- Global Alignment: Adoption of IFRS S1 and S2 would align UK businesses with global sustainability reporting standards, enhancing transparency and accountability.
- Comprehensive Reporting: The standards address Scope 3 emissions and integrate environmental impacts with financial disclosures.
- Support for Transition: Recommendations include phased implementation to ease businesses into compliance without overburdening them.
UK FRC Pushes for ISSB Reporting Standards
The UK Financial Reporting Council (FRC), acting as secretariat to the UK Sustainability Disclosure Technical Advisory Committee (TAC), has urged the UK Government to adopt the International Sustainability Standards Board (ISSB) reporting standards. These standards, IFRS S1 and IFRS S2, aim to enhance corporate sustainability and climate transparency.
What the ISSB Standards Cover
- IFRS S1: A global framework for sustainability-related financial disclosures, addressing emissions (Scopes 1, 2, and 3), waste management, and environmental risks.
- IFRS S2: Focuses on climate risks and opportunities, building on existing frameworks like the Taskforce on Climate-related Financial Disclosures (TCFD).
Both standards ensure companies account for their full environmental impact, including often-overlooked Scope 3 emissions.
“This is a crucial step in aligning UK businesses with global reporting practices, promoting transparency and supporting the transition to a sustainable economy,” said Sally Duckworth, TAC’s UK sustainability disclosure chair.
Related Article: EFRAG Launches Voluntary Sustainability Reporting Standard for Non-Listed SMEs
Recommendations for a Smooth Transition
The TAC suggests minor amendments to tailor the standards to the UK’s regulatory context:
- Extend the “climate-first” reporting relief from one year to two, giving companies more time to adapt.
- Issue guidance on aligning IFRS S1 with existing UK legal sustainability frameworks.
These adjustments aim to ease businesses into compliance while retaining the standards’ core principles.
Why It Matters
The adoption of ISSB standards would position the UK at the forefront of global sustainability reporting, fostering greater accountability and enabling businesses to address their environmental impact comprehensively.
The FRC’s recommendations reflect a balance between ambition and practicality, supporting UK businesses in their transition to a more transparent and sustainable economy.
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