What do businesses need to know, and how can they prepare?
Introduction
On June 25, 2025, the UK government initiated a consultation (the Consultation) on the exposure draft of the UK Sustainability Reporting Standards (the UK SRS). This marks a significant step in the process of incorporating the International Sustainability Standards Board (ISSB)'s International Financial Reporting Standards (IFRS) S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures) into UK law.
While the Consultation proposes certain amendments to IFRS S1 and S2, these changes are primarily technical and do not fundamentally alter the core requirements of the IFRS S1 and S2. The intention of the Consultation is instead to ensure that the IFRS S1 and S2 are appropriately tailored for the UK context without deviating from the global baseline established by the ISSB.
If the UK SRS are adopted in their current form, UK companies should anticipate a substantial increase in their sustainability reporting requirements. The UK SRS will be considerably more comprehensive than the existing requirements, which are based on the Task Force on Climate-Related Financial Disclosures (TCFD) framework, and will require companies to provide more detailed, consistent, and comparable information on a broader range of sustainability-related risks and opportunities going beyond climate to include other sustainability factors.
What are the ISSB standards?
In 2021, the IFRS created the ISSB to produce a global baseline on sustainability reporting, intended to help investors consider sustainability matters when making investment decisions. We discussed the details of the ISSB and its sustainability disclosure standards in previous articles, which you can read here and here.
Organizations have the option to voluntarily apply the IFRS S1 and S2 standards, or these standards may be adopted by policymakers as the basis for their sustainability disclosure frameworks.
Which companies could be affected?
The Consultation notes that the government's focus, when designing the regulatory regime, is on "economically significant entities where there is likely to be strong public and investor interest". As such, we expect the UK SRS to be particularly relevant to UK listed companies. The Financial Conduct Authority (FCA) is expected to launch a consultation in the third quarter of 2025 regarding proposals to require listed companies to adopt the UK SRS as part of the FCA's listing rules.
There is, however, a possibility that private UK companies may also be required to report under the UK SRS in the future. The Consultation specifically seeks feedback on the merits of private companies and LLPs reporting against the UK SRS, which will help inform future government decisions about reporting scope. The feedback sought includes not only investor feedback on the degree of information gaps that exist for private companies, but also private companies' feedback about their level of readiness to use the UK SRS and report on themes beyond climate, such as nature and biopersity.
Private companies in the UK should therefore pay close attention and be prepared to participate in the ongoing consultation process.
What about timing?
The Consultation will remain open for feedback until September 17, 2025.
Following the closure of the Consultation, the UK government will review the responses and make a final determination on whether to endorse the draft versions of UK SRS S1 and UK SRS S2 for use within the UK. Should the government proceed with endorsement, there will be a period during which organizations may choose to adopt the UK SRS on a voluntary basis.
The government will separately assess whether to introduce legal or regulatory requirements for mandatory reporting under the UK SRS (noting the wider context of proposed legislative changes that may arise from the government's review of non-financial reporting).1 As noted above, the FCA is also expected to consult on proposals requiring the use of the UK SRS by listed companies within the listing rules. The government is working closely with the FCA and FRC to ensure requirements are implemented in a coordinated manner.
What amendments are the UK government proposing?
The UK government has accepted a total of four proposed amendments from the UK Sustainability Disclosure Technical Advisory Committee (TAC) and two amendments from the UK Sustainability Disclosure Policy and Implementation Committee (PIC). Both the TAC and PIC played key roles in conducting a technical assessment of IFRS S1 and S2.
We briefly cover the six amendments below.
Amendment 1: Removal of first year transition relief
The IFRS S1 standard includes a transition relief provision, allowing reporting entities, in their first year of reporting, to publish their sustainability disclosures at a later date than their financial statements. This measure was intended to provide organizations with additional time to prepare and align their sustainability reporting processes during the initial implementation phase.
However, the TAC expressed concerns that this delayed disclosure undermines the fundamental principle of connectivity between sustainability disclosures, financial statements, and other narrative reporting. In light of these concerns, the TAC has proposed the removal of the transition relief from IFRS S1.
The government intends to publish the final versions of the UK SRS in autumn 2025.
If the proposed change is adopted, reporting entities will be required to publish their sustainability disclosures concurrently with their financial statements, even in the first year of reporting. This change would eliminate the additional preparation time previously afforded by the transition relief. Organizations should assess their current reporting processes and readiness to ensure they can meet the simultaneous reporting requirement.
Amendment 2: Extension of subject matter transition reliefs
IFRS S1 includes a further transition relief period designed to help organizations adapt to new sustainability reporting requirements. Initially, entities are required to report only on climate-related matters in their first year of applying IFRS S1. In the second year and beyond, the scope of reporting expands to cover a broader range of sustainability-related topics. This phased approach is intended to give organizations time to become familiar with the language, concepts, and processes involved in sustainability reporting, as well as to better understand and map their value chains in preparation for comprehensive disclosure.
The TAC has recommended extending this transition relief by an additional year. If this recommendation is adopted, organizations would be able to focus solely on climate-related disclosures for the first two years, with broader sustainability reporting requirements coming into effect in the third year.
For companies, the proposed extension of the transition relief allows for a more manageable transition to full sustainability reporting. Organizations will have more time to build internal capacity, develop robust data collection systems, and train staff on the new requirements.
Amendment 3: Removal of requirement to use the Global Industry Classification Standard (GICS)
IFRS S2 includes requirements on financed emissions, defined as the "portion of gross greenhouse gas emissions of an investee or counterparty attributed to the loans and investments made by an entity to the investee or counterparty".2 This includes the requirement to use the latest version of the GICS six-digit industry-level code that is available at the time of reporting. However, the GICS code is produced commercially, so entities must pay to access it.
The TAC has recommended that entities should be able to use any appropriate classification standard, be that GICS or an alternative standard that they use within existing reporting practices.
For firms, these amendments (if accepted) will mean that they can leverage existing, appropriate classification systems that are already embedded in their reporting processes, potentially reducing the need for costly transitions to new standards. However, what will be considered an "appropriate" alternative classification standard has yet to be decided.
Amendment 4: Removal of the effective date clause
Currently, both the IFRS S1 and S2 include a statement on the effective date as follows: "An entity shall apply this Standard for annual reporting periods beginning on or after January 1, 2024. Earlier application is permitted."3 The IFRS S1 and S2 also include a requirement to apply both IFRS S1 and S2 at the same time.
The TAC and the PIC have proposed the removal of the 'effective date' clause in both IFRS S1 and S2. Instead, the timetable for applying the standards should depend on subsequent rules or regulations put in place by the government or the FCA.4
The Consultation also notes that, in addition to the FCA's anticipated consultations, the government plans to consult in due course on the implementation of any requirements against the UK SRS. This consultation will include information on the timings of reporting against the UK SRS, and when the first year of reporting is likely to begin.
This means that the UK SRS implementation deadline will be subject to subsequent regulations introduced by the government or FCA rules. This would provide companies with more time to familiarize themselves with the standards, and to prepare for their implementation.
Amendment 5: Changing references to SASB standards
The IFRS S1 and S2 require entities to "refer to and consider the applicability of" the SASB standards and related guidance. The SASB standards, originally developed in the United States for voluntary use in SEC filings, are now under the stewardship of the ISSB. The ISSB is actively working to internationalize and enhance these standards, with a phased update process underway and a public consultation on revisions for certain industries expected soon.
Both the TAC and the PIC concluded that the current language does not impose a mandatory requirement to use the SASB standards. Instead, it provides organizations with the flexibility to determine whether and how the SASB standards are relevant to their specific circumstances. Accordingly, the TAC did not recommend any changes to this approach.
However, the PIC identified a practical issue: the phrase "shall refer to and consider the applicability of..." could be interpreted by assurance providers as requiring organizations to document and provide evidence of their consideration of the SASB standards. This could inadvertently create a compliance burden, requiring additional documentation and potentially increasing the cost and complexity of assurance engagements. The PIC also observed that the development of the SASB materials had not undergone the same level of due process as the ISSB standards, and that stakeholders had mixed feedback about such standards.
To address this concern, the UK government has proposed amending the language in the UK SRS S1 and S2 from "shall refer to and consider the applicability of..." to "may refer to and consider the applicability of..." (our emphasis). This change is designed to make it clear that referencing the SASB standards is optional, not mandatory, as well as to minimize the risk of unnecessary evidentiary requirements during assurance processes.
Nevertheless, the government intends to revisit the language after the ISSB completes its project to enhance and internationalize the SASB standards.
For firms, this amendment signals a more flexible approach to sustainability reporting under the IFRS S1 and S2 frameworks. The proposed amendment, if accepted, means that entities would not be required to use or provide evidence of having considered the SASB standards unless they find them relevant to their business. This, in turn, reduces the immediate compliance burden and allows organizations to tailor their sustainability disclosures to what is most meaningful for their operations and stakeholders.
However, companies should remain attentive to ongoing developments. The ISSB's project to internationalize and enhance the SASB standards may lead to further changes in reporting expectations.
Amendment 6: Changing treatment of transition reliefs
IFRS S1 and S2 provide transition reliefs to ease the implementation of new sustainability reporting requirements. These reliefs differ in duration and purpose, aiming to support entities as they adapt to the new standards.
The PIC has reviewed these provisions and determined that the reliefs should be clearly available for any entity subject to mandatory reporting. At the same time, the PIC emphasized the importance of not disadvantaging entities that choose to adopt the standards voluntarily before they become mandatory.
To reflect this approach, the draft UK SRS S1 and S2 include proposed amendments throughout the text. For example, paragraph C4 in the UK SRS S2 has been revised. Previously, it stated: "In the first annual reporting period in which an entity applies this Standard, the entity is permitted to use one or both of these reliefs...". The amended version now reads: "In the first annual reporting period in which an entity is required to use this Standard under UK law or regulations, the entity is permitted to use one or both of these reliefs..." (our emphasis). This change explicitly ties the availability of transition reliefs to the commencement of mandatory reporting, rather than voluntary early adoption.
For clients, these proposed amendments, if accepted, provide greater clarity and certainty regarding the use of transition reliefs, and are likely to encourage greater voluntary uptake of the UK SRS.
Additional discussions
The TAC has also considered the concept of financed emissions at length. While this has not resulted in a recommended amendment, the TAC concluded that the ISSB should clarify the application of its financed emission requirements. In particular, it recommended to recognize that entities can estimate their financed emissions using the most recent available loans and investments information from a previous period (due to the short time period between the finalization of balance sheet figures for the current period and the publication of the annual report, and the length of time it would take to estimate financed emissions based on the current period). This would reflect the current market practice of many entities.
Separately, the PIC also discussed the IFRS S2 requirement for reporting entities to disclose their planned use of carbon credits to meet any net greenhouse gas (GHG) emissions reduction target.5 Although it did not recommend any amendments in respect of carbon credits, the Consultation invites comments on this topic. We also note that, separately, the UK government's consultation on raising integrity of voluntary carbon and nature markets closed on July 10, 2025.6
For clients, these developments signal a continued emphasis on transparency and alignment with prevailing market practices in sustainability reporting. Entities can take comfort in knowing that, if accepted, the amendments would allow for the use of the most recent loans and investments data for estimating financed emissions. Further, these developments indicate that the regulatory landscape around carbon credit disclosures is still taking shape.
What can companies do to prepare?
Although the UK SRS has not yet been finalized, the government's limited proposed amendments to IFRS S1 and S2 indicate that the UK is committed at this stage to onboarding ISSB reporting requirements. Listed companies and economically significant entities in particular should consider responding to the Consultation in order to shape the emerging regime.
Companies should consider conducting a gaps analysis of their current sustainability reporting practices against the requirements of the UK SRS. TCFD-aligned requirements for climate-related reporting are already in force via the FCA's listing rules for listed companies and via the Companies Act 2006 for the largest private companies and limited liability companies. The ISSB reporting requirements are significantly more extensive than those under the TCFD and now is an opportunity for companies to critically assess the differences and additionalities in the exposure drafts, factoring in the data they are already collecting and reporting on and experience they may have already gained in preparing for TCFD-aligned and ISSB-aligned reports in other jurisdictions.
At the same time, there remains a degree of uncertainty around the parameters of the UK SRS, including when reporting will be required, what transitional reliefs will be available, and what form the proposed amendments will take in the final version of the UK SRS.
We encourage companies to monitor ongoing developments to ensure they can stay on the front foot with ample time to prepare for any changing obligations. For further information, please see our other published article, Sustainability reconfiguration in the EU and the UK—recent highlights.
Footnotes
1. In a further phase after this Consultation, the UK government intends to launch a consultation focusing on streamlining the UK's current non-financial reporting framework under the Companies Act 2006. This will focus on updating the structure of the Annual Report so that it can integrate sustainability related reporting requirements, while also removing redundant and duplicative requirements that have built up over the years.
2. IFRS S2, Appendix A.
3. Paragraph E1 of IFRS S1, and paragraph C1 of IFRS S2.
4. At paragraph E1 in UK SRS S1 and paragraph C1 in UK SRS 2, this clarifying sentence reads: "Any effective date for application of this Standard will be set out in the relevant legislation or regulation."
5. IFRS S2, paragraph 36(e).
6. UK Government, April 17 2025, Open consultation: Voluntary carbon and nature markets: raising integrity.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
