ICAS backs FCA’s UK SRS plan but warns on proposed reliefs

The Institute of Chartered Accountants of Scotland (ICAS) said that it welcomes the Financial Conduct Authority’s (FCA) plans to reshape listed company sustainability reporting around the UK Sustainability Reporting Standards (UK SRS).

In its response to Consultation Paper CP26/5, ICAS backed the proposal to replace the current climate disclosure rules with requirements built on UK SRS S2 for climate-related disclosures, alongside an option to use UK SRS S1, “General Requirements for Disclosure of Sustainability-related Financial Information”.

ICAS said it supports FCA’s intent and to provide clarity on the application of the UK SRS.

It added that the FCA is effectively “setting the trajectory in the market” for the pace and scope of adoption, along with the reliefs that will apply.

The institute said bringing UK rules into line with IFRS sustainability disclosure standards is key to improving global comparability and shoring up investor confidence.

It said it also supports proportionality and believes the shift from current rules to the new framework should be clear, gradual and well signposted.

However, ICAS raised concerns that some proposed reliefs could weaken reporting.

It said sustainability reporting “shouldn’t go backwards” and warned the FCA’s proposed reliefs could weaken comparability of UK SRS disclosures at home and abroad.

ICAS said: “The FCA’s approach signals a step change in the UK’s previous approach from being a first mover and progressive about changes to sustainability disclosures (as evidenced by the work of the likes of TCFD and Transition plan taskforce).

“The FCA’s proposals are tame and don’t reflect the urgency of the critical underlying sustainable development issues that some sustainability disclosures are intended to serve.” 

On emissions, it noted that Scope 3 often makes up most of an organisation’s greenhouse gas output, so excluding these figures can leave disclosures incomplete or misleading.

While recognising data challenges, ICAS said “these disclosures should be mandated within a reasonable timeframe, with earlier adoption encouraged and robust explanations required in the interim”.

It also opposes plans to push non-climate reporting down the agenda via a longer ‘comply or explain’ approach, saying many such issues are financially material and useful for investor decisions.

The FCA will review responses and is due to outline in 2026 how issuers should apply the UK SRSs, ahead of rules expected to start on 1 January 2027.

ICAS recently called for restraint on the King’s Speech reforms, warning against casting regulation as a drag on growth.