UK Consultation on Modernising Corporate Reporting: Sustainability Reporting Implications for Companies

The consultation reinforces the UK’s focus on financially material, decision-useful reporting while exploring how sustainability disclosures can be integrated into a more streamlined corporate reporting framework.

Corporate reporting requirements in the UK continue to evolve as policymakers seek to balance investor information needs with proportionate and efficient reporting requirements. Against this backdrop, the UK Government has launched a consultation on modernising corporate reporting.

While the consultation extends well beyond sustainability reporting, it includes several proposals and discussion points relevant to sustainability-related and other non-financial disclosures, including the future treatment of existing reporting requirements and broader efforts to streamline the UK reporting landscape.

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How the UK Corporate Reporting Consultation Could Affect Sustainability Reporting

A recurring theme throughout the consultation is the importance of reporting information that supports investment and lending decisions. The government frames corporate reporting as a mechanism for providing investors and creditors with information about a company’s strategy, performance, risks and future prospects.

Building on this principle, the consultation proposes reforms to the strategic report aimed at creating a more flexible and less prescriptive reporting framework. The government is seeking views on how companies can be better empowered to disclose information that meets a financial materiality test, while moving towards a more principles-based approach to narrative reporting. The consultation also seeks views on enhanced reporting of principal risks and whether greater transparency around assurance of strategic reporting, including sustainability reporting, could help improve trust and confidence in corporate disclosures.

This focus on financially material information is consistent with broader developments in sustainability reporting, including the ISSB’s IFRS Sustainability Disclosure Standards.

Location of Sustainability-Related Financial Disclosures

The government is seeking views on whether sustainability-related financial disclosures should continue to be reported as part of the strategic report or whether they should be presented separately within the corporate reporting package.

The consultation notes differing stakeholder views. Some stakeholders supported a distinct sustainability statement, arguing that evolving international and European sustainability reporting requirements can result in lengthy disclosures that may outweigh other material information in the strategic report. Others expressed concern that a separate statement could create an artificial separation between sustainability issues and business strategy, or imply that sustainability-related disclosures are not financially material or strategic in nature.

Forward-Looking Sustainability Disclosures and Liability

The consultation seeks views on whether the current legal framework governing sustainability-related financial disclosures remains appropriate, particularly where reporting includes forward-looking information, estimates, assumptions and scenario analysis. This includes consideration of companies’ potential liability for sustainability-related statements and whether the existing framework strikes the right balance between accountability and encouraging meaningful disclosure. The discussion is relevant to the broader development of sustainability reporting in the UK, including the future implementation of UK Sustainability Reporting Standards (UK SRS), although the consultation does not propose specific changes to reporting requirements or legal protections.

Greater Flexibility for SECR Reporting

The consultation proposes a change to the location requirements for Streamlined Energy and Carbon Reporting (SECR) disclosures. Currently, SECR reporting is included within the directors’ report. As the consultation proposes removing the directors’ report from the annual report framework, SECR disclosures would no longer have a prescribed reporting location. Instead, companies would be free to place SECR disclosures within any section of the first half of the annual report that they consider most appropriate. The government notes that this approach is intended to reflect the broader flexibility being pursued through the consultation.

The consultation also notes that the Department for Energy Security and Net Zero (DESNZ) intends to launch a separate consultation on SECR and the Energy Savings Opportunity Scheme (ESOS) later in 2026. That consultation is expected to consider the future framework for energy and carbon reporting and explore potential longer-term reforms to SECR.

Proposed “Very Large” Company Category for Non-Financial Reporting

The consultation highlights that different non-financial reporting requirements currently apply to different categories of companies using a range of thresholds and scope criteria. These requirements cover topics including environmental matters, employees, social matters, human rights, anti-corruption and anti-bribery, carbon emissions, climate-related financial disclosures and corporate governance arrangements.

To simplify the framework, the government is seeking views on whether a new category of “very large” companies should be introduced for certain non-financial reporting requirements. The consultation notes that there is currently no single definition of a “very large” company despite a number of reporting obligations applying only to the largest entities. The government has not proposed a specific threshold and is seeking feedback on how such a category could be defined and which reporting requirements should fall within its scope.

Interaction with UK SRS and Related Reporting Requirements

The consultation does not propose changes to the UK’s existing sustainability reporting requirements. The government notes that several related policy initiatives are being considered separately, including the implementation of UK SRS, transition plan reporting and potential sustainability assurance requirements. Looking ahead, the government will consider how UK SRS should be reflected in the Companies Act 2006, taking into account feedback from this consultation, the Post-Implementation Review (PIR) of climate-related financial disclosures and related policy processes.

The consultation also notes significant overlaps between existing Climate-related Financial Disclosure (CFD) requirements, UK SRS and proposed transition plan requirements, and states that future policy development will seek to minimise unnecessary duplication. For example, some companies may be able to use UK SRS S2 disclosures to meet certain CFD reporting obligations where requirements overlap.

The consultation confirms that it does not include proposals relating to the UK’s Climate-related Financial Disclosure (CFD) requirements. The government is currently conducting a Post-Implementation Review (PIR) of the regulations and is seeking evidence on how climate-related disclosures are being used by investors, creditors and other stakeholders. The review is expected to conclude by spring 2027, and any future changes to the CFD requirements would be subject to further consultation.

Key Considerations for Companies

For organisations with existing sustainability reporting programmes, the most relevant areas of the consultation are:

• Potential changes to where sustainability-related financial disclosures are located within annual reports.
• Potential changes to the location of SECR disclosures within annual reports.
• The proposed simplification of non-financial reporting requirements and thresholds.
• Discussion around a potential “very large” company category for certain reporting obligations.
• The continued emphasis on material, decision-useful information for investors and creditors.
• Ongoing policy discussions concerning UK SRS implementation, transition plans and sustainability assurance outside the scope of this consultation.

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