UK: Draft UK Sustainability Reporting Standards published

It is part of a package of measures that also includes the Department of for Business and Trade’s consultation on a proposal for greater regulatory oversight of third-party assurance services for sustainability-related financial disclosures and the Department for Energy Security and Net Zero’s consultation on transition plans. This briefing focuses on the UK SRS consultation only.  We comment separately on the second and third consultations in a separate briefing: UK Next steps for the UK sustainability reporting framework.

What is UK SRS and why is it relevant?

This publication of UK SRS marks a major step towards aligning the UK with the inaugural sustainability disclosure standards published by the International Sustainability Standards Board in June 2023 (ISSB Standards). The ISSB Standards are composed of two sets of reporting standards: (i) General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1), and (ii) Climate-related Disclosures (IFRS S2). The ISSB Standards have been designed to apply as a universal standard countries could implement, on a voluntary basis, by means of national legislation.  You can read more about the ISSB Standards in our earlier briefing: International Sustainability Standards Board issues first global sustainability disclosure standards.

By mirroring ISSB Standards, the UK joins 35 (and growing) jurisdictions that are using, or working towards alignment with, IFRS S1 and S2. The potential benefit of alignment is to reduce the complexity and administrative burden for businesses operating internationally. It should also enhance UK-based businesses’ ability to compete in global markets where ISSB-aligned disclosures are used.

What is the scope of the Consultation? 

The Consultation aims to seek views on:

1. The proposed amendments to IFRS S1 and IFRS S2 which will form draft UK SRS S1 and draft UK SRS S2 respectively.
2. The potential benefits and costs of UK SRS, which will inform UK government decisions on the implementation.
3. Areas in which additional guidance may be helpful for UK businesses when reporting information against UK SRS.

It is important to note that the Consultation does not set out the effective date or the types of UK businesses that will be required to report under UK SRS. This will be addressed by the UK government in legislation implementing UK SRS. The Financial Conduct Authority will consult separately on the incorporation of UK SRS-aligned disclosures into the UK Listing Rules.

How do the ISSB and UK SRS requirements compare?

The Government’s intention from the start has been to implement the ISSB Standards as close as possible to the original standard and limit the amendments in the UK SRS to the necessary minimum. Broadly, the consultation proposes six amendments set out in the table below:

ISSB Standards Requirements	UK SRS – Amendments to ISSB Standards
For first year reporting, businesses are allowed to submit their ISSB disclosures at a different time than their financial statements.	This delay is removed. Businesses will be required to submit their sustainability disclosures at the same time as their financial statements.
For first year reporting, businesses can choose to only disclose information on their climate-related risks and opportunities and defer the disclosure of sustainability-related risks and opportunities for one year. At the same time IFRS S2 includes a reporting relief from Scope 3 emissions during the first reporting year.	UK SRS allows businesses to defer the disclosure of sustainability-related risks and opportunities for an additional year (to make this relaxation available for two years). UK SRS also maintains the reporting relief from Scope 3 emissions during the first reporting year included in IFRS S2. As such the reporting timelines will look as follows: Year 1: Climate-related risks and opportunities except  Scope 3 GHG emissions Year 2: All climate-related risks and opportunities including  Scope 3 GHG emissions Year 3: Climate-related risks and opportunities, Scope 3 GHG emissions, and wider sustainability-related risks and opportunities While certain UK businesses have been required to make climate-related financial disclosures under the UK law from 2022, which positions them well to prepare for UK SRS, they will need to be prepared to comply with much wider obligations if in scope for UK SRS reporting. In this context, it is worth noting that companies in scope of UK SRS will need to report on scope 3 GHG emissions which is not part of mandatory reporting currently in force.
Businesses are required to report on financed emissions using the Global Industry Classification Standard.	This requirement is removed. Businesses may use any appropriate classification system when reporting their financed emissions.
Businesses are required to apply IFRS S1 and S2 from January 1, 2024. Both standards must be applied simultaneously.	The effective date is removed from UK SRS to be considered at a later stage and included in the UK legislation transposing SRS. However, the requirement to apply UK SRS S1 and S2 simultaneously remains.
Businesses are required to consider the applicability of the standards published by the Sustainability Accounting Standards Board (SASB).	This requirement is removed. Businesses are free to decide whether or not to refer to the SASB materials.
Both IFRS S1 and S2 include transition reliefs, with different lengths and objectives. These start when a business adopts the standards, even on a voluntary basis.	UK SRS S1 and S2 reliefs will be tied to the date mandatory reporting begins, not when a business voluntarily adopts the standards.

What happens next?

• Although the Government has not amended the ISSB’s requirements on financed emissions, it has acknowledged the recent ISSB consultation in this area. The UK Government is also seeking further clarification of how these requirements should be applied and it should be noted that there may be further changes in this respect.
• In terms of the timeline, the initial consultation on UK SRS will close on 17 September 2025. Once endorsed, UK SRS will initially be applied on a voluntary basis This is expected, at the earliest, for the start of 2026.
• The Government will carry out additional consultations to determine the entities in scope of mandatory reporting and reporting dates.

Co-authored by Nathan Handoll and Clare Johnston (Knowledge)

Further reading on UK Sustainability Reporting Standards

Update on UK Sustainability Reporting Standards

Next steps for the UK sustainability reporting framework | Eversheds Sutherland