UK Sustainability Disclosure Requirements Stepping into the Spotlight: Key Takeaways

The UK Government recently published an implementation update, including timeframes and milestones, to the Sustainability Disclosure Requirements (SDR).

As part of the Green Finance Strategy updated in March 2023, UK SDR is a package of disclosures and rules aimed at tackling greenwashing and facilitating information between corporates, consumers, investors, and capital markets. It is built on global best practice and leading standards, notably the ISSB standards.

The implementation update has been a long-awaited next step since the Green Finance Strategy 2023, so let’s dive in and see what the UK Government has in store for the SDR components and how companies can start preparing for the evolving regulations.

What are the key takeaways from the published SDR update?

• Name change: Perhaps to align terminology with the EU's already adopted European Sustainability Reporting Standards (ESRS), the Government has renamed the upcoming UK Sustainability Disclosure Standards (UK SDS) to UK Sustainability Reporting Standards (UK SRS).
  
  
• Expert taskforce convened: The Government has appointed the new 14-strong UK Sustainability Disclosure Technical Advisory Committee to assess and advise on the endorsement of the ISSB standards, which should conclude by the end of this year.

• UK SRS launch day: The initial target of publishing the UK-endorsed ISSB standards, to be known as UK SRS, in July 2024 has shifted to Q1 2025.
  
  
• Reporting requirements: If the UK SRS are approved and published, the FCA will consider using the standards to introduce disclosure requirements for UK-listed companies, whilst the Government will decide on requirements for other companies. The requirements would be effective no earlier than accounting periods beginning on or after 1 January 2026.

• Transition plans: Considering the overlap between the ISSB standards and the Transition Plan Taskforce (TPT) Disclosure Framework, the FCA plans to consult on strengthening its expectations for transition plan disclosures. In addition, the government will soon consult the UK’s largest companies on how best to disclose transition plans.
  
  
• UK Green Taxonomy: The UK Government plans to hold consultations ‘in due course’ on the design of the UK Green Taxonomy, a framework for determining which activities can be defined as ‘environmentally sustainable’ to help mobilise investment into green activities and tackle greenwashing. Following finalisation of the taxonomy, a testing period for voluntary disclosure will be introduced for at least two years before mandatory reporting is explored.

• Nature-related disclosures: While acknowledging the Taskforce on Nature-related Financial Disclosures (TNFD), there are currently no plans for the Government to integrate TNFD into UK SRS. However, in light of the Government’s support, it is likely that future TNFD standards will be incorporated into UK disclosures. 
  
  
• SDR & investment labels: The update highlighted the FCA’s final guidance on the new anti-greenwashing rule. It also reiterated the FCA's current consultation on extending the SDR and labelling regime to UK portfolio managers, and the Government's planned consultation on potentially broadening the SDR scope to including funds under the Overseas Funds Regime.

For more details on the UK SDR implementation, click here.

Although we are seeing delays, SDR, and more specifically the ISSB-endorsed standards, have stepped into the spotlight and the ball is rolling. This brings us to the question: what is your next move?

Preparing for the Future

We know the UK Government has clear intent to endorse the ISSB standards. Companies likely to be in scope of SDR can proactively prepare by assessing how to implement the ISSB standards and the TPT Disclosure Framework. While mandatory reporting isn't immediate, it is looming. Engage with the policymaking process, prepare, and plan, to stay ahead of the curve.

As we continue to keep an eye on the evolving regulations, one thing remains clear: the sooner you start, the smoother this transition will be.

For further advice and support get in touch at [email protected].