of this opportunity to get on the front foot by taking no-regrets actions now to prepare for UK SDR, and engaging with the policymaking process.”
David Croker
Partner, PwC
The Government intends to consult on transition plan disclosures for UK companies in Q2 2024.
The FCA intends to publish final rules extending its SDR and investment labelling regime to portfolio management services in H2 2024.
The Government will consult on the application of the FCA’s SDR and labelling regime through the Overseas Funds Regime in Q3 2024.
The Government intends to consult on draft UK SRS in Q1 2025.
PwC’s summary of the FCA’s final anti-greenwashing guidance and consultation on extending the Sustainability Disclosure Requirements and investment labels regime to portfolio management.
PwC’s summary of the FCA’s final rules on UK SDR disclosures, sustainability investment labels and greenwashing and implications for firms.
The Sustainability Disclosure Requirements (SDR) regime is the UK’s flagship policy to drive decision-useful information on sustainability across the economy, with regulatory requirements expected from 2024. Our latest reflections article considers the no-regret actions businesses can take now to mitigate key challenges and prepare for incoming regulatory requirements.
PwC’s summary of the FCA’s proposals on sustainable investment labels and UK SDR rules for FCA-regulated asset managers and distributors of investment products.
