The IRSG has responded to UK government consultations on UK Sustainability Reporting Standards and transition plan requirements. We welcomed the opportunity to respond to these consultations, as key elements of the UK's sustainable finance framework.
UK Sustainability Reporting Standards
The IRSG responded to the Department for Business and Trade's consultation on the exposure drafts of the UK versions of IFRS S1 and IFRS S2. Our consultation response highlights our strong support for the International Sustainability Standards Board (ISSB) Standards. Our response builds on our March 2025 report, Harmonising Sustainability Disclosures: A roadmap for the adoption of ISSB Standards, produced in partnership with Clifford Change. It emphasises the need to minimise divergence from the global baseline, ensure clear transitional pathways, and provide preparers with the certainty and support required to deliver high-quality, decision-useful sustainability disclosures across the UK economy.
Key points:
- We support endorsement of the ISSB standards in the UK, with minimal divergence from the global baseline and proportionate implementation.
- We support clear transitional arrangements, including removal of the one-year reporting delay relief, provided the climate-first approach is retained and firms are given adequate preparation time.
- We support interoperability with other global regimes and flexibility in industry classification, endorsing the TAC’s approach over the ISSB’s rigid GICS requirement.
- We broadly support the ISSB’s amendments to IFRS S2, including clarifications and reliefs, while noting that some members view facilitated emissions disclosures as decision-useful and propose time-limited reliefs with transparency on challenges.
- We support transparent disclosure of carbon credit use and recommend proportionate, consistent standards to overcome barriers and enable comparability, including substituted compliance for multinationals.
- We support timely, detailed guidance on Scope 3, transition planning, materiality, and social and climate modelling, made available at least 12 months before reporting begins to ensure effective implementation.
Transition Plan Requirements
We also responded to the Department for Energy Security and Net Zero's consultation on options to take forward climate-related transition plan requirements. Our consultation response highlights our support for the ISSB framework and the need for any future UK transition plan requirements to align with global standards. We also outline the need for appropriate sequencing alongside other elements of the UK's sustainable finance framework, phased implementation, and clear guidance on adaptation and nature.
Key points:
- Alignment with ISSB: We support the ISSB framework as the appropriate baseline for UK transition plan requirements. The UK must align its domestic approach to transition plans with global standards wherever possible, to reduce fragmentation, facilitate investor understanding and ease compliance burdens for multinational firms.
- Sequencing: The government must consider the appropriate sequencing of transition plan requirements alongside other elements of the UK’s sustainable finance framework. Companies should begin reporting under UK SRS S1 and S2 first. Future transition plan requirements should be layered on top through a “building blocks” approach.
- Design options:
- The majority of members support option 1, as this approach most closely aligns with UK SRS S2 and offers the necessary flexibility for companies.
- A minority of members support a phased implementation of option 2, as they believe it would be the best way to seize the opportunities of the transition while mitigating climate-related risks. Requiring transition plans would enhance market integrity and provide information on dependencies, helping to inform government policy and regulation.
- Implementation. We do not support mandating transition plan implementation. While we support transparency around intended actions and governance arrangements, mandatory reporting should be limited to what is financially material.
- Temperature alignment. The government should not mandate transition plans aligned with a 1.5°C pathway. While net zero by 2050 is an important target, mandating alignment with a temperature poses significant challenges. Companies should have the flexibility to choose their own transition pathways and targets.
- Clear guidance on adaptation and nature. We recognise the value of integrating climate adaptation and nature-related considerations into transition plans. However, there is a divergence of views across IRSG members on the integration of these considerations at present and clearer guidance from the government is needed.
- Avoiding legal risks. We have concerns regarding the legal implications of requiring transition plan implementation. The government must clarify the legal framework around transition plan disclosures to mitigate potential liabilities for companies and directors.
- Scope. Implementation of future transition plan requirements must take a phased approach, starting with larger listed companies and then financial institutions.
- Parent vs entity-level reporting. UK companies should be able to rely upon transition plans set by a parent company or other equivalent mechanisms, to prevent firms from being required to prepare multiple versions of their transition plans to meet local requirements.