Understanding the UK Sustainability Reporting Standards – What do UK SRS 1 & SRS 2 mean for UK companies?
Although currently voluntary, early alignment with UK SRS is strongly recommended.
On 25 February 2026, the UK government released the finalised UK Sustainability Reporting Standards (UK SRS).
Based on the sustainability standards developed by the International Financial Reporting Standards (IFRS) Foundation, these standards provide a common, investor-focused baseline for ESG reporting in the UK – replacing the current patchwork of frameworks and expanding on existing obligations under the Companies Act and FCA rules.
Voluntary use and next steps
The UK SRS establishes a long term, globally aligned framework to enhance consistency, comparability, and decision usefulness of sustainability-related financial information.
The standards will help organisations integrate sustainability and financial reporting, improve transparency for stakeholders, and prepare for the future direction of regulatory reporting expectations.
Although adoption is voluntary at this stage, the UK government has endorsed early uptake while regulators consult on future mandatory application.
The FCA consultation on listing rule amendments is open until 20 March 2026, and mandatory reporting may apply to listed – and potentially non-listed – companies for reporting periods beginning 1 January 2027.
The move is designed to:
- Improve consistency and comparability of sustainability disclosures.
- Provide investors with clearer access to material sustainability-related financial information.
- Simplify reporting by aligning UK standards with international expectations.
- Shift from retrospective environmental metrics to forward‑looking assessments of financial impacts from sustainability risks and opportunities.
About the UK SRS
UK SRS S1 – General requirements for disclosure of sustainability-related financial information
UK SRS S1 sets out the overarching framework for reporting sustainability matters, requiring companies to:
- Identify sustainability-related risks and opportunities that could reasonably affect their financial position, performance, or cash flows over short, medium, and long term.
- Disclose material sustainability topics alongside related governance, strategy, risk management, and metrics and targets.
- Demonstrate how sustainability considerations are integrated into business processes and decision-making.
UK SRS S2 – Climate-related disclosures
S2 focuses specifically on climate-related financial risk and opportunity disclosures. Key expectations include:
- Identification and assessment of climate-related risks and opportunities.
- Scenario analysis to assess resilience under different climate pathways.
- Greenhouse gas (GHG) emissions reporting across Scopes 1, 2, and, eventually, Scope 3 if material.
- Linkages to governance, strategy, risk management and metrics with climate relevance.
What does this mean for UK companies?
While adoption is currently voluntary, early alignment is strongly recommended. Businesses already reporting under TCFD, ISSB, or CSRD will find they can leverage existing processes, data structures, and controls to meet UK SRS requirements.
However, companies should begin preparing now to ensure readiness ahead of potential mandatory adoption. Here is how:
1. Identify reporting and process gaps.
Conduct a gap analysis comparing current disclosure practices to UK SRS requirements. This includes governance, metrics, internal controls, and assurance preparedness.
2. Conduct a Materiality Assessment.
Determine which sustainability issues (across environmental, social and governance) are material from a financial standpoint.
3. Build or enhance data capabilities.
High‑quality, decision‑useful disclosures require robust data. Scope 3 emissions, in particular, demand strong data governance and cross‑functional coordination across the value chain.
4. Integrate sustainability across the business.
UK SRS expects ESG information to be connected to financial reporting, not siloed in stand-alone reporting. Strengthen collaboration between sustainability, finance, strategy, and risk teams to meet integrated disclosure requirements.
How can Inspired help?
The introduction of the UK SRS marks a significant shift in corporate ESG reporting in the UK, moving from disparate frameworks to a consistent, investor-relevant, and financially focused approach.
Companies that start preparing now will be better-positioned for regulatory compliance, investor engagement, and sustainable value creation.
If you would like to discuss what the new standards mean for your organisation or need support preparing for adoption, please email us at [email protected]
