On 25^th June 2025, the UK government published the exposure drafts of the UK Sustainability Reporting Standards (UK SRS), marking a major milestone in aligning UK corporate reporting with global ESG expectations. These drafts, developed by the Department for Business and Trade (DBT), are based on the International Sustainability Standards Board (ISSB)’s IFRS S1 and S2, with targeted amendments to suit the UK context. They are designed to enhance transparency, comparability, and accountability in how organisations disclose sustainability-related risks and opportunities. 

The UK SRS aims to provide a consistent, decision-useful framework for disclosing sustainability-related risks and opportunities. The government is currently consulting on whether to endorse these standards for voluntary use from late 2025, with a consultation deadline of 17 September 2025. Mandatory adoption may follow, subject to further consultations by both the UK government and the Financial Conduct Authority (FCA). 

So, what do these changes mean for UK-based organisations – and how could your organisation respond? 

Two core standards 

• UK SRS S1: General Requirements for Disclosure of Sustainability-related Financial Information. This is based on ISSB S1.  

• UK SRS S2: Climate-related Disclosures, aligned with TCFD principles (governance, strategy, risk management, metrics & targets). This is based on ISSB S2.  

To find out more about the original ISSB IFRS S1 and S2 requirements, read our previous blog post by Sustainability Consultant Jocelyn Barker here.

UK-specific amendments to IFRS standards:  

The UK government has proposed six targeted amendments to the ISSB’s IFRS S1 and S2 to better suit UK reporting needs, as per the Technical Advisory Committee (TAC) recommendations: 

1. Removal of Transition Relief for Delayed Reporting  

The UK draft removes the ISSB’s provision that allowed entities to delay sustainability-related disclosures in their first year of reporting. 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, and the government has agreed with the TAC’s opinion that this would compromise the aim of “connectivity” of sustainability-related reporting with financial statements.  

2. Extension of the ‘Climate-First’ Approach  

While the transition relief for delayed reporting is removed, the UK draft retains and extends the option for entities to focus initially on climate-related disclosures (IFRS S2) before expanding to broader sustainability topics under IFRS S1. In IFRS S1, entities can 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.  Under the proposed UK SRS structure, this relief is extended by an additional year, making it available for two years. Therefore, at minimum, an entity must disclose: 

• Year 1 – Climate-related risks and opportunities, excluding Scope 3 emissions (as per the one-year relief continued under UK SRS). 

• Year 2 – Full climate-related disclosures, including Scope 3 emissions. 

• Year 3 – Climate-related disclosures plus broader sustainability-related risks and opportunities. 

Entities may choose not to use this relief and report comprehensively from the outset. 

3. Removal of Mandatory Use of GICS  

IFRS S2 includes requirements on financed emissions that reference the Global Industry Classification Standard (GICS). The UK SRS removes the requirement to use GICS, allowing entities to adopt alternative classification systems that may be more relevant or practical for their sector or reporting context. 

4.  Removal of ‘Effective Date’ Clauses  

In the original ISSB standards, IFRS S1 and S2 are effective for annual reporting periods beginning on or after 1 January 2024, with earlier application permitted if both standards are applied together. This fixed effective date was intended to provide a clear global baseline for implementation. 

However, under the proposed UK SRS, these effective date clauses are removed entirely. The relevant section in the standards will be renamed, and a clarifying sentence added to explain that the timeline for applying the standards will depend on regulations developed by the UK government or the Financial Conduct Authority (FCA). This gives UK regulators flexibility to align implementation with domestic policy and market readiness.  

5. Clarification on Use of SASB Materials  

References to SASB (Sustainability Accounting Standards Board) materials are clarified to ensure they are used appropriately and contextually by UK entities. This helps avoid confusion or misapplication of US-centric guidance. The government proposes to amend the IFRS S1 and S2 wording of “shall refer to and consider the applicability of…” to “may refer to and consider the applicability of…”, in the UK SRS S1 and S2, and will review this amendment following the conclusion of the work being undertaken within the IFRS to enhance the SASB materials.   

6. Additional Guidance on Carbon Credits and Financed Emissions –  

The UK draft includes expanded guidance on how entities should report on carbon credits and financed emissions, reflecting the UK’s evolving regulatory and market landscape. This includes: 

• Clarification on the treatment of carbon credits, particularly distinguishing between those used for offsetting versus those held for trading or investment. 

• Discussion on the practical challenges of calculating financed emissions, especially for financial institutions, and the need for proportionality and methodological transparency. 

• Recognition of the UK’s work on voluntary carbon market integrity principles, which may influence how carbon-related disclosures evolve in future regulatory guidance. 

---

What could organisations do now?  

1. Engage with the Consultation 

This is a rare opportunity to help shape the final standards. Organisations – especially those already reporting under TCFD or ISSB-aligned frameworks – should review the exposure drafts and submit feedback. Consider how the proposed amendments affect your sector, reporting processes, and stakeholder expectations. 

2. Assess Your Reporting Readiness 

Conduct a gap analysis against the UK SRS exposure drafts. Identify where your current disclosures align or fall short, particularly in areas like Scope 3 emissions, scenario analysis, resilience assessment, the governance of sustainability-related risks, and calculations of financially material information. This will help prioritise internal improvements. 

3. Build Internal Capacity 

The UK SRS will require cross-functional collaboration between sustainability, finance, risk, legal, and audit teams. Consider investing in training, exploring potential systems and processes to help improve reporting capability, and data governance to ensure your organisation can produce high-quality, auditable ESG disclosures. 

4. Think about how you can strategically leverage the Climate-First Relief as proposed under the UK SRS 

If your organisation is not yet ready to report on broader sustainability topics, the extended climate-first approach offers a phased path. Focus on climate-related disclosures first to set yourself up for full reporting by year 3.  

---

The UK SRS draft forms part of a package of 3 open consultations that represent the initial phase of work designed to modernise the UK’s sustainability reporting and assurance framework and landscape, part of a broader ambition to position the UK as a global leader in sustainable finance, supporting the transition to net zero and enhancing the integrity of ESG disclosures across sectors. Alongside the UK SRS exposure drafts, the government is also consulting on:  

• Developing an oversight regime for assurance of sustainability-related financial disclosures, which aims to improve the credibility and consistency of ESG data. 

• Climate-related transition plan requirements, developed by the Transition Plan Taskforce (TPT) and the Department for Energy Security and Net Zero (DESNZ), which seek to ensure that UK-regulated financial institutions and large listed companies publish credible, actionable transition plans that can provide the market with ‘credible and decision-useful information.’ 

• Read a previous post by our Operations Director, Rose Clarke, on IFRS S2 and the Role of Transition Plans here.  

At Satarla, we specialise in helping organisations turn complex regulatory change into practical, value-adding action. If you’d like to discuss what the UK SRS means for your organisation, whether you’re preparing for compliance, exploring how to integrate sustainability into your risk frameworks, or simply want to understand where to start, we’d love to speak to you. Please reach out through LinkedIn or via email to our Sustainability Lead, Rose Clarke (rose@satarla.com) or Climate Change and Nature Lead, Chris Stockey (chris@satarla.com). We’d be happy to talk through your needs, share insights from our work across sectors, and help you navigate this evolving landscape.