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On 21 March 2024, the Financial Reporting Council (FRC) announced the launch of its first market study which will examine the UK market for sustainability assurance services. The FRC’s objective is to ensure that this rapidly growing market is functioning effectively and providing high quality assurance over companies' sustainability reporting.
What will the study cover?
The FRC's market study will consider the following key topics:
- choice, quality and competition in the sustainability assurance market
- capacity constraints and barriers to entry or expansion
- potential impacts from changing international regulations
- any interplay between the sustainability assurance and statutory audit markets. This reflects the fact that some major audit firms are significant suppliers in this market in addition to providing statutory audits. In that context, the FRC wants to understand any potential implications for competition and resilience in the UK's statutory audit market.
What's the timing on this?
Interested parties should submit comments and evidence on the sustainability assurance market by 13 June 2024. The FRC currently expects that this market study will conclude in early 2025.
Where can I get more information?
The FRC has published an information sheet which is available here: Assurance of Sustainability Reporting Market Study (frc.org.uk)
Has the FRC looked at this market before?
No. This is the first time that the FRC has examined the UK market for sustainability services.
How has that market been growing?
The market for providing independent assurance over the sustainability information disclosed by UK companies has been expanding quickly in recent years. In 2022, 84% of FTSE 100 companies obtained some level of external assurance over their sustainability reporting, up from 68% in 2020.
How can we help?
If you would like to discuss this market study or any other aspect of sustainability assurance services, please speak to your usual contact at Burges Salmon or Nick Graves, head of the firm's Corporate Department.
Mark Babington, Executive Director of Regulatory Standards at the FRC, said: "Investors and other stakeholders are increasingly relying on companies' sustainability reporting and as a consequence the assurance provided over that information. It is vital that the market for sustainability assurance services is functioning properly – providing high quality, independent assurance without creating excessive costs and burdens on companies and their reporting." “By promoting transparency and high standards in this area, we can support the endeavours of UK companies to supply high quality information to financial markets that enables opportunities for growth and investment across the UK economy."
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