UK Sustainability Reporting Standards – Government Launches Consultation

On 25 June 2025, the UK Government launched its long-awaited consultation on the UK Sustainability Reporting Standards (SRS), part of its package of measures to "modernise the UK's framework for corporate reporting".

The SRS are largely based on IFRS's increasingly internationally recognised IFRS Sustainability Disclosure Standards – IFRS S1 and S2. This builds on the UK's current approach to sustainability reporting, which covers only climate and is aligned with the Taskforce on Climate-Related Financial Disclosures (TCFD). Using the ISSB Standards would bring in enhanced climate reporting (in IFRS S2), as well as reporting on sustainability more broadly beyond climate (in IFRS S1).

Following the technical review by TAC at the end of last year, the UK Government proposes to incorporate the ISSB standards largely unamended, save for a few minor proposed changes.

Proposed amendments

The consultation seeks feedback on the following limited technical amendments, aiming to ease the transition of the regime into domestic law and make this more usable for reporting entities, rather than significantly changing the substance of the reporting requirements.

1. Amendment 1 – Removing the first-year reporting delay: The international standard IFRS S1 offers a transition relief allowing companies' first sustainability report to come later than their financial statements. The UK's draft suggests removing this transitional relief, as delaying sustainability data undermines its 'connectivity' with financial reports.
2. Amendment 2 – Extending the 'climate-first' approach: IFRS S1 currently lets companies focus on climate-related risks in their first year of reporting, deferring other sustainability topics to year two. The UK plans to stretch this climate-only period to two years.
3. Amendment 3 – Dropping the GICS classification: One technical but costly requirement in IFRS S2 is that banks and investors calculating financed emissions (the carbon footprint of their loans and investments) must categorize counterparties using a specific industry code – the six-digit Global Industry Classification Standard (GICS). GICS is a proprietary system, meaning companies would need to pay for access to these codes. TAC suggested removing the GICS mandate, allowing firms to use any reasonable industry classification they already employ.
4. Amendment 4 – Removing explicit "effective dates": IFRS S1 and S2 formally state an effective date (1 January 2024) from which they apply, while permitting earlier use. Since the UK will decide later when (and for whom) sustainability reporting becomes mandatory, the draft UK standards propose to omit any specific start date. Instead, the section is relabelled 'Initial application' with a note that the effective date will be set through future UK law or FCA rules.
5. Amendment 5 – Softening the SASB reference: IFRS S1 and S2 requires that companies 'shall refer to and consider' guidance from the Sustainability Accounting Standards Board (SASB) – a library of industry-specific sustainability metrics developed in US. SASB is not as commonly used by UK and other international investors, who find the standards out of date and limited to a US context. There is also a concern that auditors might demand proof that companies have considered every SASB metric. The UK Government proposes that this requirement therefore be voluntary ('may') rather than mandatory ('shall').
6. Amendment 6 – Clarifying transition reliefs for early adopters: IFRS S1 and S2 include various transition reliefs (e.g. the climate-first scheme and Scope 3 deferral) meant to ease implementation. To avoid discouraging early voluntary adopters, the UK Government has recommended that relief periods start from the time of the legal mandate (rather than from the time of early voluntary reporting). This means that voluntary early adopters will benefit from relief prior to the regime becoming mandatory, and for the transitional period following mandatory implementation.

Other points of reflection

The consultation also highlights some other considerations for which amendments were not suggested, but on which views are being sought:

• Financed emissions: The UK Government noted that TAC extensively considered the financed emissions requirement, and in particular the concerns by financial institutions that there may not be enough time to calculate financed emissions using the final balance sheet before they are required to publish their sustainability reports (which are published alongside financial statements). The Government supported TAC's request that IFRS provide clarifications on the proposed methodology for calculating financed emissions.
• Carbon credits: The UK Government noted the requirements in ISSB S2 to provide various information in relation to carbon credits and is seeking views from the market on what information is most decision useful. This comes alongside the UK government consultation on the implementation of its principles for voluntary carbon and nature market integrity.

Next steps

The Government stated that investor groups have strongly supported the use of ISSB Standards in the UK and that the development of the SRS will promote 'high-quality, comparable information across reporting entities and across jurisdictions'.

The current consultation is therefore expected to be constructive towards furthering this goal, whilst also looking to get a better sense of implementation costs for users, and any changes which can enhance the decision-usefulness of the standards.

The consultation closes on 17 September 2025.

Following this, the UK Government will issue its final conclusions, and hand the file to the FCA, who will in turn consult on whether these should replace the TCFD for listed companies (with the aim of applying these for Financial Years starting on or after 1 January 2026, for reporting in 2027).