UK Releases Draft Sustainability Reporting Standards Based on ISSB Framework

Key Takeaways

• Draft UK SRS standards released: Based on ISSB's IFRS S1 and S2, with targeted UK-specific amendments.
• Consultation open: Stakeholder feedback accepted until 17 September 2025.
• Climate-first relief extended: Companies could focus on climate disclosures for two years before broader ESG topics are required.
• No first-year lag: Disclosures must align with financial statements from the start, no delay allowed.
• Part of wider reforms: Linked to consultations on transition plans and assurance provider oversight.

Deep Dive

The UK government has published exposure drafts of its proposed UK Sustainability Reporting Standards (UK SRS), a significant move toward aligning with the global baseline for sustainability disclosures developed by the IFRS Foundation’s International Sustainability Standards Board (ISSB).

The UK SRS (comprising draft standards UK SRS S1 and S2) form the backbone of a potential new sustainability reporting framework for UK entities. The standards are closely modeled on IFRS S1 (general sustainability-related disclosures) and IFRS S2 (climate-related disclosures), but with targeted amendments to reflect the UK legal and regulatory context.

The government is seeking feedback on the proposed standards, including input on the anticipated costs and benefits of adoption. The consultation is open until September 17, 2025, and will inform future decisions on whether to make reporting under UK SRS mandatory for certain companies.

A Phased Step Toward Mandatory Disclosure

The draft standards were released as part of a broader package of consultations tied to the UK’s sustainable finance agenda. In addition to the UK SRS consultation, the government is also collecting feedback on:

• Proposed requirements for climate-related transition plans, which it has committed to mandating for large companies and financial institutions.
• The development of a voluntary registration regime for providers of sustainability assurance.

Together, these measures aim to strengthen transparency, enhance the reliability of ESG information in financial markets, and position the UK as a global leader in sustainable finance.

“We want to work with businesses to develop a ‘common sense’ sustainable reporting framework that is transparent, clear and proportionate for those investing in the UK,” said Justin Madders, Minister for Competition and Markets. “These measures will enhance competition in the sustainability assurance sector, helping to deliver on our Plan for Change and kickstart economic growth.”

Amendments to ISSB Standards

While the UK SRS closely follows the ISSB’s global framework, several proposed modifications are intended to support implementation and reduce friction for UK reporters:

• Climate-first transition relief: Companies would be granted two years to report solely on climate-related matters before expanding to broader sustainability disclosures, an extension from the one-year relief in the ISSB version.
• Removal of first-year lag allowance: The UK draft eliminates an ISSB provision that allowed companies to publish sustainability disclosures after their financial statements in the first year of adoption. The government argues this weakens the principle of “connectivity” between sustainability and financial reporting.
• Flexibility in industry classification: Firms would not be required to use the Global Industry Classification Standard (GICS) for reporting financed emissions. Instead, they may use other classification systems already integrated into their reporting frameworks.

Other proposed amendments include technical updates to implementation timelines and clarification that any mandatory adoption of the standards would be subject to future legislative or regulatory decisions, among others.

If endorsed, final versions of UK SRS S1 and S2 could be published as early as autumn 2025, available for voluntary use. Mandatory application, whether through the Companies Act 2006 or FCA listing rules, would be determined through subsequent consultations and subject to further guidance down the road.

The government has emphasized that international comparability remains a top priority for them. Over 30 jurisdictions have already begun aligning with ISSB standards, and the UK aims to maintain its leadership position in global sustainable finance by advancing a regulatory framework that balances market confidence with practical implementation.

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