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Most businesses are aware of the increasing focus on sustainability and the expectations of a wide range of stakeholders to see relevant disclosures in the annual report and accounts. These expectations are only set to increase for all companies with further reporting requirements becoming mandatory in the future.

On this page, the Corporate Reporting Faculty provides an overview of current and future UK reporting requirements and signposts relevant practical guidance for preparers.

Current UK reporting requirements

Strategic report - general

Under UK law, all companies that are not small are required to provide an overview of their business, including a description of the principal risks and uncertainties facing the company, in a strategic report.

The strategic report should contain information that is material to shareholders and which helps them assess whether the directors have performed their duty to promote the success of the company. When the directors of a company consider a sustainability matter to be a principal risk or uncertainty facing the company, this should be disclosed in the strategic report.

Quoted companies and public interest entities (PIEs) with over 500 employees are also subject to specific reporting requirements on environmental matters within the strategic report, for example, details of policies pursued on environmental matters and the effectiveness of these policies. This information is required to the extent that it provides information that is necessary for an understanding of the development, performance, position (and impact - PIEs only) of the company's business. 

Strategic report - S172 reporting

Large companies are required to include a statement in the strategic report which describes how the directors have performed their duty under section 172 of the Companies Act 2006. This duty requires directors to promote the success of the company for the benefit of its members as a whole, and in doing so have regard to the impact of the company’s operations on the community and the environment, among other matters.

Strategic report - Climate-related Financial Disclosures

Mandatory climate-related financial disclosure requirements were introduced into UK legislation in 2022 for certain large companies and LLPs. The disclosures are required as part of the Non-Financial and Sustainability Information (NFSI) statement within their strategic report. LLPs not required to produce a strategic report should include the information in the Energy and Carbon report (see below).

The requirements are based on the Task Force for Climate-Related Financial Disclosures (TCFD) recommendations which encourage disclosure across four key areas: governance, strategy, risk management, and metrics and targets. Government issued Q&A-style guidance on the regulations aims to help reporters understand how to meet the new requirements.

The FCA listing rules LR 9.8.6R and LR 14.3.27R require certain listed companies to include a statement in the annual report which sets out whether the company has made disclosures consistent with the TCFD framework. Many of these companies will also be subject to the climate-related financial disclosure requirements mentioned above. There is a high degree of consistency between the two sets of requirements as both are based on, or directly reference, TCFD recommended disclosures.

Directors' report - Streamlined Energy and Carbon Reporting

Large companies, quoted companies, and large LLPs are required to comply with streamlined carbon and energy reporting requirements. For companies, the associated disclosures must be included in the directors’ report. For LLPs, the associated disclosures must be included in the Energy and Carbon report which forms part of the annual report.

Financial Statements

Companies must consider climate-related matters when applying accounting standards where their effect is material in the context of the financial statements as a whole. When climate-related matters are considered material, disclosures are required in accordance with those standards. 

For UK GAAP reporters, these matters are also explored in the faculty’s article on climate-related reporting in FRS 102 and the FRC’s factsheet on climate-related matters for FRS 102 reporters.

For IFRS reporters, the IASB have issued some updated educational material to support inclusion of the effects of climate-related matters on financial statements.

By All Accounts

The Corporate Reporting Faculty's digital magazine provides features and opinion pieces on the latest developments.

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Future UK reporting requirements

IFRS Sustainability Disclosure Standards

The International Sustainability Standards Board (ISSB) has issued its first two IFRS Sustainability Disclosure Standards: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.

In its March 2023 Green Finance Strategy update, the UK Government reconfirmed its commitment to assess and decide whether to endorse the standards for use in the UK. The UK Government has indicated that once an endorsement decision is made, these standards will provide the basis for future obligations within company law and FCA listing requirements.

Transition plans

IFRS S2 includes a requirement for entities to disclose any climate-related transition plan it has. A transition plan is an aspect of an entity’s overall strategy that lays out the entity’s targets, actions or resources for its transition towards a lower-carbon economy.

Established by the UK Government in 2022, the Transition Plan Taskforce (TPT) has developed a Disclosure Framework for transition plans which provides a set of disclosure recommendations that an entity can use as guidance on how to report more effectively on the transition plan-related aspects of IFRS S2.

There are currently no requirements for entities to report against the TPT Disclosure Framework although the government has committed to consulting on the introduction of requirements for the UK’s largest private companies to disclose their transition plans if they have them, ensuring parity between listed and private companies.

UK Green Taxonomy

To address a lack of common definitions about ‘what counts as green’, the UK government is set to implement a UK Green Taxonomy. This taxonomy will clearly define the criteria which specific economic activities must meet in order to be considered environmentally sustainable and, therefore, ‘Taxonomy-aligned’.

The UK Government has indicated that once the UK Green Taxonomy has been consulted on and finalised, there will be a minimum two-year voluntary application period before the introduction of mandatory obligations.

Other resources

Corporate reporting content

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Financial reporting

A range of practical resources on UK GAAP, IFRS and UK regulations.

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Non-financial reporting

Overviews of reporting requirements, plus a range of resources and guidance.

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