CA magazine: Can you start by giving us an overview of the proposed sustainability reporting standards?

Sally Duckworth: By way of background the International Sustainability Standards Board (ISSB) was officially established by the IFRS Foundation in 2021 and announced during the Cop26 climate conference in Glasgow. The ISSB published its first two sustainability disclosure standards in June 2023: IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information; and IFRS S2, Climate-related Disclosures.

These standards, like all IFRS standards, are not automatically binding in any jurisdiction. For them to become effective and mandatory, local jurisdictions must take specific actions to formally adopt them. For IFRS S1 and S2 the TAC has undertaken a rigorous process involving expert input, stakeholder consultation and public transparency. We hold all our technical meetings in open public forum, so anyone can dial in or watch them after the event online.

Just before Christmas, the TAC recommended the endorsement of those first two standards, with some minor amendments to address UK-specific considerations. The standards and recommendations are now being reviewed by the UK government, specifically the Department of Business and Trade at the direction of the Secretary of State. Based upon this review, they will conduct a public consultation on draft UK standards, which embody IFRS S1 and S2, to make them available for use in the UK.

Consideration will then be given to mandatory use of these UK standards – initially, most likely, by the Financial Conduct Authority (FCA) for UK listed companies, followed by the UK government for other public interest entities (PIEs). Mandating these standards will enhance corporate transparency around sustainability-related risks and opportunities, while promoting consistency in reporting. This, in turn, will support global comparability – particularly valuable for multinational companies operating across multiple jurisdictions. Currently, each jurisdiction applies its own set of rules, so this initiative follows a path like that of international accounting standards, where the aim is to achieve greater alignment and comparability across borders.

CA: Can you expand a bit more on what the TAC is, why it was set up and what it does?

The UK TAC was set up to assess IFRS Sustainability Disclosure Standards on a technical basis and provide independent recommendations on endorsement to the Secretary of State for Business and Trade as part of the UK process for the foundation of UK Sustainability Reporting Standards (UK SRS). The TAC is made of 11 to 15 members, including myself, the Chair.

It includes representatives from major accountancy firms and also those from corporate reporting; as well as investors and academics. We also have a couple of places reserved for a Financial Reporting Council (FRC) member and a UK Endorsement Board (UKEB) member to reflect that connectivity between UK-adopted IFRS, UK GAAP and UK SRS. All government-appointed members – bar those from the FRC and UKEB – have been appointed in personal capacities, independent of their organisations.

There was a deliberate effort to bring together a diverse range of skills and perspectives within the TAC, ensuring thoughtful, dynamic discussions and the inclusion of multiple, well-informed viewpoints. As Chair I have focused on making sure the committee addresses all the key points raised in the secretariat’s technical papers and we work towards a consensus view wherever possible, even if that has meant extending discussions. Casting a vote to break deadlock and reach a decision is not my style.

The TAC secretariat is provided by the FRC and supports the TAC, with its detailed technical assessments of the ISSB standards. Our mandate is to ensure from a technical perspective – not an implementation perspective, because there is a separate group for that, the UK Sustainability Disclosure Policy and Implementation Committee – that the standards if adopted will align with the UK’s long-term public good.

There was a deliberate attempt to bring together the right mix of skills so we could have some fruitful and engaged discussions and incorporate multiple viewpoints.

CA: Can you give a flavour of your keynote speech at this month’s ICAS Sustainability Summit?

SD: I’ll be focusing on the importance of establishing a global baseline for sustainability reporting and the UK’s role in shaping that transition. If we proceed, the UK will be the first G7 country to mandate the standards without major amendments. Other jurisdictions, such as Canada and Japan, have issued domestic versions of the ISSB standards but haven’t yet made decisions to mandate them, and EU member states are following other standards.

I’ll also highlight the growing demand for credible sustainability information. Investors, lenders and supply chain partners increasingly expect high-quality, reliable disclosures. Many large businesses are already seeking independent assurance to build trust and transparency.

“Businesses that fail to act risk falling behind – potentially losing access to affordable capital, strategic partnerships and long-term growth opportunities”

Importantly, this isn’t just about climate through a narrow lens – it’s about improving the overall efficiency and resilience of business. By broadening reporting requirements beyond purely financial metrics, we’re encouraging companies to adopt a more holistic view of their risks and opportunities, including how they use natural resources, generate waste and impact the broader environment. This shift supports smarter, more sustainable decision-making across the board.

I’ll also emphasise that sustainability reporting should be seen not as a burden, but as an opportunity. Many companies already disclose a range of sustainability-related matters voluntarily. This is a journey, not a one-off compliance exercise, and businesses can take practical, incremental steps to prepare.

Businesses that fail to act risk falling behind – potentially losing access to affordable capital, strategic partnerships and long-term growth opportunities.

But if organisations can get to grips with their reporting requirements, identify key risks and opportunities, improve data collection and actively engage with stakeholders, they’ll be far better placed to integrate sustainability into core decision-making and provide the kind of transparency investors increasingly expect.

I also plan to explore how transparent disclosures can support businesses in tracking emissions, setting science-based targets and aligning with transition finance initiatives.

This is not just a regulatory obligation. Sustainability reporting is a strategic tool – one that supports risk management, investment attraction and long-term resilience in the economy. While SMEs may fall outside the scope of any future mandatory UK reporting requirements, there will still be growing expectations from larger businesses in their supply chains, creating a strong need for sustainability data and transparency.

One of the things I value in IFRS S1 and S2 is the holistic perspective. These standards go beyond the company itself to look right through the value chain. As a result, the adoption of these standards by larger PIEs will inevitably have a knock-on effect on others in their ecosystem, even if they aren’t directly subject to the requirements. Businesses that take a proactive approach – developing the ability to gather and disclose reliable data – will strengthen their competitiveness, secure commercial opportunities and build long-term resilience. The key is doing so in a way that is proportionate and cost-effective.

I also hope to share some practical insights into how businesses of all sizes can navigate this evolving landscape, prepare for future expectations, and turn sustainability reporting into a strategic advantage.

CA: This is the third ICAS Sustainability Summit, and the previous two were both packed-out events. Is the attraction that it’s an opportunity for attendees, representing companies both big and small, to learn and share ideas?

SD: Events like these are invaluable for bringing together the full spectrum of the sustainability ecosystem – thought leaders, businesses, policymakers, large corporates and SMEs – to engage in dialogue around an ever-evolving landscape. I hope it continues to foster collaboration, knowledge-sharing and the exchange of practical insights to help businesses embed sustainability into their core strategies.

These summits play a vital role in demystifying regulation. This third gathering, in particular, will support businesses in understanding and navigating the requirements of IFRS S1 and S2. If they are approved for inclusion in UK standards then they could be applicable for accounting periods from as early as 1 January 2026, so this is a very topical discussion.

IFRS S1 and S2 are from an investor perspective and therefore have a financial materiality lens. ICAS supports the end goal of adopting double materiality – that businesses should report on the impact they have on the economy, environment and society, as well as the impact of these factors on the business. Do you see the recommended standards as a starting point and should we, like Europe, be pushing towards double materiality?

These standards are designed from an investor perspective and focus on financial materiality. That means they focus on sustainability risks and opportunities that could impact a company’s prospects and investor decisions. That aligns with capital markets reporting, which is intended to provide useful financial information to capital providers, ensuring consistency and comparability.

On the other hand, double materiality, which ICAS advocates and has been adopted by the EU, encompasses a much broader perspective by considering a company’s impacts on society and the environment in addition to financial materiality.

Some stakeholders may argue that double materiality could influence investor decisions, but financial materiality ensures sustainability reporting remains aligned with financial reporting principles, which support sufficient capital allocation over time. I suspect market expectations and regulatory developments may shape how that evolves, but for now I feel the IFRS-based standards provide a strong basis for UK reporting.

CA: Is there a danger in having different standards for UK businesses working and trading with the EU?

SD: UK businesses operating or trading within the EU will need to be cognisant of the differences and, where required, ensure compliance with both regulatory requirements.

The EU’s corporate sustainability reporting directive mandates double materiality and broader sustainability disclosures, implying that UK businesses that engage with EU-based regulators, investors, stakeholders and supply chains may have to include additional reporting.

Some are already proactively assessing reporting obligations, engaging with stakeholders and making informed decisions that are commercially and strategically beneficial. It will be crucial for UK businesses to navigate these differing requirements effectively.

CA: Might that make UK businesses less competitive than European counterparts, at least in the short term?

SD: The standards mandate what you have to include. They don’t mandate that you can’t include more [information]. So the UK’s adoption of IFRS S1 and S2 ensures alignment with what’s going on in the global financial markets, particularly areas and regions that prioritise investor-focused reporting.

The key to competitiveness is going to be maintaining high-quality, decision-useful disclosures that meet stakeholder expectations. Many businesses may still choose to report beyond the UK requirements, particularly if operating across multiple jurisdictions with different standards.

As sustainability reporting evolves, ensuring consistency and clarity, while remaining adaptable to future regulatory developments and stakeholder expectations, will be essential for maintaining investor confidence and market competitiveness. Those preparing the reporting do need to think carefully about what’s relevant to their business, and to investors and stakeholders who are assessing that business.

I think it’s hard to be prescriptive and have a one-size-fits-all. If you’re operating in multiple jurisdictions, you need to make sure that you’ve provided all the relevant information to stay competitive.

CA: A key message you touched on is how to demystify sustainability reporting, especially for SMEs. What advice can you give to smaller organisations, at the very early stage of this journey, that may be overwhelmed or just not know where to start?

SD: I think the key for smaller businesses will be to view sustainability reporting as a gradual process, rather than a compliance burden. Breaking it down into manageable and measurable milestones can make it more achievable.

So start with some voluntary reporting, engage with industry groups, seek external expertise and start to prepare effectively. It’s always overwhelming if you try to do everything at once, but if you break things down into manageable chunks and do a little bit more each year, that becomes a natural path.

“For SMEs, sustainability reporting is an opportunity to demonstrate leadership, build trust, strengthen relationships with suppliers, future-proof operations to align with market expectations and place themselves ahead of the queue in terms of winning new business”

I would start by looking at some of the larger corporates in your sector that are already reporting, and get a feel from looking at their accounts as to the sort of data they're producing to meet their requirements.

How could we now move to getting that sort of data? Do we have it already? What sort of systems would we need? What’s a cost-effective way of doing it? But start by looking at what the leaders in the market are doing, then back that into what you might be able to do and work out what changes you’d have to make within your organisation and supply chain to get the data to do that. Then break that down into bite-sized chunks – that would be the practical advice I’d give.

CA: Do you have a view on whether the reporting should be voluntary or mandatory? Can give you any indication of who will be the regulator?

SD: That question is likely to be influenced both by government policy and broader stakeholder expectations. In the UK, the decision rests with the government and the FCA. Currently, the FCA oversees sustainability-related disclosures for listed companies, but any wider reporting requirements beyond its remit are determined by government policy.

Mandatory reporting will ensure consistency, comparability and accountability, while a voluntary approach allows businesses, particularly SMEs, to adopt sustainability practices at a pace that aligns with their resources.

However, even in the absence of formal requirements, investors, lenders and supply chain expectations are increasingly driving businesses towards greater transparency. These disclosures are becoming an essential aspect of doing business.

CA: And finally, members may be looking at what’s happening in the US – and even the UK – at the moment, with governments and corporations rowing back on various climate commitments. What would your message be to those SMEs that may think: “I’m just one small part of this, and if they’re not going to pull their weight why should I?”

SD: I’d say it’s not just about regulatory compliance, it’s about long-term business resilience, risk management and access to capital as investors are expecting businesses to act sustainably. It encourages organisations to think slightly more out of the box and look at their businesses in a much more holistic way than just through a very narrow financial lens. Even if some governments or large corporations adjust their strategies, there is a broader momentum towards sustainability, and that will remain strong.

For SMEs, sustainability reporting is an opportunity to demonstrate leadership, build trust, strengthen relationships with suppliers, future-proof operations to align with market expectations and place themselves ahead of the queue in terms of winning new business.

Businesses that embed sustainability into their strategy and operations will be better placed for future growth and stability, because it encourages that broader lens, rather than looking at your organisation from a purely financial perspective.

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