On 30 September 2026, the Government announced that the UK Sustainability Reporting Standards 1 and 2 (UK SRS 1 and 2) will apply on a "comply or explain" basis from 1 January 2027. This followed the consultation on Modernising Corporate Reporting, which was released on 7 September by the Department of Business, Innovation, Science and Trade (BIST).
This article summarises key information relating to environmental and sustainability reporting under UK SRS 1 and 2 in the UK and flags forthcoming changes of SECR and ESOS reporting.
UN Sustainability Reporting Standards – Reporting Requirements for Listed Companies
The Government published UK SRS 2 (on climate-related reporting) and UK SRS 1 (on wider sustainability topics) in February 2026. On 30 September 2026, the Financial Conduct Authority (FCA) published Policy Statement PS26/19. The FCA's Statement confirmed the big change – that listed companies will be able to choose to implement UK SRS 1 and 2 on a "comply or explain" basis.
The Financial Conduct Authority said that the change of approach to voluntary climate-related reporting for listed companies was made after "extensive market engagement" and discussion of the disproportionate burden that UK SRS 2 (which was due to apply on a mandatory basis from 1 January 2027) would apply to smaller companies.
To give industry time to prepare, the FCA is using the implementation timelines they consulted on, so:
1. Companies can decide to apply the SRS 2 rules on a voluntary basis to accounting periods beginning on 1 January 2027, with first reporting of climate-related disclosures in 2028;
2. There will be a 1-year transitional relief for comply or explain reporting under SRS 2 for Scope 3 (supply chain-related) disclosures;
3. There will be a 2-year transitional relief for comply or explain reporting of S1 (wider sustainability) disclosures.
To support companies as they get ready to implement these new rules, the FCA has also published some practical considerations in PMB 66.
The new standards are aligned with the IFRS S1 (sustainability) and IFRS S2 (climate-related) reporting standards. Sustainable investing groups welcomed the move to IFRS-aligned reporting, but expressed concern about the FCA’s shift away from mandatory climate disclosure.
Overlap of UK SRS 2 and other Reporting
The Government noted that some primary listed companies that could report against UK SRS S2, will also have been making climate-related financial disclosures (CFD) on risks and opportunities in their annual strategic reports since 6 April 2022, under the Companies Act 2006.
PS26/19 will build on and replace the existing Task Force on Climate-related Financial Disclosures-aligned rules for UK-listed issuers, with new requirements based on the two UK SRS – the UK-endorsed versions of the International Sustainability Standards Board (ISSB) Standards (IFRS S1 and S2).
Reminder of UK SRS 1 – Preparation for Comply or Explain Approach
From 1 January 2029, the Government intends full comply-or-explain requirements to take effect for UK SRS S1, requiring companies to either follow the standard or give specific reasons for non-compliance. For 2027 and 2028 financial years, companies can use transitional relief for UK SRS S1 (general sustainability and non-climate matters), meaning they only need to state that these disclosures have not yet been made, without providing detailed explanations.
Location of Sustainability Reporting Disclosures
BIST has stated that all sustainability disclosures within the annual report should be strategic and financially material in nature, no matter where they are located. It's suggested that companies could have flexibility to report climate and other sustainability information anywhere in the strategic report, including either integrated in the strategic report or in a separate section of the strategic report, which refers to this information.
Final decisions on the location of transition plan reporting will be subject to separate processes and will take into consideration the outcomes of consultation on the government’s manifesto commitment.
Streamlined Energy and Carbon Reporting (SECR) and Energy Savings Opportunity Scheme (ESOS)
BIST intends to hold a consultation on the SECR and ESOS later in 2026, to analyse the current landscape for energy and carbon reporting and explore longer-term options to reform SECR. So far, the Government has stated that SECR reporting will need to be included in the first half of the annual report but it will not direct a specific location for such reporting.
Practical Implications
Primary listed companies will need to review their existing climate-related financial disclosures under the Companies Act 2006, as well as the requirements of UK SRS S2, to prepare for reporting of the relevant information from 1 January 2027 onwards. Impacted companies should decide whether they will use their UK SRS S2 disclosures to meet their CFD obligations under the Companies Act 2006, assuming this is permitted by the Government.
Commentators are stating that the introduction of this next layer of sustainability reporting (under UK SRS S1 and S2) should raise the standard for evidenced sustainability reporting which is reliable, traceable and accurate.
Companies can use this opportunity to improve data gathering, sharing and verification, review relevant contracts with suppliers (and others) and consider if new data systems and technical specialist support is needed to further integrate sustainability reporting and decision making into everyday business.
