Government publishes initial guidance on UK Sustainability Disclosure Standards

The Department for Business and Trade (DBT) has published initial guidance on the government's framework to create the UK Sustainability Disclosure Standards (SDS).

What will the UK SDS do?

The UK SDS will set out corporate disclosures on the sustainability-related risks and opportunities that companies face, including those arising from climate change. 

The standards will form the basis of any future requirements in UK legislation or regulation for companies to report on risks and opportunities relating to sustainability matters.

How will the UK SDS differ from international standards?

The UK SDS will be based on the IFRS Sustainability Disclosure Standards recently issued by the International Sustainability Standards Board (ISSB). The government is currently consulting on how to implement those global standards into UK law (see our previous blog post). 

The guidance states that the UK endorsed standards will only divert from the ISBB’s global baseline “if absolutely necessary for UK specific matters”. 

The guidance provides more detail on the two committees that are advising the government on implementation of the ISSB standards.

When will disclosures under the UK SDS be required?

The guidance also states that the government intends to create the UK SDS by July 2024 and that decisions to require disclosure under the UK SDS will be taken by the government for UK registered companies and LLPs, and by the FCA for UK listed companies.

How does this fit with other sustainability disclosures?

The UK SDS are expected to form part of a new UK Sustainability Disclosure Requirements (SDR) regime, which will include (among other things) a UK Green Taxonomy and a requirement for certain entities to disclose a climate transition plan. 

The government had already indicated in March this year, in its Green Finance Strategy, that it will consult in Q4 on the introduction of requirements for the UK’s largest companies (so this will include private companies, not just listed companies) to disclose a transition plan, if they have one (see our previous blog post). The expectation is that the requirement will be on a ‘comply or explain’ basis to ensure parity between listed and private companies. The consultation will take place in autumn/winter once the UK Transition Plan Taskforce (TPT) has published the final version of its guidance on transition plans.

For more information on the UK's existing climate reporting rules, see our client guides on this.