Getting ahead of the UK's new Sustainability Reporting Standards

By Dale Tromans, 2 November 2026

The Financial Conduct Authority (FCA) has published its final rules (PS26/19) replacing the climate disclosure regime UK-listed companies have followed since 2021. For accounting periods beginning on or after 1 January 2027, listed issuers will report against the UK Sustainability Reporting Standards (UK SRS), the UK's version of the International Financial Reporting Standards (IFRS) developed by the International Sustainability Standards Board (ISSB).

The headline change from the consultation is that everything, including core climate disclosures (UK SRS S2), now applies on a "comply or explain" basis rather than a mandatory one. However, that headline is also where companies could misinterpret regulatory expectations.

Where companies could get it wrong

The clearest misinterpretation is treating "comply or explain" as optional. An explanation must state which requirements have not been met, why, and what the company is doing to meet them in future. The FCA is clear that a well-reasoned explanation helps investors, so a short one will also be read as a signal. Where climate risk already features among a company's principal risks, an "explain" response will need to align with the rest of the annual report.

A second issue is mistaking transitional reliefs for exemptions. Companies can defer Scope 3 emissions for one year. While wider (non-climate) sustainability disclosures (UK SRS S1) can be deferred for two years, companies must say they are doing so, and both reliefs expire. It is therefore important to be planning for these regardless of the relief period.

Thirdly, "first reporting in 2028" sounds distant. For a company reporting in the first wave, the reporting period opens in Q1 2027, so data, controls and governance need to be in place now to be accurately reported in 12-18 months.

Turning compliance into advantage

When undertaking UK SRS S2, mapping climate exposure across the value chain tends to surface the same weak points that cause disruption – i.e. single-source suppliers exposed to heat or storms, logistics routes in flood-prone regions and inputs with volatile energy costs.

Understanding where physical and transition risks lie within operations can also create opportunities by protecting margins through better-targeted resilience spending and stronger positions with insurers and lenders. Ultimately, consistent, comparable information makes it easier for investors to price risk, which feeds directly into access to, and the cost of, capital. 

Why early engagement matters

Companies that start now get to choose what they implement and minimise what they explain; those that start late will explain by default. The Scope 3 relief year is time to build supplier data (i.e. identifying which categories apply to your company), not the time to wait. The FCA plans to set out its supervisory approach in the second half of 2027. Early movers can shape those expectations rather than scramble to meet them.

The wider direction of travel

Specifically in relation to UK SRS S2, understanding the quantified impacts of risks and opportunities is driving decision-making. The focus is on protecting business continuity, reducing downtime and enhancing efficiency, all while increasing value. For companies operating across jurisdictions, aligning to a global baseline (e.g. ISSB standards) should reduce duplication of reporting over time. These rules reflect broader shifts worth observing.

Start early to navigate more challenging requirements

Some requirements, notably climate scenario analysis and estimating financial effects, are genuinely tricky. A simple but effective plan can help.

First, run a gap analysis against the UK SRS now, starting from your existing climate report for the previous requirements. Then, prioritise what investors value most: governance processes, risk management, metrics and targets.

It’s advisable to use the relief periods deliberately, assigning responsible parties with clear objectives to enable your company to be ready to comply when they expire. It is also critical to give finance, risk and sustainability teams shared ownership; this will allow for a more mature approach to quantifying potential risks and opportunities.

Building data and controls robust enough to withstand future assurance is also important, and where full compliance isn't yet possible, write explanations that show a credible path forward, including interim milestones to show progress.

The FCA's own analysis assumes more than a third of domestic-listed issuers will explain against most of the standards at first. This shows that most will be complying and will need to be ready sooner rather than later.