IROs need to ensure that their companies are fully briefed on the new sustainability disclosure standards, which may be voluntary at first, moving to mandatory later.
Three major consultations, launched in June 2025, will form the key components of the government’s programme to make the UK ‘the sustainable finance capital of the world’. At the heart of this intent is the Exposure draft UK Sustainability Reporting Standards UK SRS S1 and UK SRS S2, which is based on the international IFRS standards but has been adapted for a UK context.
The government’s strategic direction is clear: to encourage high-quality, comparable sustainability disclosures that strengthen investor confidence and help support long-term capital flow. While this ambition is bold, a phased approach to adopting these requirements should allow companies to find their footing – making now the right moment to test the waters before the tide of regulation rises. The first phase consists of the following three consultations.
1. Sustainability reporting standards: what’s in scope?
The first government consultation concerns UK SRS S1 and S2. These will mirror the structure of IFRS S1 and S2, which require the disclosure of material sustainability-related risks and opportunities. These disclosures must be made through the company’s annual report, ensuring connectivity with both the financial statements and existing corporate reporting frameworks.These standards will initially be available for voluntary use, with mandatory adoption likely to be phased in through the Companies Act and FCA listing rules. A regulatory roadmap is promised that will outline the timing, scope and expectations. Six UK-specific amendments are proposed, including:
- Removing transition relief to prevent compromising the principle of ‘connectivity’ with the financial statements.
- Extending ‘climate-first’ relief to a two-year period, allowing companies to familiarise themselves before going beyond climate disclosure.
- Removing mandatory GICS code use to reduce the reporting burden and increase connectivity.
- Removing fixed ‘effective dates’ to allow regulatory flexibility.
- Making referencing SASB standards optional, reflecting their lower UK relevance.
- Clarifying that transition reliefs apply only once mandatory, to avoid penalising early voluntary reporters.
“A phased approach to adopting these requirements should allow companies to find their footing”
These changes aim to balance global consistency with local relevance, without capsizing existing reporting systems.
2. Transition plans: from disclosure to implementation
Alongside the SRS, the government is in consultation about whether large UK companies should be required to publish a 1.5°C-aligned climate transition plan.
The consultations will explore whether transition plans should also cover climate adaptation and biodiversity, and if firms should be held legally accountable for delivery, not just for disclosure.
3. An assurance regime on the horizon
The third consultation seeks views on whether the Audit, Reporting and Governance Authority (ARGA) should oversee the creation of a new voluntary registration regime for the assurers of sustainability disclosures. The goal is to develop a trusted assurance market, potentially paving the way for mandatory assurance in the future.
CSRD Omnibus update
In April 2025, the EU formally adopted the ‘stop the clock’ proposal, which is part of the EU’s Omnibus package. This proposal gives companies in Waves Two and Three until 2028 to comply with CSRD application requirements.
On June 12th, the European Parliament’s rapporteur presented his draft report on proposed CSRD amendments, reflecting his goal to ‘cut costs for companies and reduce burdens’. Key changes include:
- Optional climate transition plan reporting. This is required only if a transition plan already exists.
- Trade secrets are generally exempt from sustainability reporting requirements.
- Raising the applicability threshold to 3,000 employees and €450m in net turnover.
- ‘Value chain’ has been replaced by ‘chain of activities’ terminology. Companies may report on a ‘best efforts’ basis when full value-chain information is not available.
The draft will form the basis for the European Parliament’s negotiations towards its final position, which is expected in October, to be followed later by the final policy package.
What IR teams should do now
Although adoption is still voluntary, investor expectations are shifting fast. IR teams shouldn’t delay – they should collaborate early with sustainability colleagues and begin assessing their alignment with UK SRS requirements and the TPT framework to help identify gaps in reporting, build internal readiness and understand where forward-looking disclosures may carry liability risk until safe harbours are in place.
Regarding CSRD, it is worth waiting for updated guidance before conducting a full gap analysis. Companies can still get ahead by starting activities that add value, such as the double materiality assessment, laying important groundwork regardless of the proposed changes and scope.
With over 140 pages of consultation material now available and more to come, one thing’s clear: the tide is turning. Now’s the time to start preparing.
“Companies can still get ahead by starting activities that add value, such as the double materiality assessment”
For further details, please don’t hesitate to reach out to our Senior Reporting Consultant, Paris Mudan.
