Issue link: https://digital.shearman.com/i/1512772
Shearman & Sterling LLP U.K. Corporate Governance Developments | 64 they are endorsed by the U.K. Government. It plans to do this in the first half of 2024 with the aim of finalizing its position by the end of 2024 so that the ISSB Standards will start to apply to accounting periods starting on or after January 1, 2025. European Sustainability Reporting Standards (ESRS) At the same time as the ISSB Standards have been prepared, the EU has prepared and, at the end of July 2023, adopted its own sustainability reporting standards. These ESRS have been developed in parallel with the ISSB Standards with the aim that reporting under the ESRS on climate change will to a very large extent involve the same reporting that is required under the ISSB Standards and thus avoid companies having to issue two separate ESRS and ISSB reports. Under the EU Corporate Sustainability Reporting Directive ((EU) 2022/2464), EU and certain non-EU entities will have to report on sustainability matters in accordance with the EU's own ESRS. As with the ISSB Standards, these standards will apply to financial years starting on or after January 1, 2024 for "large" public interest entities (including non-EU-listed companies) with more than 500 employees. Other "large" companies (including non-EU-listed companies) will have to report by reference to the ESRS for periods starting on or after January 1, 2025. Listed SMEs (including non-EU-listed SMEs) will become subject to ESRS reporting for periods starting on or after January 1, 2026 (or, at the option of the SME, no later than January 1, 2028). In addition, non-EU corporates with a net turnover in the EU of over €150 million and that have: (i) a branch in the EU with a net turnover exceeding €40 million, or (ii) a subsidiary qualifying as a large company or a listed SME, will have to start reporting on a group basis for their financial years starting on or after January 1, 2028. Modified ESRS will apply to this non-EU corporate reporting. 6 FINAL THOUGHTS Despite some notable "U-turns" or "pauses" with regards to the U.K. government's much heralded "Restoring Trust" reforms, the last 12 months have still seen several significant developments in U.K. corporate governance, the most prominent of which we have mentioned in this chapter. As ever with corporate governance, corporate practice (both good but sometimes less good) and investor and regulatory priorities—all prompting enhancements or refinements of one sort or another in corporate governance— rarely stand still for long and that has certainly been the case for the U.K. over the past year and will likely continue to be the case in 2024 and beyond. 6 Shearman & Sterling LLP, "Primary Market Bulletin 45 – IFRS Sustainability Disclosures, Third Country Auditors and Shell Companies," https://www.shearman.com/en/perspectives/ passle/102iluh/primary-market-bulletin-45-ifrs-sustainability- disclosures-third-country-audi (August 13, 2023).