UK SRS S1 and S2: What finance and sustainability teams need to know

The UK Government is introducing new standards for sustainability reporting, the UK Sustainability Reporting Standards (UK SRS), and they’re designed to help companies report clearly and consistently on environmental and social issues, starting with climate.

For finance and sustainability teams, this could mean getting ready to include new types of information for annual reports in financial statements. UK SRS S1 and S2 are the first two standards, and they set out what needs to be disclosed, how it should be presented, and when it will become mandatory. There is a longer-term view that wider sustainability matters will be introduced in time.

Key dates to know

The UK SRS is still in draft form, but the timeline is moving quickly. Here’s what we know so far:

• June 2023: ISSB publishes IFRS S1 and S2 standards.
• May – December 2024: UK Sustainability Disclosure Technical Advisory Committee (TAC) conducts technical assessment and recommends endorsement of IFRS S1 and S2 with minor UK amendments.
• 25 June 2025: Draft standards published for consultation.
• 17 September 2025: Consultation closes.
• Late 2025: Final standards expected to be issued.
• Early 2026: FCA likely to consult on applying UK SRS to listed companies.
• Accounting periods commencing on or after 1 January 2026: Earliest possible start date for mandatory reporting.

What is UK SRS S1?

S1 is the general framework that applies to all sustainability disclosures. It’s not just about climate, it sets the rules for how companies should report on any sustainability issue that could affect their business.

A key principle in S1 is materiality. Companies are expected to report on sustainability-related risks and opportunities that could reasonably be expected to influence decisions made by investors, lenders, or other stakeholders. In other words, if something could affect the company’s future cash flows, access to finance, or cost of capital, and it’s likely to be material, it should be disclosed.

These disclosures should be clear, relevant, and connected to the financial statements. S1 also requires companies to use the same reporting boundaries as their financial reports and to avoid repeating the same information across different sections.

In short, S1 is about making sustainability reporting as reliable and useful as financial reporting.

What does UK SRS S2 cover?

S2 focuses specifically on climate-related disclosures and is broadly built around four key areas – Governance, Strategy, Risk Management and Metrics and Targets.

Governance

Companies need to explain who is responsible for managing climate-related risks and opportunities. This includes boards, committees, and senior leaders. The standard also asks for details on how climate responsibilities are built into decision-making and how they link to executive pay.

Strategy

This section looks at how climate issues affect the company’s strategy and financial planning. Companies should describe:

• The climate risks and opportunities they face.
• How these are expected to play out over the short, medium, and long term.
• The impact on their business model and supply chain.
• Any plans to transition to a lower-carbon business.
• How resilient their strategy is under different climate scenarios.

Risk Management

Companies must explain how they identify and manage climate-related risks. This includes the tools and processes they use, and how these are integrated into their overall risk management systems.

Metrics and targets

This is where companies report the numbers. They need to disclose:

• Greenhouse gas emissions:
  • Scope 1 (direct emissions), Scope 2 (indirect emissions from energy), and Scope 3 (other indirect emissions across the value chain).
  • How these are measured and calculated.
  • Any changes in methodology.
• Other metrics:
  • How much of the business is exposed to climate risks.
  • Investment in climate-related projects.
  • Use of internal carbon pricing.
  • Links between climate performance and executive pay.
• Targets:
  • Climate goals (e.g. net-zero).
  • Which parts of the business they apply to.
  • Timeframes and milestones.
  • Use of carbon credits.
  • Progress updates and any changes to targets.

How does this link to financial statements?

One of the key features of UK SRS is that these disclosures aren’t separate, they’re part of the financial statements and they need to connect to financial data. For example, climate risks might affect asset values, provisions, or investment decisions.

The assumptions used in climate planning should match those used in financial forecasts. This means finance and sustainability teams need to work closely together to ensure everything lines up.

Transition reliefs (year 1 only)

To help companies get started, UK SRS S2 includes some optional reliefs for the first year:

• Scope 3 emissions reporting can be deferred. This includes financed emissions for asset managers, banks, and insurers.
• Comparative information does not need to be disclosed.
• Companies can continue using existing methods for measuring emissions if already in use.

Three-year phased approach to disclosure

As part of a phased approach to introducing these standards there will be increasing amounts of information requested over a 3-year period, to allow for companies to evolve their understanding and data capture. This has been summarised in the table below:

What should you do now?

With final standards expected later this year, it’s a good time to start preparing. Here are some practical steps:

• Review how your company currently tracks emissions and climate data.
• Clarify who is responsible for climate oversight.
• Map climate risks to financial metrics.
• Start building documentation to support future audits.

UK SRS S1 and S2 mark a shift in how sustainability is reported. They bring it into the core of financial reporting, and that means Finance Directors and sustainability leads will need to work together more than ever. If you need support in understanding how this applies to your business and what you need to do to prepare, then please do contact us.