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THE MISTS ARE CLEARING ON SUSTAINABILITY REPORTING: 2025 CONSULTATION ON THE IFRS STANDARDS

Revd Dr Tony Bradley, Senior Lecturer in Business Sustainability at Liverpool Hope Business School.

We are beginning to see, more clearly, the direction of travel that sustainability reporting and accounting will take in Britain. In a previous Well Connected I commented that “the first batch of European Sustainability Reporting Standards (ESRS) was agreed by the European Commission in August 2023”. I had every expectation that these would be the standards that the UK would follow, after the July 2024 General Election.

But this is not the route that we appear to be taking. Rather than aligning ourselves with the European ESRS we are adopting the IFRS (International Financial Reporting Standards), which were initiated by the International Sustainability Standards Board (ISSB), at the Glasgow COP26, in 2021. The transfer of power from Conservatives to Labour has not substantially impacted the

UK’s sustainability reporting and accounting procedures.

This matters, why? Because it is a question ‘materiality’.

The IFRS, from ISSB, have been championed by the US. They published their 2 central standards on 26 June 2023, in advance of the ESRS. Each of IFRS S1 (General Requirement for Disclosure of Sustainabilityrelated Financial Information) and S2 (Climate-related disclosures) require ‘economically significant companies’ to report on the impacts that external changes, such as climate effects, and biodiversity loss have on their business.

This is what is known as ‘single (or outside-in) materiality reporting’. By contrast, the ESRS requires businesses to, also, report on their material impacts on the wider environment (‘inside-out’), as ‘double materiality reporting’. The ESRS is more stringent than is IFRS. We are aligning ourselves across The Pond, not The Channel. As such, this should give UK business more time to settle into the new standards.

In Q1 2025 the UK Government will consult on the ‘exposure drafts of UK SRS’. The standards will form part of a Sustainability Disclosure Reporting Framework, led by HM Treasury, which will develop the SDR Update, published in May 2024. So, we all have a chance to express our views. If you would like further information or support on sustainability reporting, please contact Tony Bradley, at Liverpool Hope Business School. Have a happy and increasingly sustainable New Year.

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