The Financial Reporting Council (FRC) published its first Statement of Intent on Environmental, Social and Governance (ESG) in 2021, which identified underlying issues with the production, audit and assurance, distribution, consumption, supervision and regulation of ESG information. Since then, it has undertaken a number of initiatives both in the UK and internationally, to assist and support its wide range of stakeholders and drive best practice in high-quality and comparable ESG reporting and disclosure.

The FRC has published an update to its 2021 Statement, setting out areas where there remain ongoing challenges in ESG reporting, suggesting actions for preparers to produce decision relevant information, and the FRC’s plans to engage with the market to ensure that stakeholder needs are being met as demand for ESG information continues to evolve.

In 2022 the FRC established the FRC ESG Group, an advisory body that provides cross-FRC thinking and response to ESG challenges and allows the FRC to respond more quickly and effectively to meet stakeholder needs.

The update not only outlines the material that the FRC has produced since 2021 including thematics, guidance and examples of best practice but also the FRC’s continued commitment to working internationally, supporting efforts towards a common international framework for sustainability disclosures, including key projects underway by the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) to develop international ethical, independence and assurance standards.

The report also highlights the FRC’s key areas of focus regarding ESG reporting during 2023 which include projects and thematics on –

  • ESG Data – how and where to find it and use it effectively
  • Materiality disclosures – what should be considered when determining what are material issues?
  • Support for FRS102 Preparers
  • What are the ESG reporting requirements of the Corporate Governance Code?
  • The link between investors and ESG reporting

FRC executive director of regulatory standards, Mark Babington said:

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“I am delighted that the FRC is today updating its very well received ESG Statement of Intent. Since we issued it in 2021, the FRC is proud to have produced a wide range of helpful tools, information, and guidance that reflects the breadth of the FRC’s remit as well as the fast-evolving landscape of ESG and sustainability reporting globally.

Today’s Statement of Intent highlights the ongoing challenges and opportunities of producing ESG reporting and disclosures and where the FRC’s focus in 2023 will continue to provide guidance and examples of best practice, both in the UK and internationally.

Improving transparency on climate and wider ESG risks and opportunities, and related governance activities and behaviours, is a key priority for our work, benefitting all those stakeholders who demand decision useful reporting which underpins effective decision making in capital markets.”