UK Sustainability Reporting standards – the FCA’s final rules

The UK SRS is the UK’s implementation of the International Sustainability Standards Board (ISSB) Standards, which is being adopted with minimal changes to maintain international alignment. It consists of UK SRS Standard 1 (S1), covering sustainability-related financial disclosures, and UK SRS Standard 2 (S2), which addresses climate-related requirements, including Scope 3 emissions. UK SRS S2 replaces the Task Force on Climate-related Financial Disclosures (TCFD) framework in its entirety, and the FCA’s final rules (PS16/29) will apply to accounting periods beginning on or after 1 January 2027.  

FCA consults on UK Sustainability Reporting Standards

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A single ‘comply or explain’ approach for UK SRS S1 and S2

The initially proposed rules in CP26/5 applied different reporting approaches across the proposals. The final rules establish a consistent ‘comply or explain’ approach across both standards. 
The FCA’s decision reflects feedback on how the rule can deliver proportionate, decision-useful information for investors. Applying the same ‘comply or explain’ principle across S1, S2 and Scope 3 emissions also creates a more consistent approach, while enabling companies to focus their reporting on the climate and sustainability matters relevant to their circumstances.

While the ‘comply’ option is relatively clear cut, the sector is still developing the practice around the ‘explain’ option. As such, the FCA is also consulting through GC26/6 on a draft technical note setting out what firms should include in their supporting statements. This includes guidance on the level of detail to provide, examples of how issuers can explain their position and further detail on how the ‘comply or explain’ model sits alongside the UK SRS statement of compliance.

Choosing to explain rather than comply will be a 'high bar' and will still require issuers to provide enough information for investors to understand their position, including which disclosure hasn’t been made and the reasons why. Companies will therefore need to consider not only whether they can meet individual disclosure requirements, but how they support and communicate any decision not to do so.

Who will the UK SRS rules apply to?  

The final rules broadly maintain the scope proposed in CP26/5 and cover listed companies already subject to the FCA’s existing TCFD-aligned disclosure requirements. This includes commercial companies, transition companies and certain international companies with UK listings. 
There is a change for international commercial companies with secondary listings and issuers of depositary receipts. The FCA had proposed allowing these companies to signpost to sustainability disclosures produced under their home jurisdiction, but they will now report against UK SRS on a 'comply or explain' basis. These companies may be able to rely on home-jurisdiction reporting where it aligns with UK SRS outcomes.

Closed-ended investment funds, open-ended investment companies and shell companies remain outside the regime, while the FCA has decided not to extend the requirements to issuers of debt and debt-like securities at this stage.  

Transitional reliefs for Scope 3 and UK SRS S1  

Although the rules will apply to accounting periods beginning on or after 1 January 2027, companies will have additional time for some of the disclosures where data may be more difficult to obtain. A one-year transitional relief will apply to Scope 3 greenhouse gas emissions disclosures, and the wider sustainability-related disclosures under UK SRS S1 will benefit from a two-year transitional period. Companies using these reliefs will not have to explain why they have not made the relevant disclosures during the two-year transitional period.

This is particularly relevant to Scope 3, where the information needed may sit outside the organisation with suppliers, customers and other parts of the value chain. UK SRS S1 presents a different challenge by extending reporting beyond climate to sustainability-related risks and opportunities more broadly. For many companies, the uplift required is likely to be greater than for UK SRS S2 because of the wider range of topics covered and the relative immaturity of existing reporting processes, data and controls outside climate.

Businesses should use the transitional periods to map existing data, identify gaps in reporting processes or controls, and engage early with suppliers and other third parties where improvements depend on external information.  

Moving from TCFD to UK SRS  

Companies already reporting against the FCA's TCFD-aligned requirements are unlikely to be starting from a standing start. Many will already have governance arrangements, climate-risk processes and established reporting structures in place. However, UK SRS S2 contains more detailed and prescriptive requirements than the existing framework, meaning further work is likely to be needed to assess and enhance disclosures, data quality, controls and supporting evidence. 
The introduction of UK SRS S1 presents a largely new set of disclosure requirements, extending reporting beyond climate to other sustainability-related risks and opportunities that could affect a company’s prospects. Existing TCFD-aligned processes may provide a foundation, but they are unlikely to cover the full breadth of UK SRS S1. For many organisations, the challenge will be less about building entirely new reporting frameworks and more about extending and enhancing existing processes to meet the broader requirements of UK SRS.

What should businesses consider now?

With the first reports under the new standards due to be published in 2028, businesses should start by assessing their readiness for UK SRS S2 and identifying the climate-related disclosures, data, processes and controls that will need to evolve. Existing TCFD reporting provides a useful foundation, but the scale of the work should not be underestimated. An early assessment will help companies prioritise the most significant gaps and develop a realistic implementation plan. 
As part of this process, businesses should consider whether their existing Scope 3 methodology and arrangements with suppliers and other third parties can support the information required under the new standards. Although transitional relief is available, developing reliable data, governance and reporting processes may take time. Companies may therefore wish to begin strengthening their approach now rather than wait until the relief expires.

Businesses should also begin identifying other sustainability-related risks and opportunities that could be relevant for disclosure under UK SRS S1. This does not mean implementing a full reporting framework immediately. Rather, an initial assessment can help companies determine which topics are likely to be financially material and establish a proportionate roadmap for developing the necessary governance, data, processes and controls over the next two to three years.

Further FCA guidance will help companies refine their approach, but it should not delay preparatory work. For many businesses, moving from TCFD-aligned reporting to UK SRS will require sustained effort across multiple functions. Taking an early, phased approach, beginning with UK SRS S2 and climate-related disclosures while building a longer-term roadmap for S1, will help organisations avoid having to compress significant implementation work into the first reporting cycle.

For further information, contact Irina Velkova or Laura Gardner.