As global efforts to combat climate change and promote sustainable development intensify, the need for transparent, consistent, and comparable sustainability reporting has never been greater. In the United Kingdom, the government is responding to this demand by introducing the UK Sustainability Reporting Standards (UK SRS)—a framework intended to shape the future of environmental, social, and governance (ESG) disclosures. These standards are designed to provide investors, stakeholders, and regulators with reliable information on how companies impact and are impacted by sustainability-related risks and opportunities.

What Are the UK Sustainability Reporting Standards?

The UK SRS are a set of disclosure requirements tailored for companies operating in the UK, based on the International Financial Reporting Standards (UK SRS S1) Sustainability Disclosure Standards developed by the International Sustainability Standards Board (ISSB). The UK SRS will serve as the domestic equivalent of these global standards, adjusted for the UK regulatory environment.

The initiative is part of the UK government’s broader strategy to make the UK a global leader in green finance and sustainable investment. The Department for Business and Trade (DBT) and Financial Reporting Council (FRC) are central to the development and endorsement of these standards, ensuring alignment with international norms while catering to domestic policy needs.

Timeline and Development

June 2023: The UK government announced its intention to adopt the ISSB’s first two standards—UK SRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and UK SRS S2 (Climate-related Disclosures).
Q2 2024: The UK Sustainability Disclosure Technical Advisory Committee (TAC) began analysing these standards for potential endorsement.
July 2024: The FRC launched a public consultation to determine how best to implement UK SRS with local adjustments.
Expected Implementation: The UK SRS are anticipated to be finalised by the end of 2024, with mandatory reporting beginning in 2025 or 2026, initially targeting publicly listed and large private companies.

Key Components of the UK SRS

The UK SRS closely mirror UK SRS S1 and S2, but with country-specific enhancements. The standards are built on four pillars, derived from the Task Force on Climate-related Financial Disclosures (TCFD) framework:

Governance: Companies must disclose governance structures overseeing sustainability risks and opportunities.
Strategy: They must report on how these risks and opportunities affect their business models, value chains, and financial planning.
Risk Management: Disclosure should cover how companies identify, assess, and manage sustainability-related risks.
Metrics and Targets: Quantitative and qualitative metrics used to assess performance against sustainability goals must be reported.

UK SRS S1 (General Requirements)

Requires disclosures across a broad range of sustainability issues.
Emphasises materiality, ensuring companies report only on issues relevant to their financial performance and investor decision-making.

UK SRS S2 (Climate-related Disclosures)

Focuses specifically on climate risks, emissions, and transition strategies.
Requires Scope 1, 2, and—where feasible—Scope 3 greenhouse gas emissions reporting.

Who Will Be Affected?

Initially, the standards will apply to:

UK-listed companies (premium and standard segments)
Large private companies (over 500 employees and £500 million turnover)

Eventually, the scope may broaden to include:

Public interest entities
Medium-sized enterprises (SMEs) through simplified reporting regimes

Private companies may also voluntarily adopt the standards to meet investor and stakeholder expectations, improve ESG ratings, or prepare for future regulation.

Benefits of the UK SRS

The UK SRS aim to bring several strategic benefits:

Improved comparability across firms, industries, and jurisdictions.
Better decision-making for investors through reliable sustainability data.
Enhanced corporate accountability and stakeholder trust.
Alignment with global ESG standards, particularly for companies with international operations or supply chains.
Support for the UK’s Net Zero by 2050 commitment and green finance strategy.

Conclusion

The UK Sustainability Reporting Standards represent a landmark step toward embedding sustainability into corporate accountability. By aligning with international standards while preserving UK-specific priorities, the UK SRS promises to elevate the quality of ESG disclosures, foster investor confidence, and support the transition to a more sustainable economy. As businesses prepare for implementation, staying informed and proactively enhancing sustainability practices will be key to compliance and long-term success.