ICAS responds to DBT with call for mandatory sustainability reporting
ICAS has called for mandatory sustainability reporting in its response to the Department for Business and Trade’s call for evidence on non-financial reporting.
The reporting of non-financial information by companies is highly valuable to both the company and its external stakeholders, and can improve how a company is managed, ICAS said today in its response to the Department of Business and Trade’s (DBT’s) survey on non-financial information. It went on to call for mandatory sustainability reporting incorporating the impact of businesses on both the environment and society.
DBT’s non-financial reporting review builds on its paper ‘Smarter regulation to grow the economy policy’ which sets out the UK government’s plans to improve how companies are regulated by reducing burdens, following the UK’s departure from the European Union.
ICAS has been calling for greater use of reporting on the social and environmental impacts of a business, and their associated risks and opportunities, for some time. ICAS has also called for the UK government to make this kind of reporting mandatory for businesses proportionate to their size.
Strategic reports have grown in length by around 60 per cent in the last five years due to increased regulation, leading to reports which often fail to be genuinely strategic. ICAS believes there is scope to improve their value through a regulatory shift to business model reporting, to encourage more succinct and useful strategic reports which will be of greater value to users.
In its response, ICAS also points to the rapid growth and pace of change in non-financial reporting, which has resulted in a high demand for the skills and training needed to comply with requirements. ICAS states there is insufficient capacity within the marketplace for both the skills and expert trainers required to meet this demand, which has led to an increase in both employee and consultancy costs. In summary, both regulation and stakeholder expectations are moving faster than the knowledge base, particularly in relation to sustainability reporting.
J Bruce Cartwright CA, ICAS CEO said:
“We believe the UK government needs to make sustainability reporting mandatory and use reporting standards that facilitate global comparability and interoperability with other standards. This would mirror other jurisdictions like the EU, where reporting in accordance with European Sustainability Reporting Standards (ESRS) is already mandated for certain entities. We think the information on the UK government’s proposed framework to create UK Sustainability Disclosure Standards (SDSs), released on 2 August 2023, is a welcome step in the right direction, and we will continue to encourage the UK government to mandate sustainability reporting.
Of course, a proportionate approach is required so that companies are not unduly burdened in meeting any potential legal obligation to make sustainability related disclosures”.
Cartwright also said:
“We support reforms which should lead to more succinct strategic reports, at the same time as supporting an increase in sustainability reporting. However, we also recognise the challenges faced by the DBT in making meaningful reforms which result in proportionate requirements for the preparation of non-financial information, as well as meeting the needs of investors and other stakeholders.”