UK Sustainability Reporting Standards

The UK Sustainability Reporting Standards (UK SRS) are set to transform corporate reporting in the UK, impacting both public and private companies. As a CFO of a UK private company, understanding the timeline, key provisions, UK-specific carve-outs, and practical steps to compliance is essential.

While integrating sustainability data and meeting compliance pressures pose challenges, early adoption offers competitive advantages and positions companies as leaders in sustainable practices. This article provides a roadmap to help you navigate these new requirements.

UK Sustainability Reporting Standards – expected timeline and implementation

The UK government is in the process of adopting the International Sustainability Standards Board (ISSB) IFRS S1 (general sustainability disclosures) and IFRS S2 (climate-related disclosures), with modifications tailored for UK businesses. These standards deliver a global baseline of sustainability-related disclosure standards to increase comparability and reduce complexity, making it easier for companies to align globally. The key milestones are currently expected to be:

• Spring 2025 – The UK SRS standards are expected to be published following public consultation.
• Mid-to-late 2025 – Final endorsement of the UK SRS by the UK government and regulators.
• 2026 reporting periods – The standards will apply no earlier than accounting periods beginning on or after 1 January 2026.

Private companies should begin preparations now, particularly those with significant supply chain or financing relationships with publicly reporting entities. They are likely to face indirect compliance pressure from investors, lenders, and large customers to align with sustainability standards in order to maintain business relationships.

Key expected provisions of UK Sustainability Reporting Standards

The UK SRS is expected to be broadly aligned with IFRS S1 and S2, requiring companies to disclose:

1. Material sustainability risks and opportunities – Information about how sustainability issues affect financial performance and strategy, tailored to meet the needs of primary users (investors, lenders, creditors) when making resource allocation decisions.
2. Climate-related disclosures – Aligned with IFRS S2, covering governance, risk management, metrics, and transition planning. Companies are required to disclose information about climate-related risks and opportunities, including physical and transition risks.
3. Industry-specific metrics – Sector-specific guidance based on the SASB (Sustainability Accounting Standards Board) framework. This tailored approach helps companies provide decision-useful information that is material to primary users.
4. Integration into financial reporting – Sustainability disclosures are expected to be incorporated within annual financial reports, specifically within the strategic report.

These requirements will apply to companies that fall under the UK government’s defined reporting thresholds.

Key impacts on UK private companies

While public companies face mandatory compliance, private companies should assess their exposure based on the following factors:

• Investor and lender expectations – Private equity firms and lenders increasingly require sustainability disclosures aligned with ISSB standards due to growing regulatory and market pressures.
• Supply chain pressure – Large customers may require their private suppliers to align with sustainability reporting frameworks to ensure regulatory compliance and manage their ESG risks.
• Competitive advantage – Companies that proactively align with sustainability standards may gain an edge in securing contracts and financing.
• Operational and data challenges – CFOs will need to integrate sustainability data collection into financial reporting processes.

UK-specific expected carve-outs and modifications

The UK government has proposed several adaptations to IFRS S1 and S2 to make compliance more manageable:

1. Extended ‘climate-first’ reporting relief – Companies will have up to two years to build robust climate reporting processes before addressing the broader range of sustainability issues.
2. Alternative industry classification for financed emissions – Companies in the financial sector can use alternative industry classification systems instead of GICS for Scope 3 reporting.
3. Immediate sustainability disclosure alignment – The UK version removes the transition relief that allowed a delay between financial and sustainability reporting in the first year.

These expected carve-outs aim to balance global alignment with practical implementation challenges for UK companies.

Action plan for CFOs: Preparing for UK SRS compliance

2024: Awareness and initial planning

• Stay informed about UK SRS developments through government and industry publications, and through the sustainability team at Saffery,
• Conduct a gap analysis to compare current reporting practices against IFRS S1 and S2, and
• Engage with investors, lenders, and major customers to understand their expectations.

2025: Data collection and internal alignment

• Establish an internal sustainability reporting team and governance structure,
• Identify key sustainability metrics and begin voluntary reporting where possible,
• Invest in systems and tools to collect and validate sustainability data, and
• Engage with auditors to assess assurance requirements.

2026: First expected reporting year

• Implement full UK SRS disclosures in annual financial reports (or actively adopt relevant deferrals where available, and if commercially appropriate),
• Ensure alignment with climate-first reporting for the first two years,
• Establish continuous monitoring and improvement processes, and
• Prepare for the expected expansion of disclosures beyond climate-related information.

Conclusion

While UK SRS compliance may not be mandatory for all private companies, the broader market trends indicate that sustainability reporting will become an integral part of financial decision-making. CFOs who take a proactive approach will enhance transparency, strengthen investor confidence, and ensure long-term competitiveness. Early adoption of UK SRS can provide a competitive edge by demonstrating commitment to sustainability and meeting the expectations of key stakeholders. CFOs should start preparing today to stay ahead of regulatory and market expectations.

We advise a range of businesses on their sustainability requirements and if you’d like to discuss any of the topics raised in this article, please get in touch with Richard Collis.