The government has ordered the creation of a new “oversight regime” for sustainability assurance providers.

Of those who responded to a consultation, 80% backed the government’s proposal for new supervision, which would see voluntary registration by providers for the new regime.

The government had faced concerns that oversight should be mandatory or risk creating a “two-tier” market, but the Department for Business and Trade’s report says it considers “voluntary” registration and oversight to be a “proportionate approach”.

“The government notes concern about the risks associated with the voluntary approach, particularly low uptake and its ability to ensure a consistent quality across the whole market (not just registered practitioners).

“However, given the market is still relatively nascent and is rapidly evolving, we consider this to be a proportionate way forward.”

Sustainability assurance remains in its infancy not least because relatively few companies in the UK are subject to mandatory sustainability reporting using the TCFD (Task Force on Climate-Related Financial Disclosures) framework. Some may issue sustainability reports voluntarily. The UK is still in the process of green-lighting new reporting standards based on a similar framework from the International Sustainability Standards Board.

The new oversight regime will also be “profession agnostic”—welcoming registration by assurance experts from both the accounting profession and non-accounting specialist firms.

Oversight will encompass not only new UK standards and TCFD but also those providing assurance of disclosures made according to the EU Corporate Sustainability Reporting Directive (CSRD), legislation that was reformed last year so that it will affect far fewer companies and involve reporting on a much reduced list of metrics.

Summer target

The government has asked the Financial Reporting Council (FRC), the UK’s governance watchdog, to have the new regime up and running by the summer of this year.

In the meantime, the government will work on legislation to place the FRC on a statutory footing.

Its statutory responsibilities will include the new oversight process. It remains unclear when legislation will be passed.

Though registration for oversight will be voluntary, assurance providers will have to meet key conditions on skills, experience and standards. These are yet to be defined and will be the work of the FRC over the coming months.

The government says: “The regime will foster a robust, competitive sustainability assurance market by allowing companies to register as suitably qualified sustainability assurance practitioners with the FRC, if they meet certain registration requirements.”