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      The UK Sustainability Reporting Standards (UK SRS) closely follow the International Sustainability Standards Board’s (ISSB) S1 and S2 standards, requiring all reported sustainability information to be verifiable. This does not mean third-party sustainability assurance is mandatory. However, the ongoing (as of the date of this blog) consultation by the Financial Conduct Authority (FCA) on the applicability of UK SRS to listed companies proposes requiring companies to issue a statement on whether assurance has been obtained.

      Sustainability disclosures should be verifiable to ensure compliance with UK SRS, which will be published alongside financial reporting. Responsibility for this will fall under the remit of company directors. This comes at a time where Provision 29 of the UK Corporate Governance Code will also require directors of listed companies to report annually on the design and operating effectiveness of material controls over both financial and non‑financial matters (including sustainability).

      These requirements raise the bar for sustainability disclosures and will require investment in data, people, processes, controls and systems. 

      Joshua Olomolaiye
      Joshua Olomolaiye

      Partner, ESG Reporting and Assurance

      KPMG in the UK

      What the standards say on verifiability

      The ISSB’s S1 standard, and the proposed UK SRS equivalent, identifies verifiability as an ‘enhancing characteristic’. This is consistent with accounting standards, where all information must be verifiable.

      Verifiability means that different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation1. 

      What verifiability means in practice

      We recommend a ‘three-part test’ to ensure that disclosures are verifiable:

      • Traceability

        Make sure that each disclosure or data point directly links to underlying evidence.

      • Controls

        Document the preparation, review and approval processes, and controls over your sustainability reporting – and make sure there aren’t any gaps or disconnects. You will need a mixture of preventative controls (system prompts for irregular data entry) and detective controls (secondary review of data). Clear approval processes are also essential, including identifying what needs approval at a senior level, such as by the Audit Committee or Board.

      • Criteria

        Ensure that there are clear, formal definitions of what will be reported, along with relevant reporting boundaries, assumptions and limitations. As an example, you are likely following the GHG Protocol for the calculation of greenhouse gases, but there may be some areas where company-specific circumstances should be explained.

      Once you have performed the ‘three-part test’, ensure that your system and organisational infrastructure is robust, including that your systems are adequate for the data collection (and data quality) needed.

      New sustainability reporting capabilities may be required. Assess your needs and current position carefully – and make use of the time still available, as technical system upgrades can take time to plan and implement.

      Cross-functional working is also critical, because sustainability information is often dispersed across the business, requiring a collaborative effort to gather and report it. Make sure that team members across the business know what is required – bring people together to discuss, coordinate and plan. 

      Assurance under the UK SRS

      Assurance is not mandatory under the current FCA proposal. However, the FCA proposes that a statement be included in annual reporting as to whether assurance has been obtained over any UK SRS disclosures. Where obtained, it is expected that companies will include sufficient information for a reader to understand the nature and scope of assurance.

      We expect this to result in a greater market-led demand for assurance by boards, investors and other stakeholders who require credible disclosures. Where financially material sustainability information is being disclosed by companies (as required by UK SRS), a statement that assurance has not been obtained could be at odds with the relative importance to stakeholders. This contradiction would be exacerbated where peers obtain assurance over the same information.

      Where a UK company has a global footprint, third-party assurance may also be driven by assurance being mandatory in another jurisdiction (e.g. the European Union and countries such as Australia, and Pakistan). Having a centralised approach to Sustainability reporting and assurance could drive efficiency in meeting global requirements.

      As outlined in the FCA consultation, sustainability assurance had increased to 57% of the FTSE 350 by 20232. KPMG research found that 85% of the FTSE 100 obtained third-party assurance over sustainability information in 20253. 

      Readiness actions for management

      UK SRS requires sustainability information to be capable of independent corroboration. Directors should anticipate scrutiny from investors, regulators and other interested stakeholders. Conducting a proportionate internal review before year-end focusing on evidence trails and controls can identify gaps, strengthen governance and align with financial close processes.

      For those where gathering sustainability data is a new process, or for those who are advanced in sustainability reporting, these actions to build your verifiability readiness are relevant no matter which side of the spectrum you fall: 

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      Conduct a gap assessment on high-priority disclosures (data and narrative) to identify where evidence may not be readily available.

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      Perform dry runs on select disclosures to validate evidence, controls and supporting narratives.

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      Enhance governance via board oversight, assigned owners and integrated sign-off with financial reporting calendars.

      How KPMG can support

      We can support you to understand whether your current sustainability disclosures and/or planned UK SRS disclosures are verifiable. Where they are not, we can support you in building out your disclosures and data to align with the requirements of the proposed UK SRS.

      Please reach out to our experts Josh Olomolaiye or Tom Arnold for more information.

      Note: Some services are restricted for audit clients and affiliates.

      This article was developed with contributions from Tom Arnold (Senior Manager, Sustainability Assurance, KPMG UK).

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      Joshua Olomolaiye
      Joshua Olomolaiye

      Partner, ESG Reporting and Assurance

      KPMG in the UK

      george-richards-image
      George Richards

      Partner, Head of ESG Assurance

      KPMG in the UK

      Alexia Perversi
      Alexia Perversi

      Director

      KPMG in the UK

      Our sustainability insights

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