Shaping the UK’s future sustainability reporting framework

The Financial Conduct Authority’s Consultation CP26/5 (which closed on 20 March 2026) proposes a significant shift in how listed companies will disclose sustainability-related information.

The proposals within that consultation articulate how the newly endorsed UK Sustainability Reporting Standards (UK SRS) will be applied to the first tranche of UK-listed companies, thereby aligning UK requirements more closely with the new international baseline set by the IFRS Sustainability Disclosure Standards.

As the global sustainability reporting landscape continues to evolve, the consultation represents an important moment in determining the UK’s direction. We however have mixed feelings about what’s proposed.

Headlines of FCAs proposals

The consultation proposes to replace the FCA’s existing climate disclosure rules with requirements based on the UK SRS, beginning with UK SRS S2 on climate-related disclosures (including some reliefs) and the option to apply UK SRS S1, General Requirements for Disclosure of Sustainability-related Financial Information. This application of the UK SRS would apply primarily to certain listed commercial companies, including issuers of equity and certain debt instruments, with the aim of making the UK’s sustainability disclosures for investors more consistent with new global norms.

A central feature of the proposals is the mandatory application of climate disclosures under UK SRS S2, reflecting the maturity of climate reporting practices in the UK market. However, the FCA proposes reliefs in two key areas:

• Scope 3 greenhouse gas emissions would be subject to a “comply or explain” approach for a transitional period, recognising the practical challenges of accurate data collection.
• Similarly, non-climate sustainability disclosures under UK SRS S1 wouldn’t initially be mandatory, and from 2029 companies would have to option to “explain” non-compliance.

The consultation also sets out proposals on how and where sustainability disclosures should be presented, encouraging integration with annual financial reports and the use of cross-referencing to avoid duplication.

Transparency around voluntary third-party assurance is proposed, alongside signposting to educational and supporting materials to assist issuers in implementing the new requirements.

Taken together, these measures are intended to support a proportionate transition while improving the consistency and usefulness of sustainability information for investors.

ICAS views on the consultation

We welcome the FCA’s clear intention to move at pace and provide clarity on the application of the UK SRS. As the first UK body to devise the application rules for the new endorsed UK SRS, the FCA is effectively setting the trajectory in the market for the pace and scope of adoption, and reliefs that will apply. The signalling effect of the FCA’s approach is significant.

Aligning UK disclosure requirements with the IFRS sustainability reporting standards is an important step towards serving global comparability and supporting investor confidence. We support the principle of proportionality and agree that the transition from existing requirements to the new framework must be clear, smooth and well signposted.

At the same time, we have significant concerns about aspects of the proposed reliefs. In our view, sustainability disclosures shouldn’t go backwards and that’s now a real danger given the reliefs proposed by the FCA. We’re also concerned that the reliefs will fundamentally undermine the comparability of disclosures per the UK SRS within the UK as well as internationally.

The FCA’s approach signals a step change in the UK’s previous approach from being a first mover and progressive about changes to sustainability disclosures (as evidenced by the work of the likes of Task Force on Climate-related Financial Disclosures and Transition Plan Taskforce). The FCA’s proposals are tame and don’t reflect the urgency of the critical underlying sustainable development issues that some sustainability disclosures are intended to serve.

Scope 3 emissions often represent the majority of an organisation’s greenhouse gas footprint, and disclosures that omit them risk being incomplete or misleading. While we recognise the current challenges associated with Scope 3 data, we believe these disclosures should be mandated within a reasonable timeframe, with earlier adoption encouraged and robust explanations required in the interim.

We also strongly disagree with proposals that would deprioritise non-climate sustainability reporting through an extended “comply or explain” approach. Many non-climate sustainability issues are financially material and decision-useful for investors. Focusing exclusively on climate risks narrows the picture presented to report users and could undermine the coherence of the UK’s adoption of its version of IFRS Sustainability Disclosure Standards as further such standards are developed.

While we must learn from other jurisdictions like the EU and establish sustainability disclosures that aren’t a burden, steps should be taken, including phasing in assurance, to quickly achieve parity with financial statements in terms of completeness, trust and rigour. The FCA proposals don’t set out that path.

Next steps

The consultation represents a critical stage in shaping the UK’s sustainability reporting regime. The FCA is considering feedback from stakeholders and has indicated an intention to announce later in 2026 how issuers should apply the UK SRS, with new rules expected to come into force from 1 January 2027.

In the meantime, we understand that the Department of Business and Trade will publish its consultation on Modernising Corporate Reporting, which will look to overhaul the entire focus and mix of reports that corporates are expected to publish, which could be a further opportunity to optimise all reporting requirements.

We’ll continue to engage constructively with policymakers and regulators to promote high-quality, decision‑useful sustainability reporting that supports market transparency, sustainable development, long-term value creation and the UK’s competitiveness as a leading global capital market.

Read our full response