ResponsibleBusiness
What will a sustainability assurance standard look like?
Assurance on sustainability is a key lever against greenwashing. With the Financial Reporting Council introducing a sustainability assurance standard, Richard Crump examines how it will work
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As pressure mounts on businesses to prove their sustainability credentials, the UK is moving to tighten the rules on how that information is reported and verified.
The Financial Reporting Council (FRC) recently consulted on a new UK sustainability assurance standard, while the government is consulting separately on new reporting standards, oversight of assurance providers and net-zero transition planning.
Together, these measures could reshape the way companies report their environmental and social impact, and shift towards a more regulated and competitive market for sustainability assurance services.
“They are all welcome in their own way, but all three need to be linked up together because otherwise it is going to be a nightmare,” Mark Lumsdon-Taylor, a partner specialising in sustainable accounting and finance at MHA, says.
Levelling the playing field
The impetus for a UK sustainability assurance standard is driven by concern over the quality and consistency of assurance in the market, increasing concentration of work in the hands of the Big Four and demand for a level playing field across all tiers of firms.
“It is a bit like having money but nobody knows which bank to take it to if you want to cash it in,” Alex Hindson, head of sustainability at Crowe, says. “That’s the issue, so there is a danger that it gets discredited.”
The FRC found in a study that there is a growing preference among the largest companies to use the Big Four audit firms to carry out sustainability assurance in the UK market.
Hindson says the view is that the Big Four will “dominate” if the market is left as it is, which could have implications for future choice, capacity and innovation.
“They have got such a head start because only the largest firms have chosen to have voluntary assurance,” he says. “The Big Four built up teams, the mid-tier has some, but the smaller firms have none because their clients aren’t asking for it because they are not big enough nor sophisticated enough.”
Sustainable finance capital of the world’
Against this backdrop, the government has signalled its ambition to make the UK the “sustainable finance capital of the world”, recognising that assurance standards must be aligned with international practice and supported by a robust regulatory framework.
To that end, the FRC plans to introduce a UK standard based on International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements.
The FRC proposed to adopt ISSA 5000 with only one change in relation to internal audit, which is common UK practice. This, says Hindson, chimes with the government’s proposal to adopt IFRS sustainability standards pretty much unchanged.
“There is a general recognition that what they call interoperability is important and it will just put a barrier to trade and competition,” Hindson adds. “The UK would be less competitive if you didn’t adopt it the same way.”
The Big Four built up teams, the mid-tier has some, but the smaller firms have none because their clients aren’t asking for it because they are not big enough nor sophisticated enough.
Voluntary or mandatory?
The plan is for the standard to be used on a voluntary basis by UK sustainability assurance providers. But Lumsdon-Taylor says it should be made mandatory so that all providers are subject to comparable standards of quality management, ethics, training, monitoring and oversight.
Unless a common assurance standard is mandated and regulated, the market will persist in being diverse, unregulated and fragmented, with assurance provided according to multiple standards.
“It is important that the sector is regulated and it is important there is a proper framework,” Lumsdon-Taylor says.
“We observe some excellent practice from our peers and our colleagues above us and parallel to us, and we observe some less than robust practice from other practitioners because it is not regulated.”
With this in mind, the government intends to create a voluntary registration regime for third-party assurance providers that will be overseen by the planned Audit, Reporting and Governance Authority (ARGA).
Lumsdon-Taylor suggests going one step further by imposing “some sort of control on who can actually be on that register”.
He adds: “You have got to regulate the providers and it should only be the providers that have got the ability to do it [that] should be doing it.”
ARGA will be responsible for registering providers – including both audit and non-audit professionals and firms – setting eligibility criteria, monitoring performance and taking enforcement action.
“They are going to need to be more inclusive of other firms that are not coming at this from an audit point of view,” Hindson says.
“The qualifications they have to have could be interesting because it is going to be a mixture of subject matter expertise on sustainability and assurance expertise. That is going need navigation.”
Crowe has been working with the ICAEW to develop a certificate in sustainability assurance. Hindson says: “I am going to be making sure my team takes it. That hopefully provides some level of protection against people asking what qualifications you have.”
Quality control
The effectiveness of any assurance standard, however, will depend on the quality of the disclosures it seeks to verify.
The foundation of the framework will be new UK Sustainability Reporting Standards (SRS) based on the International Sustainability Standards Board’s (ISSB) IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.
The UK SRS will replace the Task Force on Climate-related Financial Disclosure (TCFD) aligned requirements already in force in the UK.
Lumsdon-Taylor says the adoption of ISSB to replace TCFD “makes a lot of sense providing we are sensible about the approach and we don’t tie businesses up to impossible net-zero commitments”.
Businesses are more prepared from where they were for TCFD and CFD “because they came in cold”. He says: “No one was doing anything prior to that, so you have got that as a bedrock.”
However, TCFD “was fairly light compared to where we are now and ISSB S1 and S2 is the next level,” he adds.
UK sustainability reporting and assurance consultations – June 2025
FRC Sustainability Assurance Standard
Consultation on a UK standard, based on ISSA 5000, to improve the quality, consistency and credibility of sustainability assurance.
UK Sustainability Reporting Standards (UK SRS)
Exposure drafts aligned with ISSB’s IFRS S1 and S2, setting out disclosure requirements for climate and wider sustainability information.
Regulatory oversight of assurance providers
Voluntary registration regime for third-party assurance providers, aimed at boosting competence, credibility and market confidence.
Net Zero Transition Consultation
Reporting proposals to track corporate progress towards net zero, supporting transparency and investor confidence.
Be prepared
UK SRS S1 and UK SRS S2 will include requirements on new topics, so phased implementation is expected along with a one-year relief against disclosing Scope 3 greenhouse gas emissions in IFRS S2, which has been maintained in UK SRS S2.
Deloitte said in its response to the government’s consultation that “the ISSB standards should be brought in without modification” but acknowledged that “some minor amendments may be needed in the short term to facilitate the transition to UK SRS”.
The firm added: “We recognise that UK entities will need sufficient time to prepare for mandatory reporting requirements under UK SRS and therefore suggest that the government … consider a phased and proportionate approach to the introduction of mandatory reporting requirements.”
Looking ahead, Hindson predicts that TCFD will be retired by 2030, IFRS S1 and S2 will both be subject to independent assurance and it is possible that IFRS S3, which will cover biodiversity, may be on the horizon.
He recommends that businesses “do a dry run and do a readiness assessment” because there is a big step up between TCFD and IFRS, and having the assurance is another step up.
“It is like having a step ladder,” he says. “You are going to need to take it in phases. What helps is having an idea of what the top of the ladder looks like rather than be surprised each time you take a step.”
