Sustainability reporting in the UK has evolved significantly over the past decade, with an increasing number of regulations designed to enhance transparency, accountability, and corporate responsibility. Businesses are now required to disclose a wide range of environmental, social, and governance (ESG) factors, ensuring that investors, regulators, and external stakeholders can assess their sustainability performance effectively.
The UK government has introduced and refined several regulatory frameworks to support sustainability reporting. These include the Streamlined Energy and Carbon Reporting (SECR) framework, Climate-Related Financial Disclosures (CRFD), the forthcoming UK Sustainability Disclosure Requirements (SDRs), and alignment with global initiatives such as the International Sustainability Standards Board (ISSB), the IFRS Sustainability Disclosure Standards, and the Corporate Sustainability Reporting Directive (CSRD) from the European Union.
Additionally, frameworks such as the Global Reporting Initiative (GRI) have influenced sustainability reporting practices, providing standardized guidelines for disclosing sustainability information. These developments reflect growing stakeholder expectations for greater transparency in environmental reporting and corporate sustainability performance.
With significant regulatory changes coming into effect in 2025, businesses must ensure they are fully prepared to comply with sustainability reporting requirements. Failure to meet these obligations can result in reputational damage, financial penalties, and loss of investor confidence. This guide provides a detailed overview of key regulations, outlining who needs to comply, the reporting requirements, and the necessary steps businesses must take.
Streamlined energy and carbon reporting (SECR)
Who needs to comply?
SECR applies to a range of businesses, primarily targeting large companies that have significant energy consumption and carbon emissions. The main categories of businesses required to comply include:
- Quoted companies, meaning those listed on the London Stock Exchange, NASDAQ, or the New York Stock Exchange
- Large companies that meet at least two of the following criteria:
- Turnover of £36 million or more
- Balance sheet total of £18 million or more
- 250 or more employees
- Large limited liability partnerships (LLPs)
Small businesses, low-energy users consuming less than 40 megawatt hours (MWh) per year, and public sector organizations are generally exempt from SECR requirements.
What are the requirements?
SECR mandates that businesses disclose their energy consumption and greenhouse gas emissions within their annual reports. This ensures that sustainability reporting is integrated with financial performance data, allowing external stakeholders to assess both financial and non-financial reporting comprehensively.
Businesses must report:
- Total energy consumption, including electricity, gas, and transport fuel
- Greenhouse gas (GHG) emissions in accordance with international standards
- Measures taken to improve energy efficiency
- Year-on-year comparisons to track improvements or deteriorations in environmental performance
This form of non-financial reporting is designed to enhance corporate accountability and encourage businesses to implement effective sustainability strategies.
Steps businesses should take
- Implement a structured approach to collecting and monitoring energy consumption data
- Ensure annual reports contain SECR-compliant sustainability reporting
- Consider adopting carbon management software to streamline data collection and reporting
Climate-related financial disclosures (CRFD)
Who needs to comply?
Climate-related financial disclosures apply to:
- UK-listed companies on the Financial Conduct Authority’s (FCA) Official List
- Large UK companies with 500 or more employees and £500 million or more in turnover
- Asset managers, asset owners, and other FCA-regulated financial institutions
What are the requirements?
CRFD regulations require companies to assess and disclose climate-related risks and opportunities that could impact their financial performance. This form of sustainability reporting aligns with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and focuses on four key areas:
- Governance: how climate-related risks and opportunities are managed within corporate governance structures
- Strategy: how climate risks and opportunities affect business models, operations, and long-term financial planning
- Risk management: how climate-related risks are identified, assessed, and integrated into business risk management frameworks
- Metrics and targets: quantifiable measures related to emissions, energy usage, and climate-related financial impacts
Steps businesses should take
- Conduct a thorough climate risk assessment
- Ensure sustainability reporting aligns with TCFD principles
- Develop clear metrics and targets to track climate-related financial risks and opportunities
International Sustainability Standards Board (ISSB) standards
Who needs to comply?
While ISSB standards are not yet mandatory in the UK, they are expected to become part of the UK’s broader sustainability reporting framework. Companies that anticipate being subject to the UK Sustainability Disclosure Requirements (SDRs) should proactively align their sustainability reporting practices with ISSB standards.
What are the requirements?
The ISSB, which operates under the International Financial Reporting Standards (IFRS) Foundation, has developed two key sustainability reporting standards:
- IFRS S1: provides general sustainability-related disclosures applicable across industries
- IFRS S2: focuses specifically on climate-related disclosures, closely aligned with TCFD requirements
The IFRS Sustainability Disclosure Standards are expected to become a benchmark for global sustainability reporting, complementing existing frameworks such as the Global Reporting Initiative (GRI).
Steps businesses should take
- Monitor regulatory updates to determine when ISSB standards will become mandatory
- Integrate ISSB principles into existing sustainability reporting frameworks
- Engage with external stakeholders to ensure sustainability reporting aligns with stakeholder expectations
UK Sustainability Disclosure Requirements (SDRs) – coming in 2025
Who needs to comply?
SDRs will apply to:
- UK-listed companies
- Financial services firms offering investment products with sustainability claims
- Larger businesses that the government determines to be within scope
What are the requirements?
SDRs aim to standardize sustainability reporting and ensure transparency in ESG-related investment products. The requirements will focus on:
- Sustainability-related investment labels to prevent greenwashing
- Mandatory climate-related disclosures aligned with ISSB standards
- Enhanced rules for non-financial reporting within corporate disclosures
Steps businesses should take
- Review existing sustainability reporting frameworks to ensure compliance with SDRs
- Engage with regulators to understand evolving reporting obligations
- Train internal teams on sustainability data collection and reporting best practices
Corporate Sustainability Reporting Directive (CSRD) – EU rules affecting UK businesses
Who needs to comply?
The CSRD applies to:
- UK companies with subsidiaries or operations in the European Union
- UK businesses listed on EU-regulated markets
- Non-EU companies with an annual EU turnover of €150 million or more
What are the requirements?
The CSRD significantly expands non-financial reporting obligations, requiring businesses to align their sustainability reporting with European Sustainability Reporting Standards (ESRS). Key disclosure requirements include:
- The impact of sustainability risks on financial performance
- How sustainability strategies contribute to value creation
- Long-term environmental and social targets set by the company
Steps businesses should take
- Assess whether their operations fall within the scope of CSRD
- Align sustainability reporting with ESRS requirements
- Prepare for mandatory third-party auditing of sustainability reporting
How businesses can streamline compliance with ESG tools
With multiple sustainability reporting frameworks now in place, businesses must find ways to manage data collection and ensure compliance efficiently. ESG software solutions can assist in:
- Automating energy consumption and emissions tracking
- Aligning sustainability reporting with multiple regulatory frameworks
- Providing data visualization to evaluate a company’s performance against sustainability targets
By adopting ESG technology, businesses can improve environmental reporting, enhance transparency for external stakeholders, and ensure regulatory compliance with minimal administrative burden.
Final thoughts
Sustainability reporting is no longer just a compliance exercise—it is a crucial component of financial performance, corporate strategy, and long-term value creation. By embedding sustainability into their reporting processes, businesses can strengthen investor confidence, improve risk management, and contribute to a more sustainable economy.
