UK-Adopted International Accounting StandardsAdoption Status Report
UK-Adopted International Accounting StandardsAdoption Status Report

Connectivity between sustainability and accounting standards

UKEB Remit

The UK Government’s ‘Green Finance Roadmap’, published in October 2021, set out the commitment to adopting the IFRS Sustainability Disclosure Standards for use by the UK registered entities. This commitment was a core component of the economy wide ‘Sustainability Disclosure Requirements’ (SDR) regime.  As such, like many other jurisdictions, the UK Government intends to establish a framework for the endorsement and adoption of IFRS Sustainability Disclosure Standards. In the UK, no single organisation has yet been delegated a statutory function to consider and adopt IFRS Sustainability Disclosure Standards for use in the UK. 

To assist with the assessment and endorsement of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, the UK government has established a Policy Implementation Committee (PIC) and a Technical Assessment Committee (TAC), both of which include representatives from the UKEB[1].

The UKEB is assisting the UK Government by carrying out work in this area to consider the overlap or impact of the proposed ISSB IFRS Sustainability Disclosure Standards with IFRS Accounting Standards. In addition, the data gathered will help the UKEB to obtain insight on UK companies’ existing experience of reporting on climate-related matters.

UKEB Projects

The ISSB published an RfI Consultation Agenda Priorities on 4 May 2023 and requested comments by 1 September 2023. The UKEB requested stakeholder views on:

  • The strategic direction and balance of the ISSB’s activities
  • The suitability of criteria for assessing which matters to prioritise and add to the ISSB’s work plan.
  • New research and standard-setting projects that could be added to the ISSB’s work plan

The UKEB draft response focussed primarily on the first two areas, along with the appropriateness and scope of a possible project on integration in reporting.

Final Comment Letter

The UKEB published a final comment letter on 10 August, 2023.

The UKEB is very supportive of the ISSB’s objective to develop standards – in the public interest – that will result in a high quality, comprehensive baseline of sustainability disclosures focused on the needs of investors and the financial markets.

While the UKEB supports the ISSB and its objectives it also believes that the next two-year period will be crucial to establishing the credibility and success of the ISSB global baseline.

The UKEB recommends that the ISSB focuses on consolidation. This requires ensuring smooth adoption and implementation of IFRS S1 and S2 and working with the IASB to deliver standards and guidance that produce connected information.

Sustainability and financial reporting must provide investors with high-quality, comparable, and decision-useful information. Without this consolidation investors will not get the clear understanding of the impact of sustainability on the financial statements that they have told us that they are seeking.

The UKEB is carrying out the following work in this area, to consider the overlap or impact of the proposed ISSB IFRS Sustainability Disclosure Standards with IFRS Accounting Standards.

Research

A research project on reporting climate-related matters in financial statements was approved for commencement by the UKEB at the February 2023 UKEB Board meeting. The evidence gathered will help the UKEB to obtain insight on the UK companies’ existing experience of reporting on climate-related matters and the connectivity between sustainability reporting and financial reporting in this respect. This will help the UKEB to provide evidence based responses to both the IASB, on its project on Climate-related Risks in the Financial Statements, and to the ISSB, on its RFI on its future agenda setting. 

UKEB Secretariat papers on potential connectivity issues

The UKEB Secretariat has presented to the Board a series of preparatory papers, focusing on connectivity between the IFRS Sustainability Disclosure Standards and International Accounting Standards. The papers are developed to act as background material to inform the UKEB’s consideration of the key matters related to connectivity as it develops its own position.

UKEB Stakeholder Groups

To inform the UKEB’s work in this area, the following groups have been set up:

The purpose of the NSS Sustainability Forum is to develop an understanding of connectivity issues between IFRS Accounting Standards and IFRS Sustainability Disclosure Standards, consider possible solutions that would address the stakeholder needs for connectivity between information presented in companies’ sustainability reports and financial reports, and share them with ISSB and IASB as they develop high quality international standards.

The Sustainability Working Group (SWG) provides specialist knowledge and technical advice to the Secretariat on connectivity issues between the IASB’s Accounting Standards and the ISSB’s Sustainability Disclosure Standards. The group also contributes practical experience and expertise, including examples of best practice.

Both groups are chaired by the UKEB Technical Director.

[1]             UK Sustainability Disclosure Standards – 2 August 2023