In order to combat corporate greenwashing and strengthen London’s position as a major financial hub, the government has declared that it will implement sustainability criteria that have received worldwide approval.
The UK’s disclosure standards will specify guidelines for how businesses must disclose sustainability-related risks and opportunities, according to a statement released by the Department for Business and Trade on Wednesday.
It stated that the guidelines would be based on those that the International Standards Board for Sustainability (ISSB), a body established at Cop27 to establish international guidelines on climate reporting, announced last month.
According to the regulations, businesses are under increased pressure to publicly declare their influence on the environment, especially their Scope 3 emissions, which encompass the goods or services they sell.
The UK Sustainable Disclosure Standards (SDS) will be established by July 2024, according to the government’s announcement that Business Secretary in charge Kemi Badenoch is thinking about endorsing the worldwide standards.
The UK standard will only depart from the international standard “if absolutely required for UK specific matters,” it was underlined.
Disclosures from UK-listed firms will be governed by the Financial Conduct Agency (FCA), whereas UK registered businesses and partnerships with limited liability will be governed by the Government.
According to the department, it will also aid in investor information comparison, efficient capital allocation, and the seamless operation of the UK financial markets.
The Business Secretary receives guidance from the Policies and Implementing Committee (PIC), which is made up of the Bank of England, the Financial Conduct Authority, the Financial Reporting Council, and the Treasury.
According to the ISSB, the UK is one of many nations, such Japan, Canada, Singapore, the African nation of Nigeria Chile, Malaysia, for example, Brazil, Egypt, Kenya, and South Africa, that have agreed to take into consideration approving the international standards.
Both the FCA and the stock exchange in London have praised the new requirements.
We have been particularly impressed by the sheer number of jurisdictions who have made clear that they will explore adoption, ISSB chairman Emmanuel Faber earlier informed the PA news agency.
“The UK has played a significant role in laying the groundwork for investor-friendly sustainability reporting and providing guidance on the creation of ISSB standards.
We announced our guidelines today at the beginning of trading on the stock exchange in London and at other stock exchanges around the world. We have been in constant contact with the UK FCA, which is very supportive of our goal to create a universal language for investors.
The ISSB is an affiliate of the autonomous International Financial Reporting Standard Foundation, which develops uniform accounting standards that are applied in about 140 nations.
According to this, companies may publish their annual financial reports along with the new reporting requirements for sustainability.