UK Sustainability Disclosure Requirements: Implementation Update 2024

On 16 May 2024, the UK Government published an update on its development of Sustainability Disclosure Requirements (SDR): a framework that is intended to facilitate the flow of robust sustainability information between key stakeholders including corporates, consumers, investors and capital markets. This framework captures corporate disclosures, financial product disclosures and broader taxonomy disclosures. The update is explicitly made in the context of the global progress made on sustainability standards including the launch of the IFRS Foundation’s International Sustainability Standards Board (ISSB) baseline standards in July 2023. Fifteen countries (so far) have consulted or are consulting on how to implement ISSB-aligned standards domestically, and the UK is one of the leaders in this area. 

The key takeaways from the Government update are:

UK Sustainability Reporting Standards

The Government plans to make the ISSB-aligned UK Sustainability Reporting Standards (UK SRS) available in Q1 2025 and it has set out the endorsement and implementation processes to allow publication in the separately-published framework. Once the UK SRS are endorsed, the Financial Conduct Authority will then be able to introduce requirements for UK listed companies to disclose against these standards and the Government will also consider whether related disclosure obligations should be imposed on non-listed companies. It expects to make this decision in Q2 2025, with any changes required to company reporting to be effective from accounting periods beginning on or after 1 January 2026. 

Transition Plan Disclosures

In parallel, the Transition Plan Taskforce has been developing a transition plan disclosure framework (the TPT Disclosure Framework) to support companies in the development and publication of their plans to achieve net zero (please see our blog for further details). As there is substantial overlap between IFRS S2, the ISSB Climate standard, and the TPT Disclosure Framework, the FCA intends to consult on its expectations for transition plans under the UK SRS with reference to the TPT Disclosure Framework. In the update, the Government also commits to consulting shortly on how the UK’s largest companies should disclose their transition plans. 

SDR and investment labels regime

The Government used this announcement to also highlight broader developments around the SDR. It reminded readers of its policy statement on the SDR and investment labels regime released in November 2023 (see our blog for details) and the FCA’s consultation to broaden the scope of the regime to UK portfolio managers, as we explain here. 

UK Green Taxonomy

The Government also confirmed that they are continuing to develop the proposed UK Green Taxonomy, and expect to consult on the design during 2024. Once the taxonomy is finalised there will be a testing period for voluntary disclosures lasting at least two years. A decision on mandatory disclosures against the taxonomy has not yet been made and would be subject to further consultation. 

As noted by the Government in this update, international interoperability is a key principle for the UK’s approach to the SDR, so this roadmap and measured pace will be welcomed by those working through the intricacies of forthcoming EU Corporate Sustainability Reporting Directive, and anticipated changes to the EU’s Sustainable Finance Disclosure Regulation. 

For further detail or if you would like more information, please reach out to your usual Freshfields contact.