UK sustainability reporting and assurance consultations - our response

In a busy period over the summer, we have responded to a series of much anticipated consultations by the UK government and FRC regarding sustainability reporting and assurance, covering endorsement of reporting and assurance standards, requirements around transition plan reporting and early ideas for an assurance oversight regime for sustainability assurance.

This suite of consultations will form the foundations for the UK’s sustainability reporting and assurance framework, which we believe is important to provide stakeholders with credible information on actions being taken to address the current climate and wider sustainability challenges facing society.

We urge the Government and the FRC, working with other stakeholders, to maintain this momentum with the further development of the sustainability reporting and assurance framework, including ongoing consideration by the FRC of the appropriateness of the IESSA and ISQM (UK) 1 for sustainability assurance in the UK, to ensure high quality and a level playing field for all sustainability assurance providers.

Our responses are attached on and a summary of the key points is provided below:

Adoption of ISSA 5000 – Sustainability Assurance standard

The FRC proposed adoption of the International Standard on Sustainability Assurance (ISSA 5000), with only one proposed amendment relating to the prohibition on the use of direct assistance by internal, consistent with the prohibition in UK auditing standards. The standard is to be made available for voluntary adoption.

In our response we strongly supported the adoption of ISSA 5000 by the FRC. However, noting the risk of fragmentation in standards used, we highlighted that its use should be made mandatory as soon practicable, along with the adoption of international ethics (IESSA) and quality management standards (ISQM) to ensure consistency, high quality and a level playing field for all sustainability assurance providers.

Endorsement of UK Sustainability Reporting Standards

In response to the government’s proposal to endorse UK Sustainability Reporting Standards (UK SRS), based on the International Sustainability Standards Board’s IFRS S1 and S2 with some additional and amended transitional reliefs, we fully supported their adoption noting that along with the alignment with financial reporting standards, they reinforce the UK’s ambition to be a world leader in sustainability. We supported the proposed amendments to transitional reliefs, including alignment of the reporting timetable for financial and sustainability reports from year one and the use extended reliefs rather than carve-outs in other areas.

While we understand the rationale for proposals requiring ‘economically significant’ companies (i.e. the largest private companies) to report on sustainability, it is difficult to support the proposal until the definition of such companies is resolved in the upcoming audit reform proposals.

Transition planning requirements

IN responding to the government’s consultation on implementation of transition plan requirements, we acknowledged the need for a clear and measurable transition to a low carbon economy and applauded the recognition of the need for robust decision-useful information around how companies are contributing towards the transition, particularly for stakeholders to understand progress. However, we do not support a mandatory approach to implementation of transition plans and recommended that the government a “comply or explain” approach for now and consider whether mandating plans might be appropriate in the future as good practice evolves. Furthermore, we believe that UK SRS S2, once adopted, provides an effective base for reporting on transition plans.

Assurance oversight regime

The government set out proposals to establish the beginnings of an oversight regime for sustainability assurance, to be implemented by the FRC, including development of a voluntary register for assurance providers. We have been calling for a registration regime for sustainability assurance providers, along with the other large firms, and fully support the proposals to establish a voluntary register. However, we stress that such a regime should be accompanied by a plan to move to a mandatory registration regime, which will be particularly important if and when mandatory assurance requirements are introduced.

We support the profession-agnostic approach to sustainability assurance adopted by international standard setters, and proposed in this consultation, and it is critically important that the registration regime should be proportionate and established in a manner which does not preclude potential sustainability assurance providers from registering. Furthermore, the registration scheme should set out consistent requirements, including assurance, ethical and quality management standards, to be applied by all assurance providers to ensure a level playing field.

While we support the proposals in the consultation, there are many questions left unanswered, including clarity of the scope of the assurance provided by registered firms, how registration will be applied for different reporting frameworks, how non-audit firms will be encouraged to register and which bodies have the powers to mandate consistent assurance, ethics and quality management standards for audit and non-audit firms alike as it is currently unclear whether the FRC/ARGA will have the powers to oversee non-audit firms.

If you have any questions on any of these responses please contact Paul Winrow (ISSA 5000, Sustainability Assurance Regime) or Andrew Jones (UK SRS, Transition plans).