UK Releases Draft Climate And Sustainability Standards

The UK government has published draft climate and sustainability reporting standards, a significant step towards greater corporate transparency and accountability over environmental and social governance. The draft standards, published , are being framed as the basis for future UK sustainability-related financial disclosure framework, complementing and drawing on international initiatives led by the International Sustainability Standards Board (ISSB), an organization established by the IFRS Foundation.

This move is part of an even broader series of consultations currently being undertaken by the UK government, such as climate transition plan requirements as well as sustainability reporting assurance arrangements reviews too. The move mirrors the nation's resolve to further enhance its sustainable finance leadership as well as guaranteeing that the UK businesses are still aligned with global reporting standards.

Central to the announcement are the draft standards "UK SRS S1" and "UK SRS S2." They map to the ISSB's S1 standard, which discusses the broad sustainability-related disclosures, and S2, discussing the climate-related reporting in particular. Although the UK standards generally align with the ISSB structure, they include a few UK-specific differences that respond to domestic policy priorities and industry stakeholder demands.

One of the most important proposed changes is expanding the "climate-first" reporting relief. Under this approach, firms would be permitted to specialize in climate-focused disclosures within an initial period before broadening into more generic sustainability-related exposures. The UK's draft standards propose granting a two-year relief period, whereas the ISSB grants a one-year relief. This add-on seeks to help companies build capacity and allocate their resources initially to climate risk reporting, which is seen as anshort-term priority.

On the other hand, UK needs abolish a relief that allows firms to delay publication of sustainability-related information against their financial reports in the first year of reporting. The UK government has provided the argument that deferral causes volatility within the connectivity principle between the financial and the sustainability reports. Connectivity has been viewed as being essential in a bid to enable investors and other stakeholders to have an uninterrupted and comprehensive view of a firm's performance and strategic risks.

The new rules and the consequent consultations are an extended consideration in government circles on whether and how to require UK companies to make sustainability disclosures. Mandatory uptake, though not yet in the bag, has been asserted by the government as actively polling opinion on the possible cost and benefit of the standards outlined. These findings will be used in subsequent policy decisions about which bodies to require mandatory reporting to and how best to achieve phasing.

The period for public consultation of the draft standards and related proposals expires on 17 September 2025. Throughout this period, businesses, investors, auditors, and others are invited to comment. The government hopes to publish finalized and published standards towards the end of this year with a view to creating a solid and balanced sustainability disclosure regime.

UK Government's Competition and Markets Minister, Justin Madders, reiterated the government's commitment to the creation of a simple and rational reporting system. He added, "We want to work with businesses to create a 'common sense' sustainable reporting system that is clear, transparent, and proportionate for those investing in the UK. These steps will encourage competition in the sustainability assurance market, supporting our Plan for Change and supporting economic growth."

As well as the consultation on standards, the government has also initiated a parallel consultation on transition plans. It reaffirmed its intention to require large corporations and financial institutions — banks, asset managers, and pension funds — to create and implement good transition plans. These suggestions will need to be consistent with the 1.5°C global warming target of the Paris Agreement, consistent with the government's assertion that UK companies are to be at the vanguard of the global fight against climate change.

A further consultation has also been initiated on introducing a voluntary registration scheme for assurance providers of sustainability reporting. This step will hopefully enhance confidence in sustainability disclosures by promoting an active and good-quality assurance market.

These together are intended to build a consistent and internationally aligned sustainability reporting framework in the UK. By combining global best practice with domestic interests, the government hopes to make the UK a centre for sustainable investment and corporate responsibility. The result of these consultations will have the potential to influence not just the course of UK policy but also the behavior of companies in the future.