UK opens consultation on draft UK Sustainability Reporting Standards

The consultation is open until 17 September 2025.  It forms part of the first phase of consultations to, in the words of the UK Department for Business and Trade (DBT), 'modernise the UK’s framework for corporate reporting'.  It was published alongside two other consultations, the first being on the mandatory disclosure of climate transition plans and the second being on the oversight of sustainability assurance providers (each of which is also open until 17 September).

Who is this relevant to?

The consultation will be relevant to all entities that may eventually be required to report under the UK SRS, including listed companies and other economically significant businesses. 

That being said, the consultation does not address who will be required to report (but does seek certain feedback on this aspect), nor the timing around the UK SRS' eventual implementation.

What is the background to the consultation?

The UK has, for several years, been planning the introduction of UK disclosure standards to facilitate eventual mandatory corporate reporting on sustainability-related risks and opportunities.  As a reminder, the European Union's Corporate Sustainability Reporting Directive does not apply in the UK, although it can, under certain circumstances, impact UK-incorporated companies.

The IFRS S1 and IFRS S2 standards

The draft UK SRS reflect, with minor proposed amendments, the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB), specifically IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and IFRS S2 Climate-related Disclosures (IFRS S2).

These standards have wide applicability: thirty-six jurisdictions have either adopted or otherwise used the IFRS Sustainability Disclosure Standards or are in the process of finalising steps towards introducing them, either fully or via broad alignment (the UK's approach), into their regulatory frameworks.

IFRS S1 establishes the foundational framework for sustainability-related financial disclosures, requiring entities to disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect their cash flows, access to finance, or cost of capital over the short, medium, or long term.

IFRS S2 builds upon IFRS S1's overarching principles with a specific focus on climate-related disclosures, requiring the identification and disclosure of information about climate-related physical risks (event-driven or from longer-term climate shifts) and transition risks, along with climate-related opportunities.  It integrates and builds upon the recommendations of the Task Force on Climate-related Financial Disclosures.

Both standards are effective, on a voluntary basis, for annual reporting periods beginning on or after 1 January 2024. 

The consultation

The consultation, which is being run by DBT, seeks views on six minor amendments to IFRS S1 and IFRS S2 and the costs and benefits of using the UK SRS. 

Evidence obtained through the consultation will inform future government decisions when it considers whether to require entities to report information using the UK SRS. 

The proposed UK amendments

The two draft UK SRS are available here and here, respectively.  The proposed amendments are as follows:

1. Removal of delayed reporting relief:

The transition relief in IFRS S1 (paragraph E4) that allowed delayed publication (i.e., later than the publication of financial statements) of sustainability information in the first year is removed in the draft UK SRS.  

The draft UK SRS S1 therefore requires, to aid 'connectivity' between reporting heads, sustainability information to be published simultaneously with annual financial statements from year one.

2. Extension of "climate-first" reporting relief:

The period during which entities can report only on climate-related matters (before reporting on broader sustainability issues) is extended from one year under IFRS S1 (paragraph E5) to two years under the UK SRS S1 (paragraph E4).

Given the one-year relief on reporting Scope 4 emissions in IFRS S2, this means that entities will be required to disclose, at a minimum:

• in year one – climate-related risks and opportunities except Scope 3 emissions;
• in year two – all climate-related risks and opportunities, including Scope 3 emissions; and
• in year three – climate-related risks and opportunities, Scope 3 emissions and wider sustainability-related risks and opportunities.

3. Flexibility on classification standards for financed emissions:

The current requirement in IFRS 2 to use the Global Industry Classification Standard (GICS) for reporting financed emissions is removed.  GICS provides a standardised way to classify companies into sectors, industry groups, industries, and sub-industries. 

UK entities may, in draft UK SRS S2 (paragraphs B62 (a)(i) and B63 (a)(i)), use any other appropriate classification schemes already in use.

4. Omission of "effective date" clauses:

The 1 January 2024 effective date provisions in IFRS S1 and S2 are omitted. For the UK SRS, the effective date for their mandatory application will be as set by future UK legislation or regulation. 

5. Permissive reference to SASB materials:

In the draft UK SRS, the references in IFRS S1 and S2 to referring to and considering the applicability of Sustainability Accounting Standards Board (SASB) materials and related industry guidance are changed from mandatory (i.e., the word "shall") to permissive.  Entities “may refer” to these materials and guidance, but are not required to do so.

6. Clarification on transition reliefs:

In the draft UK SRS (paragraphs E3, E4, and E5 in draft UK SRS S1 and paragraphs C3 and C4 in draft UK SRS S2) transition reliefs are explicitly linked to the introduction of any mandatory reporting requirements. 

Existing UK disclosure and reporting requirements

Many companies are, of course, already subject to a panoply of existing environmental and climate-related disclosure and reporting requirements in the UK.  The UK Companies Act 2006 and related regulations, Listing Rules, Disclosure Guidance and Transparency Rules and Taskforce on Climate-related Financial Disclosure recommendations require certain companies to report annually on environmental matters and climate-related matters in their directors' reports, strategic reports and elsewhere in their annual reports.

Similarly, limited liability partnerships’ annual reports should include disclosures on greenhouse gas emissions, intensity metrics, energy efficiency steps and total energy use (and large limited liability partnerships have broader obligations under the Climate-Related Financial Disclosure Regulations). 

What should businesses do now?

Businesses are encouraged to review the draft UK SRS and submit feedback.  Beyond this, potentially affected companies – such as large private companies and listed companies – should continue to monitor developments. 

Please contact Aonghus Heatley if you would like to discuss any of the issues covered in this blog.