A New Chapter for UK Sustainability Reporting: Government Consultations Open

This package of measures is intended to “ensure public and private investors drive our country and the world towards climate and clean energy”[1].

The consultations cover:

• Draft UK Sustainability Reporting Standards (UK SRS): proposed new reporting standards based on international baseline rules. The consultation can be found here.
• Climate-Related Transition Planning: proposals to require large companies to publish climate transition plans. The consultation can be found here.
• Oversight of Sustainability Reporting Assurance Providers: a proposed regulatory regime for those auditing or verifying sustainability information. The consultation can be found here.

These initiatives reflect a coordinated effort to modernise corporate reporting for the net-zero era.

Below is a high-level summary of each consultation, why it matters, and what it means in practice.

All 3 consultations close on 17 September 2025.

Consultation 1: Draft UK Sustainability Reporting Standards (UK SRS)

Overview

This consultation, led by the Department for Business and Trade (DBT), sets out draft UK Sustainability Reporting Standards. These are based on the ISSB’s global baseline standards, IFRS S1 (general sustainability disclosures) and IFRS S2 (climate-related disclosures), with minor adaptations for the UK.

The draft UK SRS includes 6 key modifications:

1. Removal of first-year reporting relief: Unlike the original ISSB standard, UK SRS would require sustainability disclosures from the first year of application, in line with financial statements.
2. “Climate-first” phased approach: Companies could initially report only on climate-related disclosures, with broader sustainability topics introduced over time (i.e. full sustainability reporting, beyond climate, would ramp up over approximately 3 years).
3. Removal of requirement to use GICS: Firms would not be required to use the Global Industry Classification Standard (GICS), giving flexibility to adopt other taxonomies.
4. No fixed effective date in the standards: References to an “effective date” in IFRS S1/S2 are deleted. Commencement dates will be set through future regulation, not within the standards themselves.
5. Sustainability Accounting Standards Board (SASB) materials optional: Companies may consider, but are not required to follow, SASB sector guidance.
6. Treatment of transition reliefs: Transitional provisions (such as the deferral of disclosure of sustainability-related risks and opportunities beyond climate referred to at amendment 2 above) would only apply once UK authorities mandate UK SRS use, as opposed to applying from the point of voluntary use, in order to avoid penalising early voluntary reporters.

These changes are intended to make the standards workable for UK companies, while keeping them closely aligned with the international framework.

Why it matters

Adopting UK SRS is a key step in establishing a “world-leading sustainable finance framework”.

By aligning with the ISSB baseline, the UK aims to ensure that sustainability disclosures are globally comparable and useful for investors. This helps maintain the UK’s competitiveness, particularly as the EU and other jurisdictions roll out their own sustainability standards.

Practical implications

UK SRS is initially being introduced on a voluntary basis, with final standards expected in autumn 2025.

Mandatory adoption is likely to follow, subject to further action by the Financial Conduct Authority (FCA) and potentially changes to the Companies Act 2006. Larger unlisted companies may eventually be brought within scope.

Key considerations for in-scope companies (likely large listed firms and financial institutions) include:

• Governance readiness: Boards will need to oversee sustainability risks with the same rigour as financial risks. In effect, sustainability will need to be integrated into the core governance and reporting cycle, akin to financial reporting.
• Data and systems: Early assessment of ESG data systems will be essential. Companies may choose to adopt UK SRS voluntarily to identify gaps before compliance becomes mandatory.
• Legal liability: The Government is considering extending Companies Act, section 463 safe harbour protections to directors in respect of sustainability disclosures – a critical step in managing liability for forward-looking statements.
• Strategic planning: The standards require companies to consider the business impact of sustainability risks and opportunities. This will drive the integration of ESG considerations into corporate strategy and reporting.

In short, the UK SRS consultation signals that Government is on track to mandate ISSB-aligned sustainability disclosures.

Companies should not wait for a formal mandate. Engagement with the standards now will support smoother implementation and improved investor trust.

Consultation 2: Climate-Related Transition Planning

Overview

This consultation, from the Department for Energy Security and Net Zero (DESNZ), explores whether to require transition plans from large companies and financial institutions. This follows the Government’s 2024 manifesto pledge to mandate credible transition plans aligned with the Paris Agreement’s 1.5°C goal.

While no specific rules have been proposed yet, the consultation seeks views on how to introduce such requirements effectively.

What is a transition plan?

A transition plan is a roadmap for how a business will adapt its strategy and operations to thrive in a low-carbon economy.

It includes:

• net-zero or emissions-reduction targets;
• investment and operational changes to achieve them; and
• milestones and accountability mechanisms to track progress.

Frameworks such as IFRS S2 and the UK’s Transition Plan Taskforce (TPT) provide guidance and models for what credible plans should look like.

Policy options

The consultation presents 2 main options:

• Option 1: “Comply or Explain”, under which companies would be expected to publish a plan or explain why they haven’t.
• Option 2: Mandatory Plan Publication, under which companies would be required to develop and disclose a plan, possibly updating it every 3 years, with annual reporting on progress.

Beyond these primary options, the Government is also seeking views on a range of related questions to gauge the current state of play and practical implications.

These include mandatory transition plan implementation, the benefits of transition plans and how investors use them, what motivates companies that already publish plans, the costs and challenges in developing them, how to best integrate nature (biodiversity) considerations, the scope fo transition plan requirements, and importantly, the legal risks companies face in making forward-looking climate commitments.

Scope

Initially, the requirement would apply to:

• UK-regulated financial institutions (banks, insurers, asset managers, pension funds); and
• FTSE 100 companies.

The Government is considering extending the scope of future transition plan requirements to cover economically significant entities where there is clear public or investor interest.

However, it has emphasised that any such requirements will be proportionate, and SMEs are not expected to be included. The rationale is to capture as much of the economy’s emissions and financial flows as possible, without hampering genuinely small businesses.

Practical implications

If implemented, transition planning would become a formal part of corporate governance.

Key implications include:

• Strategic alignment: Transition plans would need to be embedded into core strategy, with capital allocation and operational decisions aligned to climate goals. This will involve setting science-based targets, outlining capital investments (e.g. in renewable energy, R&D for low-carbon tech), and potentially restructuring parts of the business that are inconsistent with a low-carbon future.
• Board oversight and accountability: Boards would be required to sign off and oversee progress. Many companies may need to create or expand sustainability committees. The consultation’s reference to “aligning with 1.5°C” implies companies might be judged on how their plans measure up to climate science and national commitments. There is no universally accepted method to declare a plan “1.5°C-aligned” (and indeed some argue 1.5°C may no longer be attainable given ~1.2°C of warming already occurred). The lack of certainty here is itself under discussion, meaning further guidance or industry standards may emerge.
• Legal risk: As transition plans are inherently forward-looking (e.g. projections of emissions, future investments, assumed technological developments), there are concerns over liability if the plans are misleading or if they fail to execute them. The Government is considering extending Companies Act, section 463 safe harbour provisions. The outcome of the consultation will likely clarify what assurances or disclaimers companies can rely on.
• Interaction with existing disclosure: The consultation suggests there will be an attempt to rationalise reporting, to reduce duplication. Companies might incorporate their transition plan into their annual reports or sustainability reports to meet multiple requirements at once.

Timeline

The consultation closes on 17 September 2025.

The FCA is also expected to launch its own consultation on enhancing transition plan requirements for listed companies and asset managers.

Consultation 3: Oversight of Sustainability Reporting Assurance Providers

Overview

The third consultation proposes a new oversight regime for third-party sustainability assurance providers.

At present, there is no formal regulation of these providers in the UK, unlike statutory auditors.

The Government proposes a voluntary registration framework, with oversight by the Audit, Reporting and Governance Authority (ARGA).

Registered providers would be required to meet eligibility criteria and comply with quality standards. The regime would apply to any firm – whether an audit firm or a specialist consultancy – that offers assurance over ESG or climate-related disclosures.

This regime is voluntary at first, but may become mandatory, particularly if UK SRS disclosures become compulsory.

Why it matters

This initiative is about ensuring that sustainability disclosures are credible and trustworthy. Without oversight, assurance practices vary significantly, creating risks for investors and reputational risks for companies.

By establishing ARGA oversight, the Government aims to:

• drive up quality and consistency of ESG assurance;
• build market confidence; and
• prepare for a future where sustainability assurance is expected as standard.

It also aligns with international moves, such as the EU’s shift to mandatory assurance under its Corporate Sustainability Reporting Directive (CSRD) regime.

Practical implications

For companies and asset managers:

• Choosing an assurance provider: Use of registered firms may become a market expectation (even if not mandated), particularly among listed companies. Asset managers and banks, in particular, might prefer portfolio companies to have assured data from accredited i.e. AGRA registered) sources.
• Enhanced trust and comparability: If a company’s sustainability disclosures are assured by a reputable, overseen provider, investors will have more confidence in those disclosures. Consistent assurance also improves comparability across the market. If disclosures like carbon emissions or diversity metrics are verified to the same standard, investors can more easily compare companies with confidence in the accuracy of the data.

• Quality vs cost: Higher assurance standards may mean increased costs. If assurance providers must meet new regulatory standards and possibly invest in their own training and compliance, assurance fees could rise. Firms will need to factor this into compliance budgets.

ARGA’s oversight may also pave the way to eventually mandate assurance. The consultation seeks views on the possibility of making assurance mandatory for companies reporting under UK SRS in the future.

Timeline

The consultation closes on 17 September 2025.

If supported, ARGA may launch the registration regime in the coming years, with mandatory assurance rules possibly following later.

Conclusion

These 3 consultations mark a significant step in reshaping the UK’s approach to sustainability reporting.

They signal a future in which ESG information is treated with the same seriousness and structure as financial data: with clear obligations, regulated standards, and potential enforcement.

All consultations close on 17 September 2025. The Government is expected to move quickly in response, with regulatory proposals likely from late 2025 into 2026.

Businesses should not wait. Engaging early – by responding to the consultations, reviewing governance structures, and assessing data and reporting readiness – will place stakeholders in a stronger position as the new regime takes shape.

Sharpe Pritchard advises project developers, investors, regulators and public authorities across the energy and infrastructure sectors. To see what we can do for you, please call 020 7405 4600 or email us on enquiries@sharpepritchard.co.uk

[1] https://www.gov.uk/government/speeches/climate-innovation-forum-2025-keynote-speech-by-ed-miliband