SRS consultation responses

Subject to removal of IASPs, we agree with the government’s proposal to introduce a voluntary registration regime for sustainability assurance providers. As a mid-tier audit firm with a growing ESG advisory and assurance offering, we believe this approach is proportionate and appropriate given the current maturity of the UK sustainability assurance market. A voluntary regime allows providers, such as ourselves, to demonstrate their commitment to quality and transparency without imposing immediate regulatory burdens and barriers to entry.

Should the government persist with its plans to introduce IASPs, we do not believe voluntary registration promotes the performance of consistent engagements in line with relevant standards, including ethical standards, and therefore is liable to undermine the market’s confidence in sustainability assurance.

The opt-in approach may offer flexibility and encourage market-led development. It is important to note, however, that assurance firms would have other registration commitments with UK RSBs and regulators and therefore the extension of registration to include sustainability assurance is not likely to be a barrier. Given the existing regulatory supervision of assurance firms, extension of registration to include sustainability assurance should not be an onerous process.

In our view, a purely voluntary regime will lead to inconsistencies in assurance quality and could create uncertainty for users of sustainability disclosures. We are therefore in favour of mandatory registration for sustainability assurance providers.

We are strongly opposed to the government’s proposal to adopt a profession-agnostic approach to sustainability assurance. We appreciate that the delivery of sustainability-related financial disclosures demands a broad range of expertise, however the incorporation of this expertise into an assurance report requires specific expertise in the field of assurance. Possessing a sub-set of skills relevant to the engagement is not the same as having the necessary skills and experience to complete the engagement. A scrub nurse, while skilled and vital to the performance of a surgery, does not hold the scalpel… We do not believe that the use of IASPs promotes the quality and credibility of the sustainability assurance process.

The use of IASPs also does not provide a level playing field. Assurance providers are correctly subjected to enhanced professional requirements, performance standards, and regulatory scrutiny. This results in a level of compliance cost necessary for the performance of quality engagements. The ability of IASPs, who are not subject to such professional standards and regulatory scrutiny, to operate, somewhat unregulated, in this space, allows them to deliver these engagements at a lower cost than would be possible by an assurance provider. This is not a cost-saving to the customer, however, as the output comes with a significant reduction in quality (see above).

The proposal notes the view of IOSCO that the use of IASPs should be promoted. This is not a view held by the majority of countries who have implemented sustainability assurance requirements. Only 7 of the 25 EU member states (28%) permit IASPs. Amongst countries which do permit IASPs, formal registration of these providers with regulatory authorities is required, with very few exceptions. We are therefore of the view that paragraph 1.15 (bullet 1) in the consultation does not provide a fair and balanced reflection of the global consensus on this matter, and the views of IOSCO in isolation should therefore not be persuasive in setting UK regulation of sustainability assurance.

Further, as noted above, statutory auditors are already subject to rigorous oversight and accountability mechanisms. They operate within established frameworks for quality management, ethical standards, and assurance methodologies, and are regularly reviewed to ensure compliance with professional and regulatory expectations. As such, statutory auditors are well positioned to deliver assurance services, particularly where financial and governance elements are involved.

Finally, full recognition should be given to the role of Ethics and Professional scepticism in delivering these engagements. Ethics (which is broader than a simple code of conduct) is a core skillset of the auditor, and the ability to observe and mitigate threats to independence is a key requirement in delivering a quality assurance engagement. Professional scepticism and the exercise of challenge of management, critical to any assurance engagement, is equally at play in sustainability assurance, where the use of estimates is prevalent. Without specific and extensive experience in the field of assurance, the exercise of appropriate professional scepticism and challenge of management is highly unlikely.

We agree that both individuals and firms should be eligible for registration as sustainability assurance providers. This dual model reflects the structure already in place for statutory audit and allows for flexibility in how assurance services are delivered. However, we believe that the registration regime must recognise and address the inherent differences in the operating environments of firms and individuals, particularly sole practitioners.

Firms typically operate within established governance structures that provide natural safeguards for assurance quality. These include documented methodologies, supervision protocols, peer review processes, and internal quality management systems. These structures help ensure that assurance engagements are consistently delivered to a high standard and that ethical and professional requirements are upheld.

In contrast, individuals (especially those operating independently) may not have access to the same infrastructure or oversight mechanisms. Serious consideration must be given to whether sole practitioners can meet the same level of quality management expectations as firms. Registration requirements for individuals should therefore be carefully designed to ensure that they can demonstrate equivalent capability, including access to technical resources, quality control procedures, and professional support networks. Without these safeguards, there is a risk that assurance quality may be compromised, which could undermine confidence in the regime.

ARGA should publish clear and differentiated guidance on the scope of responsibility for individuals versus firms, particularly in relation to quality management, engagement oversight, and accountability. In addition, ARGA should establish a proportionate framework for monitoring and enforcement that reflects the structural differences between firms and individuals. This should include mechanisms for investigating complaints, conducting quality reviews, and applying sanctions where necessary. By setting clear and appropriate expectations the regime can ensure that all registered providers, regardless of structure, deliver assurance services that meet the needs of users and uphold public trust.

ARGA should be guided by principles of competence, integrity, transparency, and proportionality. The registration criteria must ensure that providers possess the necessary technical and ethical capabilities, while also being achievable given the current state of the market. For mid-tier firms like ours, it is important that the regime supports growth and capacity-building without creating unnecessary barriers. The regime should also be adaptable, allowing criteria to evolve as market practices and sustainability standards develop. Transparency in registration decisions and criteria will be essential to build confidence among stakeholders.

We believe it is essential that ARGA consults with a broad and representative range of stakeholders when developing the future registration regime. This should include professional accountancy bodies, sustainability experts, assurance providers of varying sizes, industry groups, and users of sustainability disclosures. Such inclusive engagement will help ensure that the regime is both practical and proportionate, and that it reflects the realities of the current market.

As a mid-tier firm, Kreston Reeves LLP is particularly mindful of the need to avoid creating unintended barriers to entry. The registration regime should be designed to encourage participation from firms of all sizes, including those that are expanding their ESG assurance capabilities. A resilient and effective assurance market requires active participation from providers of all sizes. If the regime is overly complex or costly to comply with, it risks consolidating the market around a limited number of large firms, which could reduce choice, innovation, and accessibility.

We encourage ARGA to adopt a collaborative and transparent approach, using consultation not only to inform technical criteria but also to understand the operational challenges faced by firms entering the sustainability assurance space. This will help ensure that the regime supports growth, fosters diversity, and ultimately delivers robust assurance that meets the needs of UK businesses and investors.

We agree that the UK’s registration regime should recognise sustainability assurance providers as capable of delivering assurance across multiple reporting standards. Many of our clients operate internationally and are subject to various disclosure frameworks. Recognising providers across TCFD, UK SRS, and ESRS ensures that companies can rely on a single provider for assurance, reducing complexity, duplication of effort, and cost.

This recognition will also support UK assurance providers in competing internationally and enhance the credibility of UK assurance services. For firms like ours, this is essential to offering comprehensive and competitive ESG assurance solutions. It also ensures that assurance users, particularly investors and regulators, can rely on consistent quality and comparability across jurisdictions, regardless of the reporting framework used.

For SMEs, this flexibility is particularly valuable. As ESG expectations increase across supply chains and financial markets, smaller entities will benefit from being able to demonstrate credible assurance across multiple frameworks without needing to engage multiple providers.

We agree that sustainability assurance providers should be required to follow UK-equivalent standards to ISSA 5000. The core objective of any assurance regime should be to ensure that users of sustainability-related financial disclosures, whether investors, regulators, or other stakeholders, can have confidence that the assurance provided is of a consistently high standard. This consistency is critical to building trust in the market and enabling comparability across entities and sectors.

ISSA 5000 provides a comprehensive and internationally recognised framework for sustainability assurance. It sets out clear ethical and technical requirements that are applicable across a wide range of sustainability topics. For firms like ours, which are expanding our ESG assurance services to meet evolving client needs, alignment with ISSA 5000 offers a clear benchmark for quality and helps ensure that our methodologies meet global expectations.

This is particularly important as the market expands and new entrants emerge, ensuring that assurance quality does not vary based on provider size. We believe that any UK equivalent should closely mirror ISSA 5000 to maintain international credibility and facilitate cross-border engagements.

ARGA should take a proactive and collaborative approach to standard setting. It should consult widely with stakeholders, monitor international developments, and ensure that UK standards remain relevant and effective. ARGA should promote innovation and continuous improvement, recognising that sustainability assurance is a rapidly evolving field. Its approach should be flexible enough to accommodate new methodologies and emerging risks, while maintaining a strong ethical and technical foundation.

In addition to general standards, ARGA should consider developing sector-specific guidance to reflect the differing sustainability risks and reporting maturity across industries. This would help ensure that assurance engagements are appropriately tailored and decision-useful for stakeholders. For firms like ours, clear and consistent standards, combined with practical implementation support, will be essential to building capacity and delivering high-quality assurance services.

When developing its enforcement approach, ARGA should consider proportionality, transparency, and the maturity of the market. Enforcement should focus on serious breaches, such as greenwashing or misconduct that poses a significant risk to public trust. ARGA should also prioritise education and capacity-building, particularly in the early stages of the regime. Guidance and support should be provided to help providers meet expectations. For mid-tier firms like ours, a supportive regulatory environment will be key to enabling growth and ensuring that enforcement does not become a barrier to market participation.

We believe that mandatory assurance of UK SRS disclosures is desirable in the long term for all entities that are currently subject to statutory financial audit. Sustainability-related financial disclosures are increasingly viewed by stakeholders as critical to understanding a company’s long-term prospects and risk profile. As such, it is essential that these disclosures can be relied upon with the same level of confidence as financial statements.

However, we also believe that mandatory assurance should be introduced in the relatively short term for public interest entities (PIEs), other listed entities, and very large private companies. These organisations are already subject to heightened public and investor scrutiny and are already including climate and sustainability disclosures in their financial reports. In our view, it is critical that these disclosures are subject to robust assurance to safeguard against greenwashing and to support informed decision-making by stakeholders.

For smaller companies, we support a phased approach to mandatory assurance. This would allow affected entities and assurance providers sufficient time to prepare for the change, including developing internal reporting processes, building market capacity, and upskilling professionals. As a mid-tier firm with a growing ESG assurance offering, we are actively investing in methodology, training, and technology to support this transition, but recognise that smaller entities may need additional time and support.

Finally, we see the greatest value in the provision of reasonable assurance over limited assurance. Reasonable assurance provides a higher level of confidence and is more aligned with the expectations of users who rely on sustainability disclosures for investment and strategic decisions. We would support a move to reasonable assurance as soon as practicable, particularly for larger entities, and encourage the government to consider this in its implementation roadmap.

We anticipate that, without a formal UK registration regime for sustainability assurance providers, UK firms would face increasing barriers to participating in CSRD assurance engagements. The European requirements under CSRD stipulate that assurance must be provided by a person or firm authorised under national law. In the absence of a recognised UK framework, UK-based providers may not meet this criterion, even if they possess the necessary expertise and experience.

This lack of formal recognition risks creating a perception among EU-based entities and regulators that UK assurance providers are of lower quality or less credible, simply due to the absence of a statutory registration system. Such perceptions could lead to UK firms being excluded from cross-border engagements, despite being fully capable of delivering high-quality assurance. For firms like Kreston Reeves, which are actively developing ESG assurance capabilities, this presents a significant concern as we seek to support UK parent companies with EU operations.

While we do not have quantitative data on the scale of this impact, we believe the risk is material and likely to grow as CSRD requirements become more widely implemented. Establishing a UK registration regime would help mitigate this risk, enhance the international credibility of UK assurance providers, and ensure that UK companies can access assurance services from domestic providers without unnecessary barriers.

We have not encountered direct barriers due to the non-audit services cap to date. However, we recognise that this may present challenges for firms with a higher proportion of non-audit work and support further review of its application to sustainability assurance. We support the view that the assurance of sustainability information should not be considered against the non-audit fee cap, as it relates to assurance of matters disclosed in the Financial Statements, likely delivered simultaneously with the audit.

We broadly support the four proposed amendments. They reflect a thoughtful attempt to balance ambition with practicality while UK entities embed the standards in their strategies and processes.

Ensuring entities publish disclosures at the same time as their financial statements creates better quality, usable information from the earliest opportunity. If entities were to release the data at different times the usability and timeliness of such data would be a concern.

Extending the transition relief in IFRS S1 to continue a climate first approach for an additional year is sensible. Teams need time to understand the data and refine processes before introducing wider sustainability matters. Further to that, many of the data points for wider sustainability reporting are going to need to be developed, with some of the required information new to many.

However, the calculation of Scope 3 emissions is something we feel could be adopted in year 1 and not prolonged to year 2. Depending on the thresholds for the first-year entities subject to reporting, the “economically significant” entities are likely already calculating Scope 3 emissions. Without the entities at the top of the value chain calculating Scope 3, it is unlikely we will see the necessary progress towards engagement with their value chain to better understand and reduce carbon emissions, or the creation of transition plans.

We agree that using prior-period data can result in decision-useful information, especially where current-period data is impractical to obtain. However, it is important that entities disclose the rationale for using such data and any material changes that could affect comparability. Additional guidance should clarify when this approach is acceptable so that entities do not automatically default to using historic data when a better alternative is available, and how to communicate its limitations.

Revising comparative data for financed emissions could improve the quality and consistency of disclosures over time, but it may also introduce complexity and uncertainty for the entities calculating emissions and the users of the information. Should these standards be introduced to SMEs and other mid-tier finance institutions then we anticipate many will lack the systems and resources to track and revise historical data with precision. This could lead to inconsistencies or reluctance to engage with financed emissions reporting altogether.

To mitigate this, we recommend:

• Clear guidance on when revisions are expected (e.g. material errors vs. methodology improvements).
• Practical examples of how to disclose changes transparently.
• To allow an approach for those making good-faith estimates based on available data, with relevant disclosures.

None.

We agree with the amendment. Mandating reference to SASB materials could impose unnecessary burdens on SMEs, particularly where the relevance of those materials is unclear or where UK-specific alternatives are more appropriate.

We recommend reviewing this amendment within 18–24 months, once more relevant industry guidance is developed and tested in practice. This would also allow for the wider application of the standards before introducing another reporting criteria.

We agree. This approach provides clarity and ensures that reliefs are used appropriately and not indefinitely. It also creates a further incentive for entities to voluntarily adopt the standard and benefit from additional time to see through several reporting cycles and refine their processes.

a) Disclosure of carbon credit use is useful, particularly in the context of net-zero claims. It helps users assess the credibility of emissions reduction strategies.

b) There may be significant barriers, including:

• Limited access to verified carbon credits.
• Lack of understanding of credit types and quality.
• High costs of certification and verification.

c) Further disclosures should include:

• Type of credit (removal or avoidance).
• Verification scheme and permanence assumptions.
• Extent of reliance on credits to meet targets.

Guidance should be proportionate and tailored to different organisational sizes.

We support the ISSB’s proposed amendments. These changes improve usability and reduce ambiguity. However, we urge the UK government to ensure that any alignment with ISSB standards is proportionate and does not inadvertently increase complexity for our market. GHG Protocol should still be seen as the highest level of globally accepted framework for greenhouse gas emissions.

None.

Yes, we support endorsement of the standards, subject to the proposed amendments. Albeit, as discussed in our response to question 1, the calculation of Scope 3 emissions is something we feel could be adopted in year 1 and not prolonged to year 2. Depending on the thresholds for the first-year entities subject to reporting, the “economically significant” entities are likely already calculating Scope 3 emissions. Without the entities at the top of the value chain calculating Scope 3, it is unlikely we will see the necessary progress towards engagement with their value chain to better understand and reduce carbon emissions, or the creation of transition plans.

This change would help ensure the standards are both ambitious and achievable.

The following direct and indirect benefits are all seen as additional benefits from current reporting practices.

Direct Benefits:

• Better understanding for the readers of the financial statements on the link between sustainability and financial reporting, allowing for more informed decisions by stakeholders.
• Improved consistency and comparability across sectors.
• Enhanced investor confidence and access to finance.
• Better integration of sustainability into business strategy.
• A greater level of sustainability reporting that is more ambitious and drives the economy towards the ‘Green’ plan the UK government has.
• We would hope there would be a more consistent approach to sustainability data requests for companies reporting or for those in a value chain of a reporting entity. Currently the lack of regulation means companies can receive a multitude of different requests that become a significant administrative burden.

Indirect Benefits:

• Cultural shift toward long-term thinking and resilience.
• Innovation in data systems and governance practices.
• Alignment with global standards, improving competitiveness.

Direct Costs:

• Investment in data systems and reporting infrastructure.
• Consultant support where internal capacity is limited.
• Staff training and capacity building.
• Assurance and verification expenses.

Indirect Costs:

Additional Costs:

We support the proposal for economically significant private companies to report against the UK SRS. These companies play a vital role in the UK economy, and their inclusion in sustainability reporting frameworks is essential for achieving transparency, accountability, and progress toward national and global sustainability goals.

The direct benefits are substantial. Standardised disclosures improve internal decision-making by providing reliable data for strategy, risk management, and resource allocation. They also enhance access to capital, as investors and lenders increasingly rely on ESG information to assess long-term viability. For companies embedded in supply chains, UK SRS alignment ensures continued competitiveness and responsiveness to the requirements of larger corporate partners. Furthermore, sustainability reporting strengthens reputation and stakeholder trust, while preparing companies for future regulatory developments.

Indirectly, broader adoption of UK SRS allows market-wide transparency and supports better policymaking. It creates a level playing field by reducing greenwashing and enabling fairer comparisons across sectors. It will also drive innovation and operational efficiency, encouraging companies to rethink processes and develop sustainable products and services. Over time, it contributes to a cultural shift toward long-term thinking and stakeholder engagement, aligning private sector activity with the UK’s net zero and biodiversity targets.

However, implementation does come with costs. Companies may face initial burdens related to data collection, system upgrades, and staff training. For smaller firms, these costs could be disproportionate unless the standards are appropriately scaled and phased in over a period to allow them to prepare. There is also a risk of complexity if reporting requirements are not clearly defined or aligned with existing frameworks.

Overall, the benefits outweigh the costs, provided the UK SRS is designed to be proportionate, practical, and supportive of companies at different stages of their sustainability journey.

Readiness varies significantly. While some already report climate-related information, UK SRS S1 introduces broader topics (e.g. biodiversity, social capital) that many are not equipped to address. Additional resources will be needed, including:

• Materiality assessment tools.
• Data systems for non-climate metrics.
• Training in governance and stakeholder engagement.

These are all things that are readily available in the market but will have a cost attached.

There is a clear opportunity to rationalise existing frameworks (e.g. SECR, TCFD) into a unified UK SRS approach. This would reduce duplication and reduce the administrative burden. We recommend:

• Where UK SRS is adopted, other reporting frameworks for financial statements are not required, e.g. SECR
• Allowing integrated reporting where disclosures overlap.
• Streamlining reporting timelines and assurance expectations.

N/A as not replying on behalf of Kreston Reeves.

Many SMEs are not yet equipped to meet the expectations implied by the standards, particularly in areas like scenario analysis, Scope 3 emissions, and governance disclosures. However, with the support of advisors and the improvements in AI that are leading to technological advances to make this data more easily obtainable for SMEs, we feel SMEs are ready to be supported but at additional cost. We must however acknowledge the growing number of demands on SMEs and how tough, economically, it is for them. To support the process, we would suggest:

• Accelerating the development of UK-specific industry guidance.
• Establishing a formal mechanism for SME feedback during implementation.
• Piloting the standards with a representative sample of SMEs to test feasibility.
• An indication of the positive commercial outputs from the government could be provided.

Needed Support:

• Sector-specific templates and examples.
• Grants to support businesses with training, tools and implementing strategies required.
• SME-focused guidance on materiality and proportionality.
• Better indication of the types of requests SMEs will receive from their value chain customers that are having to report on this information.

Existing Support:

• BEIS guidance on SECR.
• Industry associations offering webinars and toolkits.

Impact:

• Reduces reliance on external consultants.
• Improves data quality and confidence.
• Encourages meaningful engagement with sustainability.

Not providing a response – best for legal experts to respond.

No other comments.

Guidance is strong for climate-related topics but weaker for biodiversity, social capital, and governance. Additional global guidance is needed on:

• Biodiversity metrics and ecosystem services.
• Stakeholder engagement frameworks to allow for a consistent approach amongst businesses and not leave it open to interpretation, which would potentially create an additional administrative burden.
• UK-specific examples and sector case studies would be particularly helpful.