The UK is moving forward with its ambition to become a “world leader for sustainable finance” with two connected projects designed to increase the availability of “high‑quality, decision‑useful” sustainability‑related information for investors and other users of financial statements and sustainability reports. First, the UK government has officially endorsed new voluntary standards for sustainability reporting. Second, the UK Financial Conduct Authority has launched a public consultation on new mandatory reporting requirements for UK-listed companies.
This post provides an overview of the current UK sustainability reporting landscape and these two key developments.
1. Background and Current Landscape
Since 2022, certain UK companies have had an obligation to make climate‑related disclosures in their annual reports aligned with the Task Force on Climate-related Financial Disclosures (“TCFD”) Recommendations and Recommended Disclosures. This requirement applies to UK registered companies with more than 500 employees and a turnover greater than £500 million, along with limited liability partnerships, listed companies, and public interest entities with 500 employees or more. Specifically, the UK regulations require in‑scope companies to describe their governance and risk‑management processes for climate‑related risks and opportunities, explain actual and potential climate‑related impacts on the company’s strategy, and set out the company’s climate‑related metrics and targets. The company can omit certain disclosures where the information is not necessary for an understanding of the company’s business, but the company must provide a clear and reasonable explanation for the omissions.
In parallel, the UK Financial Conduct Authority (“FCA”) imposes separate climate‑related disclosure requirements on companies with securities listed on a UK market. These UK‑listed companies (regardless of the number of employees) must report climate‑related financial risks and opportunities in line with the TCFD framework, or explain why they do not. Under the current “comply or explain” model, listed companies must either make TCFD‑aligned disclosures on climate governance, strategy and risk management, and climate‑related metrics and targets, or explain why they have not yet done so and indicate when they expect to comply.
The developments discussed below originated in 2024, when the UK government announced its intention to develop new “UK Sustainability Reporting Standards” (“UK SRS”) based on the ISSB’s then‑recent IFRS S1 and S2 standards. The government consulted on the draft UK SRS in 2025 and officially endorsed the final UK SRS in February 2026.
Against this backdrop, the FCA is holding a public consultation on updating the sustainability disclosure requirements for UK‑listed companies to align more closely with the UK SRS and ensure consistency with emerging global standards.
2. The UK SRS
The new UK SRS are closely based on the ISSB’s IFRS S1 and S2 standards with minor amendments to reflect the UK context and regulatory regime. The standards focus on disclosures on a company’s general sustainability‑related governance and strategy, and its climate‑related impact. This is a narrower focus than e.g., the European Sustainability Reporting Standards (“ESRS”).
- UK SRS S1 replicates IFRS S1 and covers “General Requirements for Disclosure of Sustainability-related Financial Information.” It defines the conceptual foundations of sustainability reporting under the UK SRS, including fair presentation, materiality, entity reporting boundaries, etc. It also sets out the core reporting content requirements, including requirements related to the sustainability‑linked governance framework, strategy, risk management processes, and metrics and targets.
- UK SRS S2 replicates IFRS S2 and covers “Climate-related Disclosures.” It requires the reporting company to disclose information about its governance and strategy specific to climate‑related risks and opportunities, as well as its climate-related metrics and targets, including its greenhouse gas emissions and internal carbon prices.
Modelling the new UK standards on the internationally-recognized and increasingly-adopted ISSB standards was a deliberate choice. The UK government wanted to ensure that the final UK SRS would “facilitate the provision of comparable and robust information regarding an entity’s sustainability-related risks and opportunities” and therefore prioritized “international alignment” and maximizing comparability for users, while minimizing unnecessary costs for preparers.
For now, the UK government encourages large companies that are unlisted (and therefore not subject to the FCA’s sustainability disclosure requirements discussed below) to voluntarily adopt UK SRS-aligned sustainability reports. The government’s guidance makes clear that unlisted companies can use their UK SRS‑aligned disclosures to satisfy their obligation to make TCFD‑aligned disclosures, where applicable.
The government also intends to consult later in 2026 on whether to make full UK SRS‑aligned reporting mandatory for large unlisted companies (in the context of a wider “Modernising Corporate Reporting” initiative). This would significantly expand the scope of disclosures required for unlisted companies, and could expand the range of obligated companies to include unlisted UK companies with smaller employee or turnover counts. The government has not set out a timeline for introducing such requirements, but would be required to propose new legislation and secure parliamentary approval.
3. The FCA’s Proposal for Listed Companies
In January 2026, the UK FCA launched a public consultation on new mandatory sustainability reporting standards for several categories of UK‑listed companies (including commercial companies and overseas companies with a secondary UK listing). The FCA has invited stakeholders to give feedback on the proposed rules until March 20, 2026. The FCA’s proposed reporting requirements align with specific sections of the final UK SRS S1 and S2, with some exceptions and transitions to ease the reporting burden. We set out a summary of the companies in scope and the proposed reporting requirements below.
Disclosure requirements for UKLR 6, UKLR 16 and UKLR 22 issuers
Standard‑listed commercial companies, transition issuers, and issuers of non-equity and non-voting equity shares would be required to make the following disclosures in their annual financial reports, which standard‑listed commercial companies must publish at the latest four months after the end of each financial year:
Mandatory Emissions Reporting
From financial years beginning January 1, 2027 onward, companies would be required to disclose their climate‑related governance and strategy processes, and identify their climate‑related risks and opportunities in line with UK SRS S2 (and certain sections of UK SRS S1). They would also be required to disclose key climate‑related metrics and targets, including their Scope 1 and Scope 2 greenhouse gas emissions.
The FCA does not propose to require companies to disclose their Scope 3 emissions from the outset. The FCA received feedback from stakeholders that it remains difficult for listed companies to obtain quality data for Scope 3 disclosures. Thus, the FCA proposes to give companies a one‑year transition period for Scope 3 disclosures i.e., to require Scope 3 disclosures in line with UK SRS S2 for financial years beginning January 1, 2028 onwards. The FCA also proposes to make Scope 3 disclosures a “comply or explain” obligation, rather than a mandatory disclosure.
In light of these transition periods and reliefs, the FCA invites consultation feedback on whether the proposed rules provide sufficient time for in‑scope companies to implement the new approach.
Climate Transition Plans
From financial years beginning January 1, 2027 onward, companies would be required to have a “comply or explain” obligation to state in their annual report whether they have published a climate transition plan and, if so, where it can be found. The FCA is not proposing that companies will be required to have a transition plan, or to have a transition plan that satisfies any form or content requirements. However, the FCA does direct companies to the Transition Plan Taskforce’s (“TPT”) Disclosure Framework (now managed by IFRS) for guidance on how to draft a transition plan.
It is worth noting that the UK government recently consulted on whether to introduce a general requirement for companies to have a transition plan. The government closed the consultation in September 2025 but — at the time of writing — has not yet published a response or indicated its preferred approach following the consultation.
Non‑Climate Sustainability Reporting
Two years later, from financial years beginning January 1, 2029 onward, companies would be required to have a “comply or explain” obligation to make sustainability‑related disclosures against the non‑climate‑related reporting standards set out in UK SRS S1. These standards cover a company’s sustainability‑related governance, strategy and risk management processes, as well as its sustainability‑related metrics and targets.
For example:
- UK SRS S1, para. 30 requires a company to: (a) describe sustainability-related risks and opportunities that could reasonably be expected to affect the company’s financial prospects; (b) specify the time horizons — short, medium or long term — over which the effects of each of those sustainability-related risks and opportunities could reasonably be expected to occur; and (c) explain how the company defines “short term,” “medium term,” and “long term” and how these definitions are linked to the planning horizons used by the company for strategic decision-making.
- UK SRS S1, para. 46 requires a company to disclose, for each sustainability-related risk and opportunity that could reasonably be expected to affect the company’s prospects; (a) metrics required by an applicable UK Sustainability Reporting Standard (for now, only the climate‑related metrics set out in UK SRS S2); and (b) metrics the company has chosen itself to measure and monitor each sustainability‑related risk and opportunity.
Assurance of Sustainability Reporting
The FCA does not propose making assurance mandatory and instead proposes to require companies to include a statement in their annual financial reports confirming whether they have obtained third‑party sustainability assurance over their disclosures relating to UK SRS. Moreover, the FCA does not propose to require companies to provide reasons for choosing not to obtain assurance.
However, where companies disclose that they have obtained assurance, they must disclose:
- The name of the assurance provider.
- Which of the climate and/or sustainability-related financial disclosures have been assured and to what level (e.g., reasonable or limited assurance).
- Which assurance standard(s) were used.
- Where the assurance report can be located (if published) and how to access it (including a hyperlink if appropriate).
Disclosure requirements for UKLR 14 and 15 issuers
For overseas companies with a secondary UK listing and depositary receipt issuers, the FCA proposes a separate disclosure obligation: their annual financial statements must identify any overseas or voluntary climate and sustainability requirements (including climate transition plan requirements) that they are subject to or voluntarily adopt, and indicate where the related disclosures, if any, can be accessed.
Next Steps
The FCA’s consultation is currently open and stakeholders have until March 20, 2026 to submit a response (more information on how to submit a response is available here) Stakeholders can comment on each proposed disclosure requirement, and on whether the proposed rules provide sufficient time for in‑scope companies to implement the new approach.
The FCA aims to review the feedback and adopt new rules via a Policy Statement later this year. The FCA has the authority to implement the new rules without any further parliamentary or executive approvals. The FCA anticipates that the new rules would come into effect for financial years beginning on or after January 1, 2027.
4. Broader Context
Finally, these reporting developments are just one of the government’s recent efforts to evaluate its approach to sustainability regulation. While the UK SRS and FCA proposals focus on general sustainability governance principles and specific disclosures related to climate risks and opportunities, the government also announced a broader review of its approach to managing responsible business conduct in its Trade Strategy 2025. The government indicated that this “RBC Review” will focus on a broader range of sustainability issues, including risks of modern slavery in the global supply chains of businesses operating in the UK. We discuss these developments in more detail here.
If you are interested in preparing a response to the FCA consultation or wish to discuss the implications for your organisation, please reach out to any of the authors of this piece or to your Covington contacts.
This blog post was written with contributions from Lizzie Davy and Roman Kenny-Manning.