We're conscious of the alphabet soup of sustainability reporting regulations and the need to keep track of the ongoing UK changes. We have summarised below the key information relating to environmental and sustainability reporting elements of the latest consultation on Modernising Corporate Reporting, which was released on 7 September by the Department of Business, Innovation, Science and Trade (BIST).
UN Sustainability Reporting Standards – for Listed Companies
The Government published the UK Sustainability Reporting Standards (UK SRS 1 and UK SRS 2) in February 2026, which can be used voluntarily at the moment. BIST has reconfirmed that final listing rules are expected to be published in autumn 2026 – ahead of quoted companies being required to report in line with the UK SRS 2 from 1 January 2027.
Overlap of UK SRS 2 and other Reporting
The Government noted that some primary listed companies that will need to 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.
In the case of dual reporting obligations, BIST has stated that companies may choose to use their UK SRS S2 disclosures to meet their CFD obligations using section 414CB(6) of the Companies Act 2006, which allows companies to report this information using a "national, EU-based or international reporting framework" rather than duplicating the information. Subject to the outcome of the FCA’s consultation, it's expected that UK SRS S2 will be confirmed as a national reporting framework for these purposes.
Reminder of UK SRS 1 – Preparation for Comply or Explain Approach
From 1 January 2029, the Government intends full comply-or-explain requirements 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.
