The UK and the ISSB (International Sustainability Standards Board)

The standards aim to provide investors and stakeholders with consistent and compatible data that can be used to assess an organisation’s sustainability performance and the impact on its financial value.

The UK and ISSB 

The UK government previously expressed strong support for adoption of ISSB standards leading to a period of review that resulted in the ‘Exposure draft of UK Sustainability Reporting Standards: UK SRS S1 and UK SRS S2’ consultation (25th June, 2025).

Background to UK sustainability-related financial disclosures 

The transition to an economy that is climate-resilient and sustainable is essential for long-term UK economic growth. 

It is an ambition of the UK government to make the UK an energy superpower, delivering clean power by 2030 and ‘accelerating to net zero’. 

With this in mind, the UK government has set out its ambition for the UK to be the world leader in sustainable finance. This includes delivery of a regulatory framework to support sustainable growth and to enable the private sector to fully realise the transition opportunities. 

To achieve this requires the policy and legal frameworks that support investment decisions. 

Part of the Mansion House package (November 2024), saw HM Treasury set out steps that the UK government is taking to strengthen the UK’s attractiveness as a destination for inward investment, and as a centre for sustainable finance. 

This included a consultation seeking views on the development of a UK Green Taxonomy. 

Another commitment is to deliver decision-useful sustainability-related financial information to financial markets to aid investment. 

The development of an enhanced UK sustainability disclosures regime is an essential stage of the process.

Relationship with the ISSB

In 2021, the ISSB was established to set international standards for corporate sustainability disclosures, following a similar process as that for the development of accounting standards. 

The ISSB’s aim is to ensure entities across the world report sustainability-related company information consistently and comparably, and with sufficient quality to enable investors and stakeholders to make informed investment decisions. 

In June 2023, the ISSB published its two inaugural standards: 

• IFRS S1 ‘General Requirements for Disclosure of Sustainability-related Financial Information’ 

• IFRS S2 ‘Climate-related Disclosures’ 

All ISSB Standards have a financial materiality focus: reporting entities must disclose material information about sustainability-related risks and opportunities that may affect the entity’s financial position in the short, medium and long term. 

The ISSB’s Standards also reference the Task force on Climate-related Financial Disclosure (TCFD) four pillars: 

• Governance 

• Strategy 

• Risk management 

• Metrics and targets 

TCFD-aligned reporting is already in force in the UK for listed companies via the FCA’s listing rules, together with the largest private companies and LLPs via the Companies Act 2006. 

IFRS S1 has two functions: 

• To provide a framework supporting all ISSB Standards, including IFRS S2 

• To provide general disclosure requirements for entities on any sustainability-related risk or opportunity where a topic-specific standard does not yet exist 

IFRS S2 includes requirements to disclose material information concerning climate-related risks and opportunities (including physical and transition risks) covering: 

• Risk management processes and policies 

• Responses to climate-related risks and opportunities (including progress against previous plans) 

• Climate resilience 

• Metrics, including for greenhouse gas emissions 

• Climate-related targets 

In May 2024, a document was published by the then UK government, setting out the process for assessing ISSB Standards, to enable a decision to be made regarding UK endorsement for UK use. 

The technical assessment of IFRS S1 and IFRS S2 has been completed, having been delivered through: 

• The UK Sustainability Disclosure Technical Advisory Committee (TAC) 

• The UK Sustainability Disclosure Policy and Implementation Committee (PIC) 

TAC recommended four minor amendments in order to finalise UK SRS S1 and UK SRS S2. 

Further consultation is now taking place to establish: 

• The potential costs and benefits of using UK SRS to inform decisions taken during the implementation phase 

• Topics on which more guidance may be useful 

The final decision regarding whether to endorse UK SRS S1 and UK SRS S2 is targeted for Autumn 2025. 

Any decision on whether to introduce legal or regulatory requirements will be assessed separately. 

The consultation 

Consultation on UK SRS S1 and UK SRS S2 is open for 12 weeks from 25th June 2025 to 17th September 2025, with online questions to answer.

Results of the consultation will be shared with the FCA, FRC, and UK government departments.

The proposed amendments from TAC

The proposed amendments under consultation are: 

1. Removal of the transition relief in IFRS S1 that permits delayed reporting in the first year 

2. Extension of the transition relief in IFRS S1 that permits a ‘climate-first’ approach 

3. Removal of the requirement to use the Global Industry Classification Standard (GICS) in IFRS S2 

4. Removal of the ‘effective date’ clauses in IFRS S1 and IFRS S2 

The proposed amendments from PIC

The proposed amendments under consultation are: 

1. References to the SASB materials in IFRS S1 and IFRS S2

2. Treatment of transition reliefs

Projected costs and benefits

According to ‘Exposure draft of UK Sustainability Reporting Standards: UK SRS S1 and UK SRS S2’ consultation (25th June, 2025), investor groups have strongly supported the use of ISSB Standards in the UK, and ‘have expressed a desire to have access to high-quality, comparable information across reporting entities and across jurisdictions’. 

For entities using the standards, it is anticipated that they will gain greater awareness of sustainability-related risks and opportunities over the medium-to-ling term that will enable them to develop more effective strategies to ‘improve both sustainability-related outcomes and business performance’. 

UK SRS is expected to make reporting more consistent. ‘Rather than using multiple frameworks for reporting on climate or sustainability-related matters, entities will be able to use one comprehensive set of standards that have been developed to meet investor needs’. 

UK SRS will require new areas of disclosure as well as greater in-depth reporting. This will result in some additional costs for entities, namely: 

• Familiarisation costs 

• Staff changes 

• Process and system changes relating to data collection 

• Data sharing between organisations, and analysis 

• Costs associated with third party assurance 

These costs should be ‘borne by the reporting entity, its subsidiaries, or its suppliers’. 

Small and medium-sized enterprises 

With so much of the UK economy being driven by SMEs, UK SRS is likely to have an impact on SMEs who will be asked for information by reporting entities. It will be essential to establish the likely scale of this impact, and the tools, training and data platforms necessary to support SMEs. 

The legal implications 

Forward-looking information will be included in reporting on climate and sustainability-related matters. Stakeholders have already raised concerns about legal implications if it later emerges that information is inaccurate. 

Whilst it is likely that, at least initially, breaches will be treated on a case-by-case basis, there could be implications from any reliance on third-party data, including data used to estimate GHG emissions across the value chain. 

In section 463 of the Companies Act, there are protective provisions for forward-looking information in the Strategic Report and the Directors’ Report. Directors are essentially liable to the company for any loss suffered as a result of any untrue or misleading statement in a report, or any omission, where the director either ‘knew the statement to be untrue or misleading or was reckless’. Under consideration is whether similar provisions should be applied to UK SRS. 

Reference sources 

For a full copy of ‘Exposure draft of UK Sustainability Reporting Standards: UK SRS S1 and UK SRS S2’ consultation (25th June, 2025), please go to: Exposure draft of sustainability reporting standards UK SRS S1 and UK SRS S2