IR Society responds on Assurance of sustainability reporting
The Society supports an initial voluntary/opt-in registration regime, with transition from voluntary to mandatory registration encouraged once there is greater maturity/number of providers/standardisation in the regulations. In our view, robust internal governance and external stewardship mean it is unlikely that issuers would use unregistered providers unless there is a very good and demonstrable reason and, in these circumstances, this should be able to be communicated to stakeholders. We also support the proposed profession-agnostic approach to provide the flexibility to accommodate the different skills required to conduct sustainability assurance. An overriding principle of the registration regime needs to be equivalence with other jurisdictions, so that issuers can use a provider that can work across its geographical footprint. In relation to any future mandatory assurance, we suggest phasing in terms of having initial ‘comply or explain’ reliefs, size thresholds (with large-cap brought in first), a phasing in of the disclosures that are subject to assurance requirements, and is introduced at a time where the market choice for assurers has matured (and there is maturity and stability of the UK SRS regime), with account taken of the experiences in the EU with mandatory assurance on sustainability reporting (CSRD/ESRS) starting from the first year of application. It is important to recognise the associated costs to businesses of collecting, reporting and assuring sustainability information, especially for more resource-constrained smaller caps, and the potential negative impacts on ‘UK plc’ competitiveness (in particular small and medium sized issuers) and attractiveness of UK listing.
The Investor Relations Society
Office 605 Birchin Court, 20 Birchin Lane
London EC3V 9DU
Hannah Skewes
Sustainability Reporting
Company Law and Governance
Department for Business and Trade
Old Admiralty Building, London, SW1A 2DY
By email: uk.srs@businessandtrade.gov.uk
17th September 2025
Dear Hannah,
Re: Assurance of sustainability reporting
Thank you for giving us the opportunity to respond to your Consultation Paper on Assurance of sustainability reporting, and also for attending our roundtable last Friday to allow some of our Members to share their views and concerns directly with your team. This response is made on behalf of The Investor Relations Society (‘the IR Society’).
The IR Society represents Members working for publicly listed companies and investor relations focused service providers, to assist them in the development of effective two-way communication with the markets. It has approaching 800 Members, drawn mainly from the UK, including the majority of the UK FTSE 100, many of the FTSE 250 constituents and some from AIM-listed companies, as well as those listed overseas.
The IR Society’s mission is to promote best practice in investor relations; to support the professional development of its Members; to represent their views to regulatory bodies, the investment community and Government; and to act as a forum for issuers and the investment community.
Our response has therefore been primarily constructed through the lens of a corporate issuer, and as such reflects the views of those very much at the ‘coal face’ of investor engagement and corporate reporting – both financial and non-financial.
We set out below our comments on those aspects of most relevance to our Members, rather than answering all of the specific questions.
1. Do you agree or disagree with the government’s core proposal to create a voluntary registration regime for sustainability assurance? Provide justification.
We would support the proposal to create a voluntary registration regime for sustainability assurance, but importantly only as the initial step of a phased introduction. The regime needs to be simple, proportionate and cost effective, and an inclusive, pragmatic approach is key to avoiding the risk of locking out smaller providers.
The technical skills requirements around sustainability assurance are demanding, including sector expertise as well as sustainability expertise and audit expertise, all three being relevant.
Readiness challenges across providers, and limitations for companies as to the ability to access a range of professionals to fulfil these services, mean that voluntary registration would be beneficial. There is also a need to provide a degree of flexibility with regard to smaller assurance provider firms, allowing them time to upskill without being locked out of the market by mandatory registration.
The balance is ensuring technical sustainability capability is partnered with financial acumen and the assessment of financial materiality. Our Members experience is that these do not readily go hand in hand for many providers. As we mention at Q11 below, a phasing in of the disclosures that are subject to mandatory assurance requirements could also provide more steady opportunities for organisations to upskill and improve.
We mention above that voluntary registration should be the initial phase. We believe consideration as to whether/when there should be a transition from voluntary to mandatory registration can only take place once there is greater maturity and number of providers and also greater standardisation in regulations. The initial voluntary regime would then allow a degree of flexibility with regard to smaller assurance provider firms, before making them subject to ARGA’s quality inspection and enforcement regime.
We would encourage a subsequent move towards mandatory registration because of the need for increased standardisation, given the sizeable disparities in price and quality, rigour and methodology amongst providers (see the Society comments on the UK’s sustainability assurance market), and acknowledge standardisation could be undermined long-term by a permanent voluntary regime. However, given this is an emerging market and there is a need for proportionality, we would only support the phasing in of a mandatory regime after an initial period of voluntary registration.
This phased approach would also help balance the benefits of robust sustainability assurance regulation with the government’s commitment to support the growth of the sustainability assurance market and its overall mission on economic growth.
2. In your view, what are the advantages and disadvantages of the opt-in approach?
Advantages of a Voluntary Registration Regime
The biggest advantage in our view is that a voluntary regime could be established relatively quickly, whether as a stepping stone to mandatory registration or not, and start to develop a track record. Registration – as a statement of intent - would then open up doors for some smaller, non-audit firms, which could open up competition and encourage innovative approaches. However, this will depend on ARGA having the resources to operate sufficiently timely and robust oversight of the standards of the firms who do register.
While there can be clear benefits of aligning sustainability assurance with financial audit, especially given the focus on financial materiality, we see risks to the development of a broader assurance market where this assurance is dominated by the major audit firms. This will not ensure either best value or best quality, especially where a specialist technical understanding would be helpful.
As mentioned at Q1 above:
- this is an emerging market with readiness challenges across providers and limitations for companies as to the ability to access a range of professionals to fulfil these services, and
- an opt-in regime should avoid the risk of locking out smaller providers, thus providing a degree of flexibility and allowing them time to upskill before making them subject to the ARGA quality inspection and enforcement regime.
Disadvantages & Unintended Consequences
See our comments at Q1 above regarding the risk of standardisation being undermined long-term by a permanent voluntary regime.
Provided corporates have robust governance and stewardship, we do not see any significant disadvantages or unintended consequences of an initial voluntary regime. For instance, in theory there is a risk that corporates could move to unregistered assurance providers because they may be cheaper or less stringent.
However, with robust internal governance and external stewardship, it is unlikely that issuers would use unregistered providers unless there is a very good and demonstrable reason and, in these circumstances, this should be able to be communicated to stakeholders.
3. Do you agree or disagree with the government taking a profession-agnostic approach to sustainability assurance? Provide justification.
We agree it is important that the sustainability assurance regime enables a broader scope of skills and qualifications given the breadth of information being assured.
As mentioned at Q1 above, the skills requirements around sustainability assurance are demanding, including sector expertise as well as technical sustainability expertise and financial acumen, materiality assessment and audit expertise.
Firms will need good knowledge of:
- technical sustainability considerations;
- financial and corporate reporting;
- sector-specific information;
- assurance considerations and requirements; and
- independence, ethics and professional standards.
We would therefore support this profession-agnostic approach to provide the flexibility to accommodate the different skills required to conduct sustainability assurance.
7. Do you agree or disagree that the UK’s registration regime should recognise ‘sustainability assurance providers’ as being capable of providing high-quality assurance over multiple reporting standards (that is, TCFD, UK SRS, ESRS)? Provide justification.
We agree, because an overriding principle of the registration regime needs to be equivalence with other jurisdictions. UK assurance standards and oversight must be comparable with other jurisdictions, especially for large companies operating internationally.
For instance, a corporate may wish to select a provider that can work across its geographical footprint, as there will be a commonality of systems and processes within its operations. The UK regime needs to be seen as credible and comparable by other regulators for this to happen.
8. Do you agree or disagree that sustainability assurance providers must follow UK equivalent standards to ISSA 5000? Provide justification and, if you disagree, indicate whether any other standards are considered appropriate.
We do not feel qualified to provide a definitive comment on the ISSA 5000 standards. We acknowledge that sustainability assurance has inherent challenges due to the levels of estimation and qualitative elements within sustainability reporting, but also due to the current lack of standardisation for reporting and for sustainability assurance engagements.
Not least also is the fact the non-financial limited assurance engagement market is still relatively new, and may cover sustainability data collection, methodology and reporting that is less well defined and for which the control environment is far less mature and robust than for more established and standardised assurance engagements.
Requiring providers to follow a UK endorsed International standard ISSA 5000 may help in this regard, but we note there may be other options – such as ISAE 3000, which can be used for assurance engagements by accountancy practitioners of internal control, sustainability and compliance with laws and regulations, and consists of guidelines for the ethical behaviour, quality management and performance of an ISAE 3000 engagement.
10. What factors should ARGA consider when developing its approach to enforcement. Provide justification.
We believe that the success of the registration regime relies on voluntary registration, and therefore that ARGA’s regulatory approach should encourage and assist providers to build capacity over time, to help smaller audit firms and ESG specialists/boutiques.
This should include a capacity/skills building campaign on the technicalities of sustainability assurance, to be rolled out in parallel with any regulatory and enforcement regime, including issuing guidance and support for providers, and acting as a convener that shares knowledge and best practice.
We also believe that enforcement action should prioritise where there are instances of egregious wrongdoing, strong public interest or suspected greenwashing.
11. Do you agree or disagree that [mandatory] assurance of UK SRS disclosures is desirable in the long term? Explain your view and also indicate whether there are any implementation approaches (for example, timelines for phasing-in requirements) or alternative measures to regulation that the government should consider.
We can see that mandatory assurance of SRS disclosures could play a role, where they are limited to material items for a corporate reporter, and introduced at a time where the market choice for assurers has matured. This also would require a maturity and stability of the SRS regime.
We believe that until then, there are significant risks to achieving the desired outcome that assurance is meant to achieve. The experience of UK issuers who have had to cope with CSRD and other new regimes is that there has to be stability and clarity in regulation.
The experiences in the EU with mandatory assurance on sustainability reporting (CSRD/ESRS) starting from the first year of application are also instructive. This caused issues given there had been insufficient time for corporates to ensure the accuracy and completeness of their data and to implement or improve their associated processes and controls. We note that CSRD also lacked fully detailed assurance guidance, which resulted in a wide range of approaches being taken among the different providers.
Both EU and other ‘real world’ experiences are that where regulatory maturity and stability is not in place, assurance providers can quickly revert to a very strict and often misguided rules interpretation – inconsistent across different providers - which does not deliver the core goal of assurance to deliver clarity and comparability.
Methodologies
Methodology reviews (akin to a “pre-assessment” engagement) can provide greater value than an assurance engagement. Other alternative measures to regulation could include voluntary assurance, or company transparency regarding the approach taken to assurance (ie a comply or explain approach), which could provide sufficient levels of trust at least in the shorter term.
It is important to acknowledge the associated costs to businesses of collecting, reporting and assuring sustainability information. This will require digitisation, digitalisation and technology/platforms that are costly, especially for more resource-constrained smaller caps.
It is in that context that we urge the government to consider the potential negative impacts of mandatory assurance on ‘UK plc’ competitiveness, particularly in the context of creating, developing and listing businesses in the UK (compared to other parts of the global economy). Regulatory complexity and mandated reporting requirements are a clear disincentive for a UK listing and risks the stated goal of reducing the reporting burden by 25%. Specifically, the impact on small and medium sized issuers we believe would need to be carefully considered.
Phasing
Furthermore, in our view, any mandatory assurance requirement should be implemented via a phased approach, to balance ambition with capacity and help mitigate the impact of mandating assurance on the perceived attractiveness/competitiveness of the UK market. This phasing could comprise:
- using a comply or explain relief during an initial period, which might support less experienced companies to learn from more ‘mature’ reporters,
- by phasing in the disclosures that are subject to assurance requirements, which could provide more steady opportunities for organisations to upskill and improve in line with assurance requirements, and/or
- by phasing size thresholds, with large listed businesses (ie FTSE 100) brought within scope first as they are more likely to have the necessary resources, and enable smaller-caps and large private companies to benefit from the development of market expertise and best practice within the assurance industry, and reducing the risk of capacity issues among providers.
We hope you find these comments useful. Please do not hesitate to make contact if you have any questions.
Yours sincerely,
Liz Cole
Head of Policy and Communications, The Investor Relations Society
(Email: enquiries@irsociety.org.uk, Tel: + 44 (0) 20 3978 1980)
Ross Hawley
Co-Chair of the Policy Committee, The Investor Relations Society
(Email: enquiries@irsociety.org.uk, Tel: + 44 (0) 20 3978 1980)
Published 19 September, 2025