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TAC Public Meeting May 2024 Paper 2: Assessment approach
Executive summary
| Field | Value |
|---|---|
| Date | 31 May 2024 |
| Paper reference | 2024-TAC-001 |
| Project | Technical assessment of IFRS S1 and IFRS S2 |
| Topic | Assessment approach |
| Objective of the paper | This paper outlines the proposed approach that will be used by the UK Sustainability Disclosure Technical Advisory Committee (TAC) to assess IFRS® Sustainability Disclosure Standards. This assessment approach includes the scope and process to be used for the technical assessment of the standards and the development of endorsement recommendations. This approach, if approved, will be used to assess whether all current and future IFRS Sustainability Disclosure Standards would be conducive to the long-term public good in the UK. |
Decisions for the TAC
The TAC is asked to approve the assessment approach and highlight whether any further considerations should be made.
Appendices
Appendix 1 - Extract from the TAC Terms of Reference
This paper has been prepared by the Secretariat for the UK Sustainability Disclosure Technical Advisory Committee (TAC) to discuss in a public meeting. This paper does not represent the views of the TAC or any individual TAC member.
Context
1 The Secretary of State (SoS) for the Department for Business and Trade (DBT) will be responsible for deciding whether to IFRS® Sustainability Disclosure Standards (the standards) for use in the UK. The UK Sustainability Disclosure Technical Advisory Committee (TAC) will support the SoS by conducting a technical assessment of the standards and delivering clear, well-reasoned and evidenced-based endorsement recommendations. The final endorsement recommendations will be presented to the SoS and DBT at the end of the TAC's technical assessment process.
2 As described in the Terms of Reference, the TAC's work will assess whether endorsing a IFRS Sustainability Disclosure Standard, to create a UK Sustainability Reporting Standard, would be conducive to the long-term public good in the UK. This paper sets out a proposed assessment approach, including a description of the endorsement criteria and the scope and process of the assessment.
3 To ensure that technical advice delivered to the SoS is timely, it is appropriate for the TAC to prioritise its work to focus on technical areas that it considers to be the most important. The proposed approach set out in this paper describes how the TAC will conduct its technical assessment of IFRS Sustainability Disclosure Standards, including for the technical assessment of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and IFRS S2 Climate-related Disclosures (IFRS S2). This assessment approach, if approved, can then form the basis of the TAC's technical work plan and final endorsement recommendations to the SoS.
4 For clarity, the terms ‘entities', 'primary users' and 'users' that are used in this paper, and future papers, are consistent with the definitions used by the IFRS Foundation.
Assessment approach
Endorsement criteria
5 DBT has requested that the TAC provides a technical assessment as to whether endorsing IFRS Sustainability Disclosure Standards would be conducive to the long-term public good in the UK. The TAC is required to assess whether:
- use of the IFRS Sustainability Disclosure Standard is likely to result in an improvement in the international comparability of sustainability-related reporting in the UK;
- use of the IFRS Sustainability Disclosure Standard is likely to support companies in making disclosures that are understandable, relevant, reliable and comparable;
- use of the IFRS Sustainability Disclosure Standard is likely to improve the quality of corporate reporting within the UK in the long-term; and
- companies are likely to be able to provide the disclosures required by the IFRS Sustainability Disclosure Standard within the timeframes that a company normally reports without undue cost or effort.
6 The TAC may also provide recommendations on whether:
- use of the IFRS Sustainability Disclosure Standard is likely to be conducive to the UK's economic growth and international competitiveness, taking into account the costs and benefits of compliance.
- the IFRS Sustainability Disclosure Standard is likely to be coherent with, and suitable for inclusion in, UK domestic legislation and regulation.
7 When providing endorsement recommendations to the SoS, the TAC may also propose amendments to the standards for use in the UK, including insertions and deletions. In the Framework and Terms of Reference for the Development of UK Sustainability Reporting Standards, the UK government has stated that where possible it wishes to avoid modifications to the requirements contained within IFRS Sustainability Disclosure Standards. As a consequence, the TAC is to propose amendments to the standards if:
- changes are considered necessary for the effective application of the standard within a UK context.
- failure to amend an IFRS Sustainability Disclosure Standard would be of detriment to the long-term public good in the UK.
8 Additionally, the TAC may also propose amendments to build upon the material provided within the global baseline provided by an IFRS Sustainability Disclosure Standard, upon request from DBT or where UK stakeholders raise a strong need.
9 Furthermore, the TAC may also provide views on whether guidance is needed to supplement the standards.
10 The SoS and DBT will provide the TAC with two letters that include a commission (the commission letter) and additional contextual information (the context letter) for the TAC to start its technical assessment. These letters may provide additional information that will inform the technical assessment, including the scope of which entities might be subject to mandatory reporting.
11 The objective of the International Sustainability Standards Board (ISSB) is to develop sustainability standards that will result in high-quality, comprehensive global baseline of disclosures that focuses on the needs of primary users and the financial markets. The ISSB's standard-setting work is subject to due process and oversight procedures that should ensure it takes into consideration the views from stakeholders across multiple jurisdictions. Whilst the ISSB has issued international standards to serve as the global baseline, the TAC's technical assessment will consider the requirements in the context of the UK and views obtained from UK stakeholders. There are likely to be some issues that have been raised by UK stakeholders that are also relevant to the international application of the requirements, and the TAC will consider these issues as they pertain to the UK. For example, challenges with Scope 3 greenhouse gas emissions reporting are not unique to the UK, but there may be some considerations that the TAC needs to make, for example, about current practice in the UK and interoperability with other jurisdictions.
12 When applying the criteria in the technical assessment, the TAC should be cognisant that satisfying one criterion may compromise another, and there is a balance to be struck. The criteria will be assessed individually and in combination to ensure a full assessment has been completed. Additionally, if the TAC recommends any amendments to the standards for use in the UK, including insertions and deletions, these amendments would need to satisfy the criteria.
13 The following paragraphs provide definitions and further explanations proposing how the criteria should be applied in the technical assessment of the IFRS Sustainability Disclosure Standards. These definitions and explanations align with definitions used by the IFRS Foundation, the Financial Reporting Council (FRC) and the UK Endorsement Board (UKEB).
International comparability
14 The TAC is required to assess whether the requirements in the IFRS Sustainability Disclosure Standards are likely to result in an improvement in the international comparability of sustainability-related reporting in the UK.
15 International comparability relates to how disclosures provided by UK entities compare to, and relate to, disclosures provided by entities in other jurisdictions. International comparability can be considered from the entity perspective—i.e., in the preparation of the required information—but also from the primary user perspective—i.e., in using the reported information to assess the performance of different entities.
16 IFRS Sustainability Disclosure Standards are intended to be a 'global baseline' that serve as a foundation for disclosure requirements that are designed to meet the needs of primary users. International comparability can be achieved if all jurisdictions apply the IFRS Sustainability Disclosure Standards without or with limited amendment. Therefore, it is assumed that adoption of the IFRS Sustainability Disclosure Standards without or with minimal amendment in the UK will likely improve international comparability. However, in the technical assessment of the standards the TAC should identify any instances, should they exist, where the requirements are not likely to improve international comparability.
17 Additionally, the TAC should consider whether any suggested amendments to the standards for use in the UK, including insertions and deletions, could negatively affect the international comparability of disclosures.
18 An assessment of international comparability will require an understanding of how jurisdictions will be applying sustainability disclosure requirements in different local contexts. Existing, and upcoming, requirements that are set by individual jurisdictions can make international comparability difficult if these requirements are not predicated on the same conceptual foundations or if the requirements are substantially different. However, the TAC is not expected to conduct a detailed comparative analysis of the use of IFRS Sustainability Disclosure Standards in other jurisdictions, or of any other jurisdictional sustainability reporting requirements. Instead, the TAC should be aware of other jurisdictional developments and may observe specific matters outside the UK that might impact international comparability. The TAC is also not expected to review every possible jurisdictional requirement and will prioritise certain jurisdictions to monitor. These matters should be considered by the TAC when they may have a significant effect on international comparability.
19 In some cases, the discussions that pertain to international comparability focus on the interoperability of different requirements. ‘Interoperability' is not when disclosure requirements are the same but is achieved when these disclosure requirements can be applied together in a coherent way to alleviate the burden on entities. The TAC is not expected to map all jurisdictional requirements against the IFRS Sustainability Disclosure Standards to assess interoperability.
Understandable, relevant, reliable and comparable
20 The TAC is required to assess whether the requirements in the IFRS Sustainability Disclosure Standards are likely to support entities in making disclosures that are understandable, relevant, reliable and comparable. The criteria 'understandable', 'relevant', 'reliable' and 'comparable' are commonly used when assessing reporting standards, such that the resulting information can be used by primary users in making decisions relating to providing resources to an entity. Primary users are existing and potential investors, lenders and other creditors.
21 Sustainability-related information can be ‘understandable' if it is clear and concise. This includes avoiding generic and boilerplate information, avoiding duplication, and using clear language that is clearly structured. Information is understandable if it is accessible, easy to navigate and is capable of being comprehended by users. Understandability will depend on the nature of the information and can be achieved through appropriate presentation and communication of information. Some sustainability-related information will be inherently complex and difficult to present in a clear and concise manner. However, the complexity of the information is not a reason to exclude requirements from the standards as it may impact the completeness of disclosure.
22 Sustainability-related information can be 'relevant' if it is capable of making a difference in the decision-making of primary users. Information may be relevant and therefore capable of making a difference in a decision, even if some users choose not to take advantage of it. Relevance can be distinguished from materiality which is entity-specific and based on the nature or magnitude of the information to which it relates.
23 Information can be 'reliable' if it can be depended on by users to faithfully and accurately represent what it purports to represent, or could reasonably be expected to represent, and is, unless otherwise stipulated by the reporting entity, complete, neutral and free from material error. Reliable information should be verifiable and assurable—that is, information that is supportable, and would support knowledgeable and independent observers to reach consensus that the information is a faithful representation.
24 Information can be ‘comparable' if it enables users to identify and understand similarities in, and differences between, two sets of information. Comparability can relate to information from the same entity but across different reporting periods, or comparability between entities in the same reporting period. Information does not have to be prepared in identical ways to be comparable—the use of estimates for example may mean different sources of data for the same disclosures. However, the preparation of the data should be similar enough to allow users to make meaningful comparisons. Comparability is not uniformity—that is, information that is alike should look alike, and different information should look different.
25 The assessment of the characteristics 'understandable', 'relevant', 'reliable' and 'comparable' will be applied to the requirements in the IFRS Sustainability Disclosure Standards recognising that it is also incumbent on entities to ensure their disclosures meet these characteristics.
Quality of corporate reporting
26 The TAC is required to assess whether the requirements in the IFRS Sustainability Disclosure Standards are likely to improve the quality of corporate reporting within the UK in the long term.
27 An assessment of the quality of reporting is highly subjective and requires a review of current practice to understand whether the implementation of the IFRS Sustainability Disclosure Standards would likely improve reporting. The TAC is not expected to complete a detailed assessment of current reporting practice in the UK but should be cognisant of how entities are currently reporting on sustainability-related risks and opportunities. The TAC may utilise reviews of reporting published by suitable third parties and any research that is readily available.
28 The quality of reporting will be influenced by a number of factors. For example, the enforceability of the requirements will reduce the risk of error or divergent practice which will increase the quality of reporting. Additionally, improved transparency, better connectivity and improved faithful representation will contribute to improvement of quality of reporting over time. The TAC should also recognise that an increased quantity of information may not necessarily improve the quality of reporting.
29 The technical assessment will consider whether the application of IFRS Sustainability Disclosure Standards has the potential to enhance the quality of corporate reporting. It is not possible to assess whether the application of the IFRS Sustainability Disclosure Standards will absolutely improve the quality of reporting. However, the TAC should be able to assess whether the application of the standards has the potential to do so.
Undue cost or effort
30 The TAC is required to assess whether companies are likely to be able to provide the disclosures required by the standards within the timeframes that a company normally reports without undue cost or effort. This includes assessing whether the requirements are technically and practically feasible in the required timeframes.
31 Information is timely if it is available to primary users in time to be capable of influencing their decisions. The TAC should consider whether the cost and effort required by an entity to obtain and report information in the timeframes it normally reports (i.e., when publishing its annual report and accounts) is reasonable and proportionate.
32 The introduction of new reporting requirements will undoubtedly include increased efforts and implementation costs. The TAC should focus on whether these costs or efforts can be considered ‘undue', which will require the TAC to make a judgement as to whether the costs or efforts are greater than believed to be reasonable or proportionate in line with the intended benefits of timely reporting.
33 The assessment of undue cost or effort does not include an analysis of the costs and benefits of application of the IFRS Sustainability Disclosure Standards. However, the TAC should have regard to the cost and benefits of compliance (see paragraph 38) when assessing whether the required cost or effort is reasonable and proportionate.
34 The TAC should also have regard to the entities that are likely to be in scope. The TAC has been requested to focus its assessment of IFRS Sustainability Disclosure Standards on the application of the requirements by Public Interest Entities (PIEs)—that is, entities whose transferable securities are admitted to trading on a UK-regulated market, credit institutions, or insurance undertakings. For example, the assessment of whether cost or effort is undue for PIEs will be significantly different for small or medium-sized entities. The TAC should be cognisant of the size and complexity of entities in scope, and also the public interest and users' information needs.
Economic growth and international competitiveness
35 The TAC is not required to complete an assessment of, but may provide advice on, whether the application of the IFRS Sustainability Disclosure Standards is likely to be conducive to the UK's economic growth and international competitiveness. This would require an assessment of the potential impact of introducing the IFRS Sustainability Disclosure Standards on economic growth and competitiveness in the UK.
36 Having regard to economic growth and competitiveness does not necessarily mean requiring less disclosure. Instead, having regard to economic growth and competitiveness will include an assessment of whether the requirements are proportionate and conducive to sustainable growth in the UK's economy.
37 This criterion overlaps with the other criteria and therefore the TAC may observe matters that contribute to, or have a negative impact on, economic growth and international competitiveness. For example, when assessing whether the application of the standards is likely to improve the quality of reporting, the TAC may observe that improved quality of reporting will improve primary users' confidence in that information and enable them to better assess the financial position and financial performance of an entity, which could support economic growth and international competitiveness through increased availability of capital and a reduction in the cost of capital.
Costs and benefits of compliance
38 The TAC is not required to complete a cost-benefit analysis. However, the TAC may provide advice on the costs and benefits of disclosing the information required by the IFRS Sustainability Disclosure Standards. In considering costs and benefits, the TAC should reflect on the balance between the needs of users and the efforts required of entities. The TAC should also be cognisant of the size and complexity of entities in scope.
Coherent with, and suitable for inclusion in, UK domestic legislation and regulation
39 The TAC is not required to complete an assessment of whether the standards are likely to be coherent with, and suitable for inclusion in, UK domestic legislation and regulation. However, the TAC may provide advice on how the application of the standards is likely to interact with current UK legislation and regulation, especially when there is an overlap in the requirements and when there might be incompatibilities that impact the other criteria. For example, if the TAC observes incompatibilities between the IFRS Sustainability Disclosure Standards and UK legislation and regulation, this could reduce the quality of corporate reporting or create undue cost or effort.
40 The TAC is not expected to complete a full mapping of the requirements in the IFRS Sustainability Disclosure Standards with the detailed requirements within current UK legislation and regulation.
Scope and process of assessment
Scope of the technical assessment
41 The TAC has been commissioned to assess both IFRS S1 and IFRS S2 at the same time. Although IFRS S1 and IFRS S2 are separate standards, the ISSB intended that the two standards be applied together. As described in IFRS S2 Basis for Conclusions on Climate-related Disclosures (BC5–BC6), IFRS S2 sets out supplementary requirements to IFRS S1 that relate specifically to climate-related risks and opportunities. When applying IFRS S2, an entity is required to apply the conceptual foundations, general requirements and requirements relating to judgements, uncertainties and errors that are described in IFRS S1. Therefore, the TAC cannot assess IFRS S2 in isolation but in the context of the requirements in IFRS S1. However, IFRS S1 goes beyond climate-related risks and opportunities and therefore the TAC should also consider IFRS S1 in the context of other sustainability-related topics.
42 IFRS S1 has sometimes been referred to as an overarching standard that establishes the conceptual framework for all other IFRS Sustainability Disclosure Standards, including current and future standards. Whilst IFRS S1 includes conceptual principles, it also includes core content requirements for the disclosure of all sustainability-related information—with or without a specific IFRS Sustainability Disclosure Standard to provide the detailed and more specific topic requirements. The expectation is that the ISSB will, in the future, issue further disclosure topic IFRS Sustainability Disclosure Standards similar to IFRS S2. It is important to clarify that this technical assessment is only on IFRS S1 as it currently stands and does not extend to any future IFRS Sustainability Disclosure Standards. If the ISSB amends the standards in the future, it is likely that further assessment of the standards for use in the UK will be required.
43 There are currently no plans to endorse the documentation that accompanies the IFRS Sustainability Disclosure Standards in the UK. This means that the TAC's technical assessment will only consider the content in the IFRS Sustainability Disclosure Standards—including the appendices that are an integral part of the standard-but not the accompanying documentation. For clarity, this means that the basis for conclusions, accompanying guidance, and any other materials published with the standards will be excluded from the technical assessment. During its technical assessment, the TAC may refer to the content in the accompanying documentation to provide context, but the TAC is not required to assess this content. The TAC may observe a need for guidance to support the application of the standards, but is not required to complete a full assessment of all available guidance.
44 Additionally, the IFRS Sustainability Disclosure Standards may refer to content that is published in other standards and frameworks. For example, IFRS S1 refers to other IFRS Sustainability Disclosure Standards—including those issued and those that will be issued in the future-in addition to standards that were published by third-party standard setters (e.g., Sustainability Accounting Standards Board (SASB) Standards, Climate Disclosure Standards Board (CDSB) Framework, Greenhouse Gas Protocol). The TAC is not required to assess the content of the third-party sources, unless the SoS commissions the TAC otherwise. Any third-party sources that are referenced in the standards are also excluded from the TAC's technical assessment. This includes the Greenhouse Gas Protocol, the SASB Standards, and the CDSB Framework Application Guidance—until such time they have undergone the full IFRS Foundation due process and the TAC has received a commission to assess them for prospective use in the UK. However, given the nature of the references in IFRS S1 and IFRS S2 to both the Greenhouse Gas Protocol and the SASB Standards, the TAC will need to consider the use of these documents as required by the standards. For clarity, the TAC will assess the requirements in IFRS S1 and IFRS S2 that refer to the use of the Greenhouse Gas Protocol and SASB Standards, but there will be no detailed assessment of the content contained within the Greenhouse Gas Protocol and SASB Standards.
45 To ensure the timely delivery of advice to the SoS, the Secretariat recommends that the TAC conducts detailed assessments on priority areas that have been determined as significant. By taking this approach, the TAC will ensure that the final recommendations presented to the SoS are not unwieldy and are focused on areas that are of particular interest. This approach is consistent with the UK Endorsement Board's approach for the endorsement of IFRS Accounting Standards. An alternative approach that would involve carrying out detailed assessments against the endorsement criteria for all requirements in the IFRS Sustainability Disclosure Standards was considered, however, such an approach was deemed to be disproportionate.
46 Figure 1 Scope of content and process for the technical assessment demonstrates the scope of content that will be included in the technical assessment and the process for assessing the IFRS Sustainability Disclosure Standards.
Figure 1 Scope of content and process for the technical assessment of IFRS Sustainability Disclosure Standards.
The diagram illustrates the two-step prioritisation process for technical assessment:
- IFRS Sustainability Disclosure Standards issued by ISSB
- Commission from DBT which might include or exclude certain technical areas
- Step 1 - Identification of technical areas for further consideration
- Step 2 - Initial assessment to prioritise these technical areas
- Detailed assessment and TAC deliberations of the priority technical areas
- Final endorsement recommendations to the SoS
Steps 3 and 4 together constitute "Two-step prioritisation".
47 The Secretariat will use a two-step prioritisation process to establish which technical areas the TAC should focus its detailed assessment on. This process includes the identification of the technical areas that merit further consideration, and an initial assessment of these areas against the endorsement criteria.
Identification of technical areas for consideration
48 The first step involves identifying a list of technical areas that may merit further consideration. To identify these technical areas, the Secretariat shall conduct a number of research and stakeholder engagement activities, including:
- collecting and reviewing responses to consultations and call for evidence requests;
- hosting or attending roundtables with UK stakeholders;
- having further discussions with individual stakeholders when more depth is required;
- performing a desktop analysis of the standards, including any accompanying documentation;
- reviewing third-party publications and commentaries about the standards especially from UK sources;
- engaging with standard setters in other jurisdictions.
49 Identifying technical areas using this approach means that the detailed assessment of the standards will focus on matters that have been raised by UK stakeholders, those that have been subject to considerable debate, or those that the Secretariat has observed as needing further analysis. Using this approach, the detailed assessment of the standards will only focus on select technical areas.
Initial assessment of the technical areas
50 The second step involves conducting an initial assessment of the technical areas identified in Step 1 to further prioritise those that may require more detailed assessment.
51 To complete the initial assessment, the Secretariat will conduct an assessment of the technical areas against each of the endorsement criteria, taking into consideration views about:
- whether the requirements meet all the endorsement criteria;
- whether the requirements are likely to have a significant impact in the UK;
- whether there has been significant interest from stakeholders in a particular technical area.
52 This initial assessment will be performed on a topic-by-topic (rather than a criterion-by-criterion) basis to minimise repetition.
53 When considering concerns raised by stakeholders, the TAC should consider whether these concerns are about technical feasibility or the interpretation and application of the requirements. In some cases, the concerns are likely to pertain to both, but the response to these concerns will be different. The Secretariat believes that endorsement criteria 'understandable, relevant, reliable and comparable' and the 'quality of corporate reporting' apply to both the technical feasibility and the implementation of the requirements as both will impact the comparability and quality of reporting in the UK. Therefore, the initial assessment should consider both the technical feasibility of the requirements as well as the interpretation and application of the requirements.
54 As the TAC progresses with its assessment of the IFRS Sustainability Disclosure Standards, it may identify additional technical areas that need to be reviewed in detail. The TAC will need to decide whether these additional technical areas should be added to its work plan as part of the technical assessment, and whether they should be prioritised over other technical areas. Any additions to the technical assessment and work plan should be reviewed in the context of the criteria set out in paragraphs 5–6 and the scope and process described in paragraphs 41–49.
55 On completion of the initial assessment, a list of select technical areas that have been assessed as being a priority will be presented to the TAC as part of its work plan. Subject to TAC approval, the Secretariat will then conduct a detailed assessment of each of these priority technical areas against the endorsement criteria and will present these assessments to the TAC at future meetings.
Detailed assessment
56 Once the priority technical areas have been identified, it is recommended that the TAC commence a detailed assessment of these requirements. The detailed assessment can consider whether the views raised by stakeholders are unique to the UK, and if so, whether the requirements can be introduced in the UK without amendment (including insertions and deletions), or whether they require further guidance or clarification. Matters that are not necessarily UK-specific should be fed back to the ISSB by requesting clarification, further guidance, or to inform the ISSB's post implementation review. Although not part of the technical assessment, the TAC may take into consideration the accompanying guidance published by the ISSB.
57 The Secretariat will present papers to the TAC in future meetings that will include:
- an outline of the technical area, including what is required and any insight into the ISSB's decisions;
- a summary of UK stakeholder views;
- when appropriate, a summary of other jurisdictional approaches;
- an analysis of the requirements against the endorsement criteria;
- suggested endorsement recommendations (including options that were considered but disregarded).
58 In these meetings, the TAC will be asked to review and deliberate on the detailed assessment presented in these papers, and to conclude whether it agrees with the assessment or whether any further aspects should be considered. The TAC will also be asked to approve, reject or amend the suggested endorsement recommendations.
59 The tentative decisions made in these meetings will form the basis for the final endorsement recommendations that will be presented to the SoS at the end of the technical assessment of the IFRS Sustainability Disclosure Standards.
Next steps
60 The TAC is asked to approve this assessment approach. Subject to any amendments, if approved, this assessment approach will then be used when assessing the IFRS Sustainability Disclosure Standards for use in the UK.
Question(s) for the TAC
- Does the TAC approve the use of the assessment approach outlined in this paper? Are there any additional considerations to be made?
Appendix 1 – Extract from the TAC Terms of Reference
The following paragraphs have been extracted from the TAC Terms of Reference.
[...]
Function and Remit of the TAC
2 As described in Section A, paragraph 8, the TAC is to conduct a rigorous technical analysis of the IFRS Sustainability Disclosure Standards and provide well-reasoned, clear and evidence-based advice to the Secretary of State accordingly. In particular, the TAC's analysis should be used to provide a recommendation to the Secretary of State on whether the endorsement of a IFRS Sustainability Disclosure Standard would be conducive to the long-term public good in the UK, including whether:
- Use of the IFRS Sustainability Disclosure Standard is likely to result in an improvement in the international comparability of sustainability-related reporting in the UK;
- Use of the IFRS Sustainability Disclosure Standard is likely to support companies in making disclosures that are understandable, relevant, reliable and comparable;
- Use of the IFRS Sustainability Disclosure Standard is likely to improve the quality of corporate reporting within the UK in the long-term; and
- Companies are likely to be able to provide the disclosures required by the IFRS Sustainability Disclosure Standard within the timeframes that a company normally reports without undue cost or effort.
3 The TAC may also provide recommendations on whether :
- Use of the IFRS Sustainability Disclosure Standard is likely to be conducive to the UK's economic growth and international competitiveness, taking into account the costs and benefits of compliance.
- The IFRS Sustainability Disclosure Standard is likely to be coherent with, and suitable for inclusion in, UK domestic legislation and regulation.
4 As described in Section A, paragraph 13, the TAC may recommend whether, in the light of its assessment, amendments are necessary before the IFRS Sustainability Disclosure Standard can be endorsed, or whether amendments to other legislative or regulatory provisions in the UK framework may be required. The TAC may propose amendments if:
- Changes are considered necessary for the effective application of the IFRS Sustainability Disclosure Standard within a UK context; or if
- Failure to amend a IFRS Sustainability Disclosure Standard would be of detriment to the long-term public good in the UK, taking into consideration the matters in Section B, paragraph 2.
5 The TAC may also propose amendments to build upon the material provided within the global baseline provided by a IFRS Sustainability Disclosure Standard, upon request from DBT or where UK stakeholders raise a strong need.
6 In addition to the responsibilities described above, the TAC also has responsibility to undertake outreach with, and provide a focal point for, UK stakeholders to influence the technical development of IFRS Sustainability Disclosure Standards. This includes the way the ISSB develops its future standards and the ISSB's choices to amend or produce guidance on existing standards.
7 Finally, the TAC may be commissioned by DBT provide supplementary advice and analysis to support endorsement or implementation decisions by DBT or FCA. For instance, this could involve providing information relating to the expected costs and benefits involved for companies in implementing systems and complying with aspects of UK Sustainability Reporting Standards. This information would be used by DBT and/or the FCA when conducting the analysis of costs and benefits or impact assessments necessary for endorsement or implementation decisions. It could also involve providing advice on the implications of adopting certain company size thresholds to any disclosure requirements imposed by the Secretary of State or the FCA.
Commencement of work to develop endorsement recommendations
8 The TAC will begin work to develop endorsement recommendations once a new IFRS Sustainability Disclosure Standard has been published and once a Ministerial letter from DBT has been sent to the TAC to commission it to initiate work on the standard. The TAC cannot begin its analysis of a IFRS Sustainability Disclosure Standard before it has received this letter, but the absence of a letter does not preclude the TAC from conducting influencing and preparatory work prior to and during the ISSB's development of a standard.
Process that must be undergone prior to providing endorsement recommendations
9 The TAC must undertake stakeholder outreach, including with companies and investors, as well as the ISSB, national standard setters and securities regulators as is necessary for it to provide informed recommendations to DBT. The TAC must also consider whether it is necessary to publish a call for evidence, following publication of a new IFRS Sustainability Disclosure Standard.
Contextual information and provision of further advice
10 DBT may, at any time, provide the TAC with contextual information concerning:
- Additional matters, which the Secretary of State is likely to take into account when making an endorsement decision on a IFRS Sustainability Disclosure Standard.
- Information provided by members of the PIC regarding the impact of endorsement of a IFRS Sustainability Disclosure Standard on matters within their organisation's remit.
The TAC must have regard to this information when making its recommendations on the endorsement of a standard to DBT.
11 DBT may provide the TAC with a target date for an endorsement recommendation to be provided. Although this target is not binding, the TAC must aim to provide an endorsement recommendation by that date on a best-efforts basis.
12 DBT may also commission the TAC to provide further advice or information on a IFRS Sustainability Disclosure Standard, before or after it has issued its recommendations. In addition, the TAC will be given the opportunity to amend its recommendations before advice is submitted to the Secretary of State by DBT following analysis of the responses received from the DBT consultation referred to in Section A paragraph 14. However, the TAC's endorsement recommendations are independent, and the Secretary of State or DBT cannot require the TAC to change its recommendations.
13 DBT may also commission the TAC for advice or analysis to support implementation decisions being taken by DBT or the FCA against UK Sustainability Reporting Standards. As described in Section B paragraph 7, such commissions are likely to focus on matters relating to the costs and benefits involved for companies in adhering to aspects of a UK Sustainability Reporting Standard. The TAC will not be asked to produce a full impact assessment for any implementation decision, as this is the responsibility of DBT and the FCA.