UK consultation: Exposure draft of UK Sustainability Reporting Standards: UK SRS S1 and UK SRS S2

On 25 June 2025, the Department of Business and Trade (“DBT”) launched a consultation on the exposure draft of the UK Sustainability Reporting Standards (“SRS”): UK SRS S1 and UK SRS S2.

The exposure draft reflects the ISSB standards IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and S2 (Climate-related Disclosures) with six minor amendments. 

The much-anticipated consultation seeks views on the exposure draft of SRS S1 and SRS S2 and evidence as to the costs and benefits of using the UK SRS. This evidence will inform future government decisions as it whether and which entities will report information using the standards. The UK is not the first country to start the process of implementing IFRS S1 and IFRS S2. As of 12 June 2025, the ISSB website reports that “thirty six jurisdictions have adopted or otherwise used the IFRS Sustainability Disclosure Standards (ISSB Standards) or are in the process of finalising steps towards introducing them into their regulatory frameworks”. In this way, the UK’s new SRS would reflect international developments on sustainability-related financial disclosures.

Currently, the UK has non-financial reporting requirements that reflect the Task Force on Climate-related Financial Disclosures (“TCFD”). It is anticipated that the Secretary of State for Business and Trade and the Financial Conduct Authority (“FCA”) will hold subsequent consultations in order to assess whether to update the existing non-financial reporting regimes to require reporting against the new SRS.

The six minor amendments

The six amendments to the ISSB rules reflect the four amendments proposed by the UK Sustainability Disclosure Technical Advisory Committee (“TAC”) – set out of the first four below – and two additional amendments based on discussions with the UK Sustainability Disclosure Policy and Implementation Committee (“PIC”). All of the proposed amendments are considered necessary in the UK context “to support the development of the global baseline”.

1. Amendment 1: the SRS removes the transition relief provided in IFRS S1 that permits delayed reporting in the first year. The ISSB provided for entities to publish ISSB-compliant disclosures at a different (later) time than their financial statements for the first year of applying the ISSB Standards. The SRS do not include this because it compromises connectivity with the relevant entity’s financial statements and because following years of TCFD-aligned reporting it is unnecessary.
2. Amendment 2: IFRS S1 (para E5) includes a transitional relief which permits reporting entities to defer disclosure of sustainability-related risks and opportunities beyond climate for one year: meaning entities need to report on climate-only matters in the first year, extending to sustainability-related matters in the second and subsequent years. The SRS proposes extending this relief to make it available for two years to respond to stakeholder concerns and to give reporters more time to respond to topic reporting which was not previously required. When taken with the one-year relief on reporting Scope 3 greenhouse gas emissions in IFRS S2, a entity will be required to disclose at least (as set out in the consultation paper):

   Year 1 – climate-related risks and opportunities except Scope 3 emissions;

   Year 2 – all climate-related risks and opportunities including Scope 3 emissions; and

   Year 3 – climate-related risks and opportunities, Scope 3 emissions, and wider sustainability-related risks and opportunities.

   The consultation paper also makes it clear that it will clarify timing when the FCA consults on inclusion of IFRS S1 and S2 in the FCA listing rules and in further stages of the consultation when amendments to the Companies Act 2006 will be proposed.

3. Amendment 3: IFRS S2 requires entities to report financed emissions with reference to the latest available version of the Global Industry Classification Standard (“GICS”) code available at the reporting date. Entities must pay to access these codes. Therefore the SRS will allow GICS or any appropriate classification standard to be used to comply with SRS S2.
4. Amendment 4: IFRS S1 and S2 are intended to apply from 1 January 2024, although earlier application is permitted. To date, no specific effective date has been stated for the SRS and it will be set out in “the relevant legislation or regulation” when published.
5. Amendment 5: IFRS S1 and S2 require entities to “refer to and consider the applicability of” Sustainability Accounting Standards Board (“SASB”) and industry based guidance which is based on SASB Standards. For a number of reasons set out in the consultation paper, including the US-centric nature of SASB and the lack of the same level of due process being applied to SASB compared with ISSB, the SRS mandates voluntary rather than mandatory consideration of the SASB standards.
6. Amendment 6: when should transition reliefs apply from? The UK Government acknowledges that entities may report voluntarily prior to any mandatory requirements applying to them. To avoid voluntary reporters being penalized for early reporting, the SRS clarify that transition reliefs are linked to mandatory reporting requirements. Though entities reporting voluntarily may apply the reliefs if they choose to do so.

Focus on financed emissions

The consultation paper also seeks views on the practical application of the current requirements included in IFRS S1 for financed emissions and sets out potential timing mismatches and the issues with restating comparative amounts due to changes in estimates. 

Disclosing planned use of carbon credits and net greenhouse gas reduction targets

The PIC identified that under IFRS S2 reporting entities are required to disclose their planned use of carbon credits to meet any net greenhouse gas (GHG) emissions reduction target.  They noted that no other disclosures regarding carbon credits are required. Consequently, the UK Government is seeking views on (i) the usefulness of disclosures about the purchase and use of credits in the current reporting period and (ii) any challenges that such disclosures might pose for reporting entities.  Views would be used to explore whether amendments should be suggested to IFRS S2 in the future.  As part of the consultation paper Voluntary carbon and nature markets: raising integrity, carbon credit disclosure is considered in more detail.

The consultation paper notes that there are ongoing IFRS consultations focusing on possible amendments.  The consultation paper sets out additional detail on this. 

Cutting red tape for business

Interestingly, the consultation paper notes that “the non-financial reporting review aims to support growth and the UK’s international competitiveness, while contributing to the government’s ambition to achieve a 25% reduction in the costs of administrative regulation for business”.  Demonstrating a similar aim to those shown by the EU currently as part of the omnibus simplification package.  Though, IFRS S1 and S2 are limited to single financial materiality (whilst the EU Corporate Sustainability Reporting Directive requires double materiality to be considered – both financial materiality and the impact of the entity on the environment).

The DBT has stated that this consultation forms part of the first phase of consultations to modernise the UK’s framework for corporate reporting. It is accompanied by two other consultations on climate-related transition plan requirements and oversight of sustainability assurance providers.

Authored by Rita Hunter, Julia Cripps, and Emily Julier.