Recent IFRS S1 & S2 Announcement: A Major Step Forward for UK Sustainability Reporting

Written By Rupert Clark-Lowes

The UK Government released Exposure Drafts of the UK Sustainability Reporting Standards (UK SRS) on June 25th, drawing from the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards S1 and S2. These drafts have been released to establish a framework to provide sustainability-related financial information to financial markets.

 

Following this announcement, the UK Government has opened consultations on proposed sustainability reporting standards based on the International Sustainability Standards Board (ISSB) framework. The drafts include two core standards: UK SRS S1, which sets out general requirements for disclosing sustainability-related financial risks and opportunities, and UK SRS S2, which focuses specifically on climate-related disclosures such as climate-related physical and transition risks.

 

The Financial Conduct Authority (FCA) may require listed companies to report, a decision which will be made only after Government adoption, which is set for Autumn 2025. The draft standards include six key adjustments made for UK implementation as part of the consultation process, which is open until September 17th 2025.

 
 

Four amendments were proposed by the UK Sustainability Disclosure Technical Advisory Committee (TAC):

  1. Removal of delayed reporting relief: Eliminates the ISSB S1 provision that allows entities to delay reporting in the first year to after the publication of their financial statements.

  2. Extension of climate-first relief: Allows organisations to ease into the standards by reporting just on climate disclosures S2 for the first two years.

  3. GICS requirement removed: Allows use of other industry classification systems as an alternative to the Global Industry Classification Standard (GICS).

  4. Removal of fixed effective dates: Deletes the ‘effective date’ clauses in S1 and S2, allowing the UK government to set its timeline within the relevant legislation and regulation.

 

Two further amendments were recommended by the UK Sustainability Disclosure Policy and Implementation Committee (PIC):

  1. SASB references made optional – Changes references to the materials of the Sustainability Accounting Standards Board (SASB) in S1 and S2 from required to optional.

  2. Transition reliefs revised – Revisits how and when transition reliefs apply, ensuring voluntary reporters are not bound by any restrictions or applying transition reliefs.

Orbis Advisory are actively participating in the UK Government’s consultation on the proposed Sustainability Reporting Standards, and encourages you to get involved as well, through this link. This is a key opportunity for businesses and stakeholders to help shape the future of sustainability reporting in the UK.

 

Taking part is simple; the consultation invites views on your organisation’s current reporting practices, engagement with transition planning, and experience with sustainability assurance. It then explores your stance on the Government’s proposed amendments to the international standards, your readiness to adopt the UK SRS, and the expected benefits, costs, and practical implications of reporting.

 

Respondents can also share views on carbon credits, financed emissions, and support needed for smaller or non-listed companies. This is a valuable chance to help shape a practical, feasible and effective UK-wide approach to sustainability reporting and the adoption of the standards.

 

Adopting the UK Sustainability Reporting Standards (UK SRS) should provide more consistent and clear disclosures to help investors in evaluating long-term risks and opportunities. Businesses can benefit from increased stakeholder trust as well as more access to funding.

 

For firms, the UK SRS offers a path to more credible and investor-attractive sustainability reporting, in line with the recent trend of investors focusing more on the risk management and resilience of firms against the rapidly changing physical and transitional climate risks, as well as those that have positioned themselves strongly to benefit from the multiple opportunities these changes present.

How Orbis Advisory Can Support You

If you would like to learn more, Orbis Advisory is an expert in this area and assists clients with aligning strategically to disclosures and preparing them for the legislative changes

 

We offer various levels of support, including:

  • A high-level review of current internal and external documentation and operational alignment, showing where your business is currently and any further futureproofing steps that we would strongly recommend;

  • An internal audit, which will dig into the business further and allow for a detailed GAP analysis of what you currently have and what you will need to do to align with the standard and prepare for the regulation, assuming it is adopted;

  • A detailed roadmap and implementation plan, along with support to ensure you are well prepared with minimal internal resource requirements.

 

Ultimately, early alignment not only ensures you are up to date with sustainability and risk, and futureproofing your business, but also ensures maximum value creation and capitalisation of the opportunities that this UK adoption will present. Please visit: https://www.orbisadvisory.com/take-action to submit an enquiry or to find out more about Orbis Advisory and how we can support you.

 

Appendix

Rupert Clark-Lowes
Next

What’s New in CDP for 2025: Key Updates and Impacts