UK consults on draft UK SRS: implementation of ISSB sustainability disclosure standards

On 25 June 2025, the UK government published three consultations (see press release):

• The Department for Business and Trade (DBT) published Exposure Drafts of the UK Sustainability Reporting Standards (UK SRS) for consultation - see here.  
• The DBT published a consultation on the government's proposal for greater regulatory oversight of third-party assurance services for sustainability-related financial disclosures - see here. 
• The Department for Energy Security and Net Zero (DESNZ) published a consultation on transition plans - see our blog post.

This blog post focuses on the UK SRS consultation. The UK SRS will implement into UK law (with some minor changes) the sustainability disclosure standards developed by the ISSB - IFRS S1 and IFRS S2.

See our other related blog posts:

• UK government consults on transition plans: keeping its options open
• UK government proposals for overseeing third-party assurance of sustainability related financial disclosures

What is the ISSB and IFRS S1 and S2?

The International Financial Reporting Standards (IFRS) Foundation created the International Sustainability Standards Board (ISSB) in 2021 to develop a global baseline of sustainability disclosure standards that meets the information needs of investors. The IFRS Foundation is hoping to do for sustainability reporting what it has done for financial reporting with the IFRS Accounting Standards.

The information required by the ISSB standards is designed to be provided alongside financial statements as part of the same reporting package. The aim is to create a global framework that provides investors with more consistent, comparable and verifiable sustainability-related financial information and to help companies report on their sustainability matters in a robust, comparable and verifiable manner. This should help companies to reduce the risk of greenwashing and enable investors to make better informed decisions about capital allocation.

In 2023, the ISSB published the final version of its first two global sustainability disclosure standards: IFRS S1 “General Requirements for Disclosure of Sustainability-related Financial Information” and IFRS S2 “Climate-related Disclosures” (see here):

• IFRS S1 sets out overarching requirements for a company to disclose information about sustainability-related risks and opportunities that is useful to users of general purpose financial reports. 
• IFRS S2 sets out supplementary requirements that relate more specifically to climate-related risks and opportunities. IFRS S2 incorporates and builds on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD was formally disbanded in October 2023 and has been subsumed into the ISSB.

Companies can start applying IFRS S1 and IFRS S2 on a voluntary basis for annual reporting periods beginning on or after 1 January 2024, with the first set of reports to be published in 2025. In the first year of reporting using the ISSB standards, companies will be incentivised to prioritise putting in place reporting practices and structures to provide information about climate-related risks and opportunities. In the second year, companies are to provide full reporting on other sustainability-related risks and opportunities in addition to climate issues.

The  ISSB standards have a financial materiality focus, meaning that reporting entities must disclose material information about any sustainability-related risks and opportunities that may affect the entity’s financial position (in the short, medium and long term).

More than 30 jurisdictions, including the UK, are making progress towards introducing the ISSB standards into their legal or regulatory frameworks (see here). The ISSB is tracking national implementation on its website. Some countries have adopted the ISSB standards with jurisdiction-specific modifications that are designed to help the standards work at a national level.

For more information on the ISSB standards, see:

• ISSB publishes final versions of first two global sustainability disclosure standards
• ISSB consults on changes to climate disclosure standard IFRS S2
• IFRS and EFRAG publish Interoperability Guidance on ISSB Standards and ESRS
• IFRS Foundation launches new e-learning modules to support implementation of ISSB Standards
• IFRS Foundation publishes jurisdictional profiles evidencing progress towards adoption of ISSB Standards

Consultation on draft UK SRS 

The DBT is consulting on Exposure Drafts of the UK SRS. 

The consultation document can be accessed here.   

The consultation closes on 17 September 2025. 

The UK government created two committees to advise it on endorsement of the ISSB standards:

• the UK Sustainability Disclosure Technical Advisory Committee (TAC), and 
• the UK Sustainability Disclosure Policy and Implementation Committee (PIC).

The TAC published its recommendations to the government in December 2024 (see here). The TAC recommended that the government endorse both IFRS S1 and IFRS S2, subject to four minor amendments and additional guidance.

The government agrees with the four amendments recommended by the TAC, and is also proposing two further amendments recommended by the PIC. The government believes all proposed amendments are necessary in the UK context, rather than “nice to have” amendments. The government had committed from the start to keeping any amendments to the ISSB standards to the absolute minimum so as not to cause significant divergence from the global standards.  

The six amendments are discussed in more detail below but the most significant changes are as follows:

• UK companies would only be required to report on climate issues (rather than all sustainability issues) in the first two years of reporting so that reporting of wider sustainability issues would only start in the third year. 
• Reporting entities can refer to the SASB industry-specific standards if they wish to but are not required to do so.  
• The UK government proposes to the keep the existing Scope 3 emissions relief in the ISSB standards so that reporting entities do not have to report on Scope 3 emissions until the second year of reporting. However, as UK companies are not currently required to report on Scope 3 emissions, this new requirement will be significant when it eventually starts applying the second year of reporting. 

This consultation deals with what changes would need to be make to the ISSB standards in order for the UK to be able to endorse IFRS S1 and S2. This consultation does not deal with which entities will have to report using UK SRS or when they will have to start reporting. This will be the subject of a separate government consultation in due course (see “Next steps” below). When the UK SRS are endorsed, they will initially apply on a voluntary basis. 

It is worth noting that the government has made it clear that any decisions will need to be aligned with the government’s ambition to reduce the costs of regulation for business by 25%. The objective is to ensure that any new sustainability disclosure requirements generate decision-useful information for investors and other stakeholders, while not being overly burdensome for reporting entities to meet. 

Six proposed amendments to IFRS S1 and S2  

Amendment 1: removal of the transition relief in IFRS S1 that permits delayed reporting in the first year.

• IFRS S1 contains a transition relief (paragraph E4) that permits reporting entities to publish disclosures made in accordance with ISSB standards at a different (later) time than their financial statements, for the first year of applying the ISSB standards. This relief is intended to give entities more time to prepare to align their reporting of sustainability-related financial disclosures with their financial statements. 
• However, the government agrees with the TAC that this would compromise the principle of “connectivity” with financial statements. Also, certain UK entities have already been required to make climate-related disclosures that are aligned with the TCFD for several years under existing UK rules. 
• The government has therefore removed this relief from the draft UK SRS S1. 

Amendment 2: extension of the transition relief in IFRS S1 that permits a “climate-first” approach

• IFRS S1 includes a transition relief (paragraph E5) that permits reporting entities to defer the disclosure of sustainability-related risks and opportunities beyond those on climate by an additional year. This means that entities would report on climate related matters only in their first year of applying ISSB Standards before extending reporting to wider sustainability-related matters in the second and subsequent years. However, entities may choose to not use the relief (or only for some sustainability related risks and opportunities), as is the case for any transitional relief in the standards.
• The TAC recommended extending this relief by an additional year to make it available for 2 years.
• The UK government has included this amendment, based on the TAC’s recommendation, and it is reflected in draft UK SRS S1 (paragraph E4).
•  This means that, alongside the one-year relief against disclosing Scope 3 greenhouse gas emissions in IFRS S2 (which has been maintained in UK SRS S2), an entity will (at a minimum) disclose: 
  • in year 1 – climate-related risks and opportunities except Scope 3 emissions 
  • in year 2 – all climate-related risks and opportunities including Scope 3 emissions 
  • in year 3 – climate-related risks and opportunities, Scope 3 emissions, and wider sustainability-related risks and opportunities

Amendment 3: removal of the requirement to use the Global Industry Classification Standard (GICS) in IFRS 2

• IFRS S2 includes requirements on financed emissions. One element of this is the requirement to use the Global Industry Classification Standard (GICS) 6-digit industry-level code. 
• The TAC recommended that entities should be able to use any appropriate classification standard – which could be GICS or an alternative standard that they use within existing reporting practices.
• The UK government has included this amendment, based on the TAC’s recommendation, in draft UK SRS S2 (paragraphs B62 (a)(i) and B63 (a)(i)).
• The ISSB is currently consulting on an amendment to the requirement to use the GICS in IFRS S2. The UK government will monitor this and will consider the implications for UK SRS S2.

Amendment 4: removal of the “effective date” clauses in IFRS S1 and S2

• IFRS S1 and S2 currently include a statement on the effective date: “An entity shall apply this Standard for annual reporting periods beginning on or after 1 January 2024. Earlier application is permitted". 
• The TAC has not recommended any specific effective date, concluding that setting this was a matter for the PIC to consider. The TAC recommended that, in the absence of an effective date, this section in the standards should be reworded to “initial application”.
• The PIC concluded that the effective date should be removed from the standards, on the basis that UK SRS will be freely available for any entity to use on a voluntary basis at a time of their choosing. 
• As a result, the date will be removed, the section will be renamed as per the TAC’s recommendation, and a clarifying sentence will be added to explain that the timetable for applying the standards depends on subsequent rules or regulations put in place by government or the FCA.

Additional discussion on the practicality of calculating financed emissions for the given reporting period

• The TAC had an extensive discussion on financed emissions. Those discussions did not result in a recommended amendment, but the TAC concluded that clarification from the ISSB was necessary on the application of the financed emission requirements. It is expected that challenges identified by the TAC apply to other jurisdictions using IFRS S2, so additional support from the ISSB would be useful. 
• The UK government supports the TAC’s request to the ISSB to provide additional clarification. 
• The government notes that requirements to report financed emissions are part of Scope 3 emissions disclosure requirements. IFRS S2 (and UK SRS S2) include a one-year relief from disclosing Scope 3 emissions, which provides some additional time for clarification on financed emissions to be provided by the ISSB. 

Amendment 5: reference to the SASB materials in IFRS S1 and IFRS S2

• IFRS S1 and S2 include requirements that state that entities “shall refer to and consider the applicability of” the standards published by the Sustainability Accounting Standards Board (SASB) and the “Industry-based Guidance on Implementing IFRS S2” (which is based on the SASB standards).
• The SASB was a US-based non-profit organisation that created voluntary industry-specific standards to guide company disclosures of financially-material sustainability information for use in corporate filings to the United States Securities and Exchange Commission. Following the transfer of ownership of the SASB materials to the ISSB, the ISSB has been taking these materials through a process of “internationalisation”. The ISSB has also committed to further enhance the SASB standards through a phased approach and plans to consult on updating a number of SASB standards for a specific set of industries in July 2025.
• The TAC and the PIC concluded that the wording in the ISSB standards would not require entities to disclose information using the materials and that the entity would be free to decide that SASB materials were not relevant in the context of that entity’s particular business, sector or operations. Therefore, the TAC did not recommend any amendment to the requirements on SASB materials. 
• However, the current wording in IFRS S1 and S2 could result in entities being required to prove – with evidence – how they have considered the materials when asked to do so by their assurance provider. 
• The government therefore proposes to amend “shall refer to and consider the applicability of…” to “may refer to and consider the applicability of…”, in the UK SRS S1 and S2. 
• The government will review this amendment following the conclusion of the ISSB’s project to enhance the SASB standards.

Amendment 6: treatment of transition reliefs 

• The government proposes to amend the wording on reliefs so that they are explicitly linked to the introduction of any mandatory reporting requirements. 
• These amendments are in paragraphs E3, E4, and E5 in draft UK SRS S1 and paragraphs C3 and C4 in draft UK SRS S2. 
• By way of example, paragraph C4 in UK SRS S2 has been amended from: “In the first annual reporting period in which an entity applies this Standard, the entity is permitted to use one or both of these reliefs…” to: “In the first annual reporting period in which an entity is required to use this Standard under UK law or regulations, the entity is permitted to use one or both of these reliefs…” 
• This proposed amendment would not preclude entities from using the reliefs if they choose to report on a voluntary basis. 

Requirements on carbon credits in IFRS S2

• IFRS S2 (paragraph 36 (e)) requires reporting entities to disclose their planned use of carbon credits to meet any net greenhouse gas (GHG) emissions reduction target. The standard does not require any other disclosures regarding carbon credits. 
• IFRS S2 says that an “entity might also include information about carbon credits it has already purchased that the entity is planning to use to meet its net greenhouse gas emissions target, if the information enables users of general-purpose financial reports to understand the entity’s greenhouse gas emissions target” (paragraph B71).
• The PIC concluded that it would be helpful for the UK government to seek views on: 
  • the usefulness of disclosures about the purchase and use of credits in the current reporting period; and 
  • any challenges that such disclosures might pose for reporting entities. 
• The government welcomes views from market participants on this topic. 
• The UK government is consulting on the implementation of its principles for voluntary carbon and nature market integrity (see here) and will consider whether additional guidance for UK entities may be helpful.

Costs and benefits of UK SRS will affect future decisions on whether or not to require entities to use these standards

• Section 4 in the consultation document provides an overview of the expected costs and benefits of disclosures made in accordance with UK SRS S1 and S2. It also seeks further evidence on those costs and benefits. This evidence will be used to inform future decisions when the government considers whether or not to require entities to use these standards (see “Next steps” below).
• Investor groups have strongly supported the use of the ISSB standards in the UK and have expressed a desire to have access to high-quality, comparable information across reporting entities and across jurisdictions. 
• The government is of the view that, for entities using the standards, this will enable them to develop more effective strategies to improve both sustainability-related outcomes and business performance, supporting the UK government’s growth mission.
• Some of the benefits of UK SRS are already being achieved in the UK as a consequence of existing regulations under the Companies Act 2006 and the UK Listing Rules (see here for a summary of the existing UK regimes). The government is seeking views on the additional benefits offered by the use of UK SRS compared to current reporting requirements.
• As the UK SRS will require new areas of disclosure, and will require greater depth of reporting, the government recognises that reporting entities will face additional costs in applying UK SRS S1 and S2. The UK government would welcome evidence from stakeholders on the costs they expect to incur. 
• In particular, the government is interested in evidence on the costs associated with the requirements in UK SRS S1 and S2 for an entity to report information regarding their value chain. It is seeking evidence on the additional costs of using these standards over and above current reporting requirements, such as TCFD-aligned reporting requirements and SECR requirements.
• The FCA will consult on proposals to require the use of UK SRS within the UK Listing Rules. The government will also consider whether to introduce sustainability disclosure requirements via the Companies Act 2006, which would require economically significant entities that are outside the FCA’s regulatory perimeter to report in accordance with UK SRS. The government will consult on any requirements in due course. 
• The government is also interested in views on the potential opportunities for streamlining of the UK’s existing non-financial reporting framework, should the government introduce reporting requirements against UK SRS for economically-significant private companies. This information will inform the government’s review of the UK’s non financial reporting framework.
• To inform our next phase of consultation, the government is seeking views on the merits of private entities (namely companies and limited liability partnerships (LLPs)) reporting against the UK SRS. 
• The government is also seeking views on how reporting entities are expecting to be affected by international requirements, and their intended approach to meeting these requirements, as this might affect the anticipated costs and benefits of UK SRS - including requirements in the EU under the Corporate Sustainability Reporting Directive (CSRD) and and the European Sustainability Reporting Standards (ESRS).

Sustainability reporting by pension schemes 

• The government will consider whether to update current rules for pension schemes, separately from its consideration of disclosure requirements in the Companies Act 2006.
• The Department for Work and Pensions (DWP) will review the existing regulations this year, building on evidence provided by The Pensions Regulator. As part of this, the government will consider the role of the UK SRS in reporting on climate-related matters by pension schemes.

Legal implications of sustainability-related reporting 

• Reporting on climate and sustainability-related matters will include forward-looking information, including information on the future prospects of the reporting entity, how its strategy will develop over time, and its climate and environmental targets. 
• Stakeholders have raised the prospect of legal implications if it later emerges that this information is inaccurate. There could also be implications from any reliance on third-party data including – for example – data used to estimate GHG emissions across the value chain.
• In section 463 of the Companies Act 2006, there are protective provisions for forward looking information in the Strategic Report and Directors’ Report. Directors are liable to the company for any loss suffered as a result of any untrue or misleading statement in a report, or any omission, where the director either “knew the statement to be untrue or misleading or was reckless” or knew that the omission was a “dishonest concealment of a material fact”. These provisions provide some protection, and they allow for reporting to be made with the best available information and in good faith. 
• The UK government is considering whether similar provisions should apply for any reporting requirements that may be introduced for the UK SRS. It welcomes views through this consultation on the degree of legal risk associated with the publication of forward-looking information and information that relies on third-party data, and whether provisions similar to those in section 463 could be beneficial.

Additional guidance 

• The government is also seeking views on whether entities may require additional guidance to that already available,
• The government encourages readers to consult the existing educational materials and other resources produced by the ISSB - in particular, the ISSB guidance on materiality and interoperability with the EU's ESRS.
• The TAC identified further areas where additional guidance may support reporting entities when they make disclosures in accordance with UK SRS S1 and S2 but that guidance would be best developed by the ISSB - including additional guidance on financed emissions, commercially sensitive information, and Scope 3 emissions reporting, among others.

Next steps 

The consultation on the draft UK SRS closes on 17 September 2025.

The government will make a final decision on whether to endorse the draft UK SRS and will make final versions available for any entity to use initially on a voluntary basis. 

If endorsed, the government aims to publish the final versions of the UK SRS S1 and S2 in autumn 2025. 

The decision on whether on whether to introduce mandatory reporting against the UK SRSs for economically significant entities will be assessed separately. The government has not said when that consultation will be published (it just says “in due course”) but, in the Industrial Strategy and Clean Energy Industries Sector Plan published on 23 June 2025, the government indicated that it will set out next steps in July in the Financial Services Growth and Competitiveness Strategy. 

The FCA will also consult on proposals to require the use of UK SRS by listed companies. That consultation is expected in Q3 2025. 

The question of whether or not transition plans will be mandatory in the UK (and what the UK SRS S2 will require in respect of transition plans) is the subject of a separate consultation (see our separate blog post).