UK SRS S1 & S2
The UK Sustainability Reporting Standards (UK SRS) are the UK's sustainability reporting framework, based on ISSB IFRS S1 and S2, requiring companies to disclose sustainability-related financial information.
UK SRS provides a standardized framework for UK companies to report on sustainability risks and opportunities, aligning with global standards while meeting UK regulatory requirements.
UK adoption of ISSB standards
UK SRS 1 and UK SRS 2 standards
Financial materiality focus
Mandatory for in-scope UK companies
UK SRS in 30 Seconds
UK SRS is the UK's sustainability reporting framework
Based on ISSB IFRS S1 and S2 standards
Consists of UK SRS 1 (General) and UK SRS 2 (Climate)
Applies to UK listed and large private companies
Focuses on financial materiality
Mandatory with phased implementation
UK SRS provides the UK framework for sustainability-related financial disclosures
What UK SRS Actually Does
UK SRS requires companies to disclose sustainability-related financial information that is material to investors, following a standardized framework aligned with global standards.
Disclose Sustainability Information
Climate-related risks and opportunities
Other sustainability-related risks
Governance and strategy
Use Standardized Framework
UK SRS 1: General requirements
UK SRS 2: Climate-specific disclosures
Aligned with ISSB IFRS S1 & S2
Apply Financial Materiality
Investor-focused disclosures
Integrate with Financial Reporting
Sustainability information in annual reports
UK SRS provides a standardized framework for sustainability-related financial disclosures
UK SRS aligns UK reporting with global standards while meeting UK regulatory requirements
Who UK SRS Applies To
UK SRS applies to companies operating in the UK, with phased implementation based on company size and listing status.
UK Listed Companies
Companies listed on UK exchanges, including premium and standard listings
Large Private Companies
Large private companies meeting size thresholds (turnover, employees, balance sheet)
Other In-Scope Entities
Other entities as determined by UK government regulations
Non-UK Companies
Companies with UK operations or UK listings may be in scope
Phased Implementation
UK SRS is being implemented in phases, starting with the largest companies and expanding over time. The exact scope and timeline will be determined by UK government regulations.
UK SRS Standards Overview
UK SRS consists of two main standards: UK SRS 1 for general requirements and UK SRS 2 for climate-related disclosures.
UK SRS 1: General Requirements
Sets out the general requirements for disclosing sustainability-related financial information, including governance, strategy, risk management, and metrics and targets. Based on IFRS S1 with UK-specific adaptations.
UK SRS 2: Climate-related Disclosures
Provides specific requirements for climate-related disclosures, including governance, strategy, risk management, and metrics and targets for climate risks and opportunities. Based on IFRS S2 with UK-specific adaptations.
ISSB-Based Framework
UK SRS is based on ISSB IFRS S1 and S2, ensuring alignment with global standards while meeting UK regulatory requirements through the Endorsement Criteria.
UK SRS 1: General Requirements
UK SRS 1 sets out the general requirements for disclosing sustainability-related financial information.
Governance
Disclose the governance processes, controls, and procedures used to monitor, manage, and oversee sustainability-related risks and opportunities.
Strategy
Disclose the actual and potential effects of sustainability-related risks and opportunities on the company's business model, strategy, and financial planning.
Risk Management
Disclose how the company identifies, assesses, and manages sustainability-related risks, including the processes used to prioritize these risks.
Metrics and Targets
Disclose the metrics and targets used to measure and monitor sustainability-related risks and opportunities, including Scope 1, 2, and 3 greenhouse gas emissions.
Foundation for All Sustainability Disclosures
UK SRS 1 provides the foundation for all sustainability-related disclosures, ensuring consistent and comparable reporting across companies.
UK SRS 2: Climate-related Disclosures
UK SRS 2 provides specific requirements for climate-related disclosures, building on the TCFD recommendations.
Climate Governance
Disclose governance processes, controls, and procedures for climate-related risks and opportunities, including board oversight and management responsibility.
Climate Strategy
Disclose the effects of climate-related risks and opportunities on business model, strategy, and financial planning, including resilience analysis and transition plans.
Climate Risk Management
Disclose how climate-related risks are identified, assessed, and managed, including the use of climate-related scenario analysis.
Climate Metrics and Targets
Disclose Scope 1, 2, and 3 greenhouse gas emissions, climate-related targets, and progress toward achieving those targets.
TCFD-Aligned
UK SRS 2 is aligned with TCFD recommendations, providing a comprehensive framework for climate-related disclosures that builds on existing best practices.
Endorsement Criteria
The Endorsement Criteria are the UK government's requirements for adopting international sustainability standards in the UK.
Purpose of Endorsement Criteria
The Endorsement Criteria ensure that:
- • High quality: Standards are robust and credible
- • UK-appropriate: Suitable for UK market needs
- • Compatible with UK law: Aligns with UK Companies Act and other legislation
- • Cost-benefit balanced: Benefits justify compliance costs
UK SRS and Endorsement Criteria
UK SRS has been developed to meet the Endorsement Criteria, with UK-specific amendments to IFRS S1 and S2 to ensure compatibility with UK law and regulatory practice while maintaining alignment with global standards.
FRC Role
The Financial Reporting Council (FRC) is responsible for issuing UK SRS and ensuring it meets the Endorsement Criteria. The FRC provides guidance and oversees implementation of the standards.
UK-Specific Adaptation
The Endorsement Criteria ensure that UK SRS meets UK regulatory requirements while maintaining alignment with global ISSB standards, providing UK companies with a framework that works in both domestic and international contexts.
Reporting Requirements
Companies reporting under UK SRS must follow specific requirements to ensure consistent and comparable disclosures.
Core Requirements
- • Use UK SRS 1 and 2: Apply both standards for comprehensive reporting
- • Apply financial materiality: Disclose material sustainability-related information
- • Integrate with annual reporting: Include in annual reports
- • Provide comparable information: Enable year-on-year comparison
Materiality Assessment
Companies must assess which sustainability-related risks and opportunities are material to investors and disclose information accordingly. This assessment should be documented and applied consistently.
Disclosure Location
UK SRS disclosures should be included in the company's annual report or a separate sustainability report that is incorporated by reference into the annual report.
Assurance
While assurance requirements will be determined by UK regulations, companies are encouraged to obtain independent assurance to enhance the credibility of their sustainability disclosures.
Consistent and Comparable
UK SRS requirements ensure that companies provide consistent and comparable sustainability-related financial information, enabling investors to make informed decisions.
Implementation Timeline
UK SRS is being implemented in phases, with different timelines for different company sizes and types.
Phase 1: Large Companies
Large UK listed companies and large private companies are expected to report under UK SRS from 2025, subject to final government regulations.
Phase 2: Medium Companies
Medium-sized companies will be brought into scope in subsequent phases, with more time to prepare for compliance.
Phase 3: Smaller Companies
Smaller companies may have simplified reporting requirements or longer implementation timelines, subject to government decisions.
Timeline Updates
The exact implementation timeline will be determined by UK government regulations and FRC guidance. Companies should monitor regulatory developments and prepare accordingly.
Phased Approach
The phased implementation approach allows companies to build capacity gradually while ensuring widespread adoption of UK SRS over time.
Key Financial Mechanisms
UK SRS affects companies and investors through specific financial mechanisms.
1. Transparency Mechanism
Sustainability performance disclosed → Investor visibility
2. Risk Mechanism
Sustainability risks identified → Risk perception
3. Capital Market Mechanism
Investors use sustainability data → Cost of capital impact
4. Compliance Cost Mechanism
Reporting requirements → Operational cost increase
Financial Outputs:
• Risk repricing - investor assessment of sustainability risk
• Investment flows - investor decisions based on disclosures
• Pricing of risk - sustainability data affects cost of capital
• Operating cost increase - reporting and systems
Real Financial Pathways
Disclosure Pathway
UK SRS Reporting → Investor Visibility → Risk Assessment → Valuation Impact
Cost of Capital Pathway
Strong Sustainability Disclosure → Investor Confidence → Lower Cost of Capital
Compliance Cost Pathway
Reporting Requirements → Data + Systems → Higher Costs
Risk Exposure Pathway
Disclosed Sustainability Issues → Higher Perceived Risk → Capital Impact
Market Positioning Pathway
Strong Sustainability Performance → Competitive Advantage → Capital Attraction
Impact on Business & Strategy
Operational Impact
Data collection, reporting systems, internal controls
Strategic Impact
Sustainability integrated into decision-making and strategy
Investor Impact
Increased transparency, better access to capital
Competitive Impact
Market differentiation, brand value, talent attraction
UK SRS drives sustainability integration into UK corporate strategy
UK SRS transforms sustainability from a reporting exercise into a strategic business function
Link to Financial Impact
Risk → disclosure
Capital → investor decisions
Costs → compliance
Value → market positioning
UK SRS is a key mechanism through which sustainability becomes visible, measurable, and actionable in UK capital markets
UK SRS vs ISSB
UK SRS is the UK's adoption of ISSB standards, with minor adaptations to meet UK regulatory requirements.
Substantially the Same
UK SRS 1 and S2 are substantially the same as IFRS S1 and S2, with the core requirements and structure maintained to ensure global alignment.
UK-Specific Amendments
Minor amendments have been made to ensure compatibility with UK law, particularly the UK Companies Act, and to align with UK regulatory practice overseen by the FRC.
Endorsement Criteria
UK SRS meets the UK government's Endorsement Criteria, ensuring that the standards are high-quality, appropriate for the UK market, and compatible with UK law.
Global Alignment
By basing UK SRS on ISSB standards, the UK ensures alignment with global sustainability reporting practices, enabling UK companies to report consistently with international peers.
Global Alignment with UK Adaptation
UK SRS provides UK companies with a framework that aligns with global ISSB standards while meeting UK regulatory requirements through the Endorsement Criteria.
UK SRS vs CSRD
UK SRS and CSRD represent different approaches to sustainability reporting, reflecting different regulatory philosophies.
Materiality Approach
- • UK SRS: Financial materiality - focus on investor needs
- • CSRD: Double materiality - both impact and financial materiality
Prescriptiveness
- • UK SRS: Less prescriptive, principles-based
- • CSRD: Highly prescriptive, detailed ESRS standards
Stakeholder Focus
- • UK SRS: Investor-focused
- • CSRD: Multi-stakeholder approach
Assurance
- • UK SRS: Assurance requirements to be determined
- • CSRD: Mandatory assurance (limited moving to reasonable)
Different Regulatory Approaches
UK SRS and CSRD represent different regulatory approaches. UK SRS focuses on investor needs with financial materiality, while CSRD has broader stakeholder focus with double materiality. Companies operating in both jurisdictions must comply with both frameworks.
Challenges & Limitations
Data Availability
Collecting the data required for UK SRS reporting can be challenging, particularly for Scope 3 emissions and value chain disclosures.
Resource Requirements
Implementing UK SRS requires dedicated resources, including personnel, systems, and potentially external consultants.
Regulatory Uncertainty
The exact implementation timeline and requirements are subject to final government regulations, creating uncertainty for companies.
Multi-Jurisdiction Compliance
Companies operating across jurisdictions must comply with multiple frameworks (UK SRS, CSRD, ISSB), increasing complexity.
Preparation is Key
Despite challenges, early preparation for UK SRS can help companies build capacity, reduce compliance costs, and gain competitive advantage.
Key Takeaways
UK SRS is the UK's adoption of ISSB standards
UK SRS consists of UK SRS 1 (General) and UK SRS 2 (Climate)
UK SRS focuses on financial materiality
UK SRS meets the Endorsement Criteria
UK SRS is mandatory for in-scope companies
UK SRS aligns with global ISSB standards
UK SRS enhances transparency and access to capital
UK SRS Provides the UK Framework for Sustainability Reporting
UK SRS provides UK companies with a standardized framework for sustainability-related financial disclosures, aligning with global standards while meeting UK regulatory requirements.