Jun 12
The UK Sustainability Reporting Standards, known as UK SRS S1 and UK SRS S2, were published in final form on 25 February 2026. They are currently available for voluntary use by any entity that chooses to adopt them.
The FCA has consulted on replacing existing TCFD-aligned listing rules with requirements linked to UK SRS for certain listed companies, with rules expected to come into force from 1 January 2027, subject to the FCA’s final Policy Statement in autumn 2026. Large private companies and LLPs are being considered separately through the government’s wider corporate reporting reform programme.
SMEs are not the primary target of direct mandatory UK SRS reporting. But that does not mean they can ignore the standards. Large customers, lenders, investors and public sector buyers will increasingly need better sustainability data from their suppliers. For many SMEs, UK SRS will arrive indirectly through supply chain questionnaires, tender requirements and finance applications before any direct reporting duty appears.
This guide explains what UK SRS S1 and S2 require, how they relate to SECR, what the assurance layer means, and how SMEs can build a practical compliance roadmap without overcomplicating the process.
The 2 standards are closely based on the ISSB’s global sustainability disclosure standards, IFRS S1 and IFRS S2.
UK SRS S1 provides the general framework for sustainability-related financial disclosures. UK SRS S2 applies specifically to climate-related risks and opportunities.
Both standards are built around 4 pillars.
An organisation must explain how sustainability-related risks and opportunities are monitored, managed and overseen.
That means identifying who has responsibility: the board, a committee, the finance director, the managing director, or another named person. It also means explaining how often sustainability matters are reviewed and how relevant findings are escalated.
For larger organisations, this may include links to remuneration, incentives and performance frameworks. For SMEs, the governance model can be simpler, but it still needs to be clear.
The organisation must explain how sustainability-related risks and opportunities affect its business model, strategy and financial position over the short, medium and long term.
For climate reporting under UK SRS S2, this includes considering climate resilience and, where relevant, scenario analysis. The standard does not require every business to create a complicated modelling exercise, but it does expect genuine consideration of how climate risk could affect operations, costs, customers, assets, supply chains and access to finance.
The organisation must describe how it identifies, assesses, prioritises and monitors sustainability-related risks and opportunities.
This should connect to the wider risk management process. Sustainability should not sit in a separate document that nobody uses. It should link to operational risk, financial planning, insurance, procurement, supply chain management and business continuity.
The organisation must disclose the metrics it uses to measure and manage material sustainability-related risks and opportunities.
Under UK SRS S2, this includes greenhouse gas emissions. Scope 1 and Scope 2 emissions are the starting point. Scope 3 emissions, which cover value chain emissions, are more complex and are one reason large companies will ask suppliers for better data.
The broader business context is covered in our pieces on the future of financial planning and why internal audit supports business growth.
The timing is important because UK SRS is voluntary now, but mandatory use is being developed in stages.
| Entity type | Position in June 2026 | Expected timing |
|---|---|---|
| In-scope listed companies | FCA consultation CP26/5 has closed | Rules expected to come into force from 1 January 2027, subject to final FCA rules |
| Secondary listings, depositary receipts and certain other listed categories | Included within FCA proposals, with category-specific treatment | Subject to final FCA Policy Statement |
| Large private companies and LLPs | Government review expected through corporate reporting reforms | No final scope or start date confirmed |
| SMEs | Not directly in proposed mandatory scope | No direct mandatory date confirmed |
| SMEs supplying large customers | Indirectly affected through Scope 3, procurement and finance requests | Already beginning through customer questionnaires |
For the first in-scope listed companies, UK SRS-aligned annual reports would begin to appear in 2028 for financial years starting on or after 1 January 2027.
The key distinction for SMEs is between the indirect data burden, which is already emerging, and a formal reporting obligation, which is not currently confirmed. Our piece on Making Tax Digital and what UK and Irish businesses need to know provides a useful parallel: once compliance systems start moving, the businesses that prepare early usually find the transition easier.
Before UK SRS, the main UK framework for energy and carbon reporting was Streamlined Energy and Carbon Reporting, known as SECR.
SECR came into force for financial years beginning on or after 1 April 2019. It remains a separate requirement and has not been replaced by UK SRS.
A large UK unquoted company or LLP is generally in scope if it meets at least 2 of the following 3 thresholds:
Quoted companies have separate SECR duties. Low energy users may benefit from reduced disclosure requirements, but should still check the rules carefully.
SECR requires disclosure of energy use and greenhouse gas emissions, usually including Scope 1 and Scope 2 emissions, an intensity ratio, prior year comparatives and energy efficiency actions taken.
The key limitation is that SECR is mainly retrospective. It records energy use and emissions. UK SRS goes further by requiring governance, strategy, climate risk, resilience and financial-materiality disclosures.
For large companies already reporting under SECR, UK SRS builds on the same data foundation but asks wider questions. For SMEs, the relevance is indirect: the large customers already collecting SECR data are often the same customers who will ask suppliers for emissions information under UK SRS-aligned reporting.
Our business owner’s guide to capital allowances covers the related area of energy efficiency investment, and our specialist tax team advises on the reliefs available.
Sustainability reporting is moving towards the same discipline expected in financial reporting: clear data, documented methodology, controls, review and evidence.
ISSA (UK) 5000 is the UK version of the international sustainability assurance standard. It applies to assurance engagements on sustainability information reported for periods beginning on or after 15 December 2026, with early application permitted.
The FRC is also developing an interim register of sustainability assurance practitioners. The FCA has consulted on listed companies explaining whether they have obtained external assurance over sustainability disclosures. Mandatory assurance has not yet been fully settled across all reporting categories, but the direction is clear: sustainability data needs to be capable of review.
For SMEs, the impact is indirect but important. If a large customer includes your emissions data in its Scope 3 reporting, that data may be reviewed as part of the customer’s assurance process. A figure that cannot be traced back to bills, mileage records, emission factors or a documented methodology is weak evidence.
Our pieces on what to expect during an external audit and how a quality external audit strengthens trust with lenders and investors explain the audit-readiness discipline that now increasingly applies to sustainability data as well as financial statements.
UK SRS uses a financial materiality lens. A sustainability risk or opportunity is material if it could reasonably be expected to influence decisions made by investors, lenders or other creditors.
This is different from the EU’s CSRD, which uses double materiality. Double materiality considers both how sustainability affects the company and how the company affects people and the environment.
The distinction matters. UK SRS is primarily investor-focused. It asks what sustainability issues could affect cash flows, access to finance, cost of capital, strategy and enterprise value.
For cross-border businesses with Irish operations, the EU position is also changing. The EU’s Omnibus package has moved towards reducing and simplifying CSRD reporting, including a narrower scope and stronger value chain protections for smaller businesses. The detail remains important and should be checked against local implementation.
Our Cross-border tax advisory team advises on the broader UK-Ireland regulatory picture, while our pieces on VAT compliance for businesses operating across the UK to Ireland border and setting up a company in both the UK and Ireland cover related structural issues.
Most SMEs do not need a full UK SRS report today. What they do need is a sensible data and governance structure that can answer customer, lender and investor questions.
Start with Scope 1 and Scope 2 emissions. These are the easiest to measure and the most likely to appear in customer questionnaires.
Actions to complete:
This does not need to be overengineered. The aim is to produce consistent, traceable numbers.
Once the foundations are in place, begin work on the main Scope 3 categories most likely to matter.
For many SMEs, this includes purchased goods and services, business travel, employee commuting, waste and distribution. Start with the categories most relevant to your customer base and sector.
Actions to complete:
Our digital bookkeeping team supports the data systems side, and our piece on switching to cloud accounting for SMEs covers the infrastructure that makes recurring data collection easier.
If a major customer, lender or investor asks for a formal sustainability report, you need better documentation.
Actions to complete:
The goal is not to create unnecessary work. It is to avoid the common problem of providing estimates that cannot later be explained.
Sustainability investment and tax planning should be considered together.
Energy efficiency capital expenditure may qualify for capital allowances. From 1 April 2026 for Corporation Tax, the main pool writing-down allowance rate reduced from 18% to 14%, but full expensing, the 40% first-year allowance and the Annual Investment Allowance can still provide valuable relief where the conditions are met. Our business owner’s guide to capital allowances explains what qualifies.
R&D tax relief may apply where a business is genuinely developing new or improved sustainable products, processes, materials, energy systems or construction methods. The UK merged R&D scheme and the Irish R&D corporation tax credit both need careful analysis. Ireland’s R&D tax credit increased to 35% for accounting periods beginning on or after 1 January 2026, with the first-year payable threshold increased to €87,500.
Our articles on what qualifies for R&D tax credits in the UK and Ireland, the companion R&D piece and common mistakes businesses make claiming R&D tax relief cover the criteria.
Land remediation relief explained is relevant where contaminated or derelict land is being cleaned up, and the Patent Box can provide a reduced 10% corporation tax rate on profits from qualifying patented inventions.
The practical discipline is to map sustainability investment against available reliefs before spending is committed. Our SME business solutions team and specialist tax team work together on that planning.
The data requests that in-scope companies send to suppliers vary, but the same themes appear repeatedly.
| Data category | Typical question | How to prepare |
|---|---|---|
| Scope 1 emissions | What are your direct emissions from owned or controlled sources? | Use fuel, gas and vehicle records |
| Scope 2 emissions | What are your emissions from purchased electricity? | Use electricity bills and recognised emission factors |
| Energy consumption | How much energy did your business use? | Collect annual kWh data from bills |
| Emissions intensity | What are your emissions per revenue, headcount or output? | Divide emissions by the chosen denominator |
| Climate risk | What physical or transition risks affect supply? | Prepare a short narrative assessment |
| Targets | Do you have emissions reduction targets? | Document any commitments and progress |
| Governance | Who oversees sustainability? | Prepare a simple governance statement |
| Methodology | How were the figures calculated? | Record the calculation basis and assumptions |
Suppliers that can respond with clear, documented figures are more likely to satisfy customer procurement requirements. Those that cannot respond may find themselves at a disadvantage, even if they are not directly regulated.
Sustainability data is also appearing more often in finance discussions. Our corporate finance team supports businesses where ESG credentials, finance terms and investment plans overlap.
As sustainability data becomes commercially important, disputes become more likely. Greenwashing claims, inaccurate emissions data, overstated targets and unsupported supplier statements can all create legal, commercial and reputational problems.
Where sustainability figures or commercial claims are challenged, the evidence matters. You may need to reconstruct calculations, verify source records and explain the methodology.
Our forensic accountants UK team supports that type of analysis. Our pieces on what a forensic accountant does and when you need one, forensic accounting vs audit and red flags of financial fraud in SMEs explain where this work sits.
For businesses where sustainability-linked finance or trading conditions are under pressure, our corporate restructuring accountants team can help manage the position. Our pieces on how recovery accountants help improve cash flow and what an insolvency accountant does in business distress cases cover the wider recovery landscape.
When building a sustainability compliance roadmap, businesses should also keep the following developments in view:
Our pieces on Making Tax Digital explained and Making Tax Digital and what UK and Irish businesses need to know cover the digital filing obligations.
For owner-managers thinking about longer-term planning, our articles on how to prepare your business for sale, due diligence and its importance in business, the indispensable role of chartered accountants in mergers and acquisitions and protecting the family business with a family charter explain how sustainability data increasingly appears in transactions and succession planning.
For cross-border operations, tax planning for UK businesses expanding overseas and cross-border payroll cover related planning areas. For directors filing personally, our self-assessment tax returns guide and HMRC PAYE issues pieces are useful starting points. For wider governance, see the key financial KPIs every SME owner should be monitoring monthly and how management accounts help SME owners.
UK SRS S1 and UK SRS S2 are the UK’s endorsed sustainability reporting standards, based on the ISSB’s IFRS S1 and IFRS S2. They were published in final form on 25 February 2026 and are currently available for voluntary use.
Not directly at present. SMEs are not in the proposed mandatory scope. However, SMEs may be asked for emissions and sustainability data by larger customers, lenders or investors who need that information for their own reporting.
SECR is a UK energy and carbon reporting obligation for quoted companies, large unquoted companies and large LLPs. It is mainly retrospective and focuses on energy use and emissions. UK SRS is broader and more forward-looking, covering governance, strategy, risk management, metrics, targets and climate-related financial risk.
ISSA (UK) 5000 is the UK sustainability assurance standard. It applies to assurance engagements on sustainability information for periods beginning on or after 15 December 2026. It is intended to support more consistent and credible assurance over sustainability disclosures.
UK SRS uses financial materiality, focusing on sustainability matters that could affect enterprise value, cash flows, access to finance or cost of capital. CSRD uses double materiality, which also considers the company’s impact on people and the environment.
Most initial requests focus on Scope 1 and Scope 2 emissions, total energy use, emissions intensity, business travel, waste, water use, climate risks and any reduction targets. The more advanced the customer’s reporting process, the more evidence they are likely to request.
Energy efficiency spending may qualify for capital allowances. Innovation in sustainable products, processes or materials may qualify for R&D tax relief. Land remediation relief may apply to qualifying site clean-up, and the Patent Box can reduce corporation tax on profits from qualifying patented inventions. These reliefs should be considered before expenditure is committed.
Building sustainability compliance infrastructure before a customer demands it is far less disruptive than doing it under a short deadline.
As chartered accountants Northern Ireland, the wider UK and Ireland businesses rely on for integrated accounting, tax and compliance work, SCC Chartered Accountants connects sustainability data to available tax reliefs, financial reporting obligations and audit-readiness requirements.
Our SME business solutions team leads the operational side, our specialist tax and tax compliance teams connect sustainability investment to available reliefs, our digital bookkeeping team supports the data infrastructure, and our external audit and internal audit teams support assurance readiness as it becomes relevant. For cross-border businesses, our Cross-border tax specialists team covers the UK and Irish regulatory interaction.
Get in touch with the SCC team for a sustainability compliance review structured around your current size, supply chain exposure and available reliefs.
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