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TAC Public Meeting June 2024 Paper 2A: Current reporting framework in the UK
AGENDA PAPER 2A
Executive summary
| Date | 18 June 2024 |
| Paper reference | 2024-TAC-004a |
| Project | Technical assessment of IFRS S1 and IFRS S2 |
| Topic | Current reporting framework in the UK |
Objective of the paper
The objective of this paper is to provide an overview of current sustainability-related reporting requirements in the UK. In particular, this paper considers the current UK reporting framework insofar as it overlaps with IFRS S1 and IFRS S2. This paper is not exhaustive but highlights the most relevant regulations and legislation for the purpose of understanding the sustainability-related reporting framework in the UK.
The information in this paper is provided as at 11 June 2026 and does not include any developments after this date.
Decisions for the TAC
There are no decisions required. This paper is for information only.
Appendices
There are no appendices to this paper.
This paper has been prepared by the Secretariat for the UK Sustainability Disclosure Technical Advisory Committee (TAC) to discuss in a public meeting. This paper does not represent the views of the TAC or any individual TAC member.
Context
1The UK already requires the disclosure of sustainability-related matters through a number of laws and regulations. For example, certain quoted and unquoted entities are required—through listing rules and company law—to disclose information about climate-related risks and opportunities, as well as information about energy use and greenhouse gas emissions. Beyond climate change, the UK also already requires disclosure of information about wider sustainability-related matters, including in the Non-financial and Sustainability Information Statement, gender pay gap reporting and Modern Slavery Statement.
2In the technical assessment of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and IFRS S2 Climate-related Disclosures (IFRS S2), the TAC should be cognisant of the current reporting landscape in the UK, including reporting obligations that already exist. This will also support the TAC in assessing whether:
- use of the IFRS Sustainability Disclosure Standard is likely to improve the quality of corporate reporting within the UK in the long term.
- companies are likely to be able to provide the disclosures required by the IFRS Sustainability Disclosure Standard within the timeframes that a company normally reports without undue cost or effort.
- the IFRS Sustainability Disclosure Standard is likely to be coherent with, and suitable for inclusion in, UK domestic legislation and regulation.
3To be able to assess whether these criteria are met, the TAC must first have some understanding of current reporting requirements in the UK, including the relevant laws and regulations.
UK reporting requirements
Sustainability-related reporting requirements in the UK
4The following table summarises reporting requirements that are currently in place in the UK. This table is up to date as of 11 June 2024.
5The requirements listed below do not apply to all entities in the UK as they have different scoping requirements. The TAC should note that the size and types of entities that are currently required to provide the disclosures listed in the table below could change in the future.
| Law / Regulation | Sustainability-related content | Location of disclosure | Overlap with IFRS S1 and IFRS S2 |
|---|---|---|---|
| Companies Act 2006 and related regulations including: - The Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 (SI 2013/1970) - The Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016 (SI 2016/1245) - The Companies (Miscellaneous Reporting) Regulations 2018 (SI 2018/860) - The Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (SI 2018/1155) - The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 (SI 2022/31) - The Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022 (SI 2022/46) | Entities that are required to publish a strategic report are required to disclose information about the entity's business model, strategy, principal risks and non-financial key performance indicators (KPIs). Although these requirements are not specific to sustainability-related matters, they may lead to sustainability-related disclosures for entities that are most exposed to sustainability-related risks and opportunities. Entities within scope are also required to disclose in the strategic report information about environmental matters (including the impact of the entity's business on the environment), the entity's employees, social, community, human rights issues, and anti-corruption and anti-bribery matters. Section 172(1) of the Companies Act 2006 Statement requires entities within scope to report in the strategic report information about how directors have had regard to matters such as the environment, employees, customers and suppliers when taking decisions to promote the success of the entity. | Annual report, specifically the strategic report or directors' report | The strategic report requirements in the Companies Act 2006 do not only include sustainability-related requirements. Broader strategic reporting requirements also overlap with IFRS S1 and IFRS S2 including: - context for the related financial statements; - insight into the business model and the entity's main objectives and strategy; - a description of the principal risks and uncertainties; and - relevant non-financial KPIs. The strategic report requirements relating to sustainability-related matters in the Companies Act 2006 have significant overlap with IFRS S1 and IFRS S2. For example, entities in scope are required to disclose a Non-Financial and Sustainability Information Statement which includes information about environmental, social, community, human rights and anti-corruption and anti-bribery matters (note that similar requirements apply to quoted companies under section 414C(7)(b)). Entities are required to disclose a description of the policies in relation to these matters, the outcomes of these policies, the principal risks related to these matters, and relevant KPIs. Section 414C(8)(c) of the Companies Act 2006 requires quoted companies to disclose a breakdown of the number of people of each sex who are directors, senior managers and employees of the company. Although there are no specific requirements in IFRS S1 that relate to diversity, this could be a sustainability matter that an entity determines as relevant in the context of the requirements in IFRS S1 to identify sustainability-related risks and opportunities. |
| The Equality Act 2010 | Entities within scope are required to report annually their greenhouse gas emissions and energy use in the directors' report—also known as Streamlined Energy and Carbon Reporting (SECR). Entities within scope are required to disclose information about the entity's climate-related risks and opportunities (Climate-related Financial Disclosure reporting). | The Non-Financial and Sustainability Information Statement should also include the entity's climate-related financial disclosures, which are based on (but not fully aligned with) the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. The TCFD recommendations form the basis for IFRS S2, and therefore there are significant overlaps between IFRS S2 and the climate-related financial disclosure requirements in the Companies Act 2006. Entities in scope are also required to report the annual greenhouse gas emissions in the directors' report. This has a direct overlap with IFRS S2 requirements on greenhouse gas reporting. | |
| The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (SI 2017/172) | The relevant employer must publish information about the difference in the average pay of male and female employees within the period of 12 months. This information is required to be submitted to the Government via an online portal by 4 April. | Online portal | Although there are no specific requirements in IFRS S1 that relate to gender pay gap, this could be a sustainability matter that an entity determines as relevant in the context of the requirements in IFRS S1 to identify sustainability-related risks and opportunities. Therefore, there could be overlaps in the information an entity discloses in compliance with the gender pay gap requirements and the IFRS S1 requirements. |
| Modern Slavery Act 2015 | Entities within scope are required to publish a slavery and human trafficking statement for the financial year. | Entity website | Although there are no specific requirements in IFRS S1 that relate to modern slavery and human trafficking, this could be a sustainability matter that an entity determines as relevant in the context of the requirements in IFRS S1 to identify sustainability-related risks and opportunities. Therefore, there could be overlaps in the information an entity discloses in compliance with the Modern Slavery Act and the IFRS S1 requirements. |
| FCA Listing Rules and Disclosure Guidance and Transparency Rules (DTR) | |||
| TCFD reporting LR 9.8.6R (8), LR 9.8.6BG, LR 9.8.6CG, LR 9.8.6DG, LR 9.8.6EG, LR 9.8.6FG LR 14.3.27R, 14.3.28G, 14.3.29G, 14.3.30G, 14.3.31G, 14.3.32G | Certain listed companies are required to publish a compliance statement in their annual financial report stating whether they have made disclosures consistent with the recommendations of the TCFD or provide an explanation if they have not done so (TCFD reporting). | Either the annual report or explain in the compliance statement where the information is located. | The TCFD recommendations form the basis for IFRS S2, and therefore there are significant overlaps between IFRS S2 and the climate-related disclosure requirements in the FCA Listing Rules. |
| Board diversity LR 9.8.6R (9)–(11), LR 14.3.33R, DTR 7.2.8AR | Certain listed companies are required to disclose (on a comply or explain basis) against targets on diversity on Boards and Executive Management. The targets include: - at least 40% of individuals on the board being women; - at least one senior position being held by a woman; and - at least one individual on the board being from a minority ethnic background. Companies are also required to provide a corporate governance statement that must contain a description of the diversity policy applied to the administrative, management and supervisory bodies and the remuneration, audit and nomination committees. This policy must have regard to age, gender, ethnicity, sexual orientation, disability or educational, professional and socio-economic backgrounds. | Annual report | Although there are no specific requirements in IFRS S1 that relate to board diversity, this could be a sustainability matter that an entity determines as relevant in the context of the requirements in IFRS S1 to identify sustainability-related risks and opportunities. Therefore, there could be overlaps in the information an entity discloses in compliance with the FCA Listing Rules and the IFRS S1 requirements. |
| Non-financial key performance indicators DTR 4.1.9 R (2) | The DTR also require, where appropriate, the disclosure of KPIs in the management report including information relating to environmental matters and employee matters. | Annual report | IFRS S1 requires the disclosure of metrics relating to sustainability-related risks and opportunities which is likely to include environmental and employee matters. Therefore, there is overlap between IFRS S1 and the FCA DTR. |
| Procurement Policy Note (PPN 06/21) | All companies bidding for government contracts worth more than £5 million a year must commit to achieving Net Zero emissions by 2050, publish a Carbon Reduction Plan (CRP), and report some Scope 3 emissions (including business travel, employee commuting, transportation, distribution and waste). | The CRP should be published on the supplier's website. | This policy requires the disclosure of Scope 1, Scope 2 and certain Scope 3 greenhouse gas emissions. IFRS S2 also requires these disclosures but requires all appropriate Scope 3 disclosures rather than a specified subset. Aspects of the CRP also overlap with the requirement in IFRS S2 for an entity to disclose its climate-related transition plan if it has one. |
Non-Financial Reporting Review
6The Department for Business and Trade (DBT), with support from the FRC, is currently considering reforms to the UK's current non-financial reporting framework (the Non-Financial Reporting Review). This review will consider policy options for streamlining some of the reporting requirements that are summarised in the table above. The review will also seek to change the thresholds used to determine which entities are in scope of the Companies Act 2006 requirements.
7The full findings from the Non-Financial Reporting Review call for evidence are available on the Government website. The following messages are relevant to the TAC for the technical assessment of IFRS Sustainability Disclosure Standards:
7.1Altogether, most respondents either strongly agreed or agreed that non-financial information is useful as it provides transparency and enables accountability. However, entities disclosing non-financial information consider the costs of preparing and disclosing non-financial information too high, whereas users consider the costs to be worthwhile.
7.2Several responses recommended that non-financial information in the annual report should focus on investor needs, rather than trying to satisfy broader audiences.
7.3The complexity of the non-financial reporting requirements is a problem, especially in relation to current reporting thresholds, exemptions and exclusions, which would benefit from simplification.
7.4The UK's commitment to endorse the IFRS Sustainability Disclosure Standards is strongly supported and viewed as a solution to reporting against multiple standards.
8On the 19 March 2024, the Government announced plans to lift the monetary thresholds that determine company size by 50% to take account of inflation and to reduce burdens on smaller companies. The suggested changes are outlined in the table below. These suggested changes are not subject to consultation and have not yet taken effect.
| Micro | Small | Medium | Large | |||||
|---|---|---|---|---|---|---|---|---|
| Old | New | Old | New | Old | New | Old | New | |
| Annual turnover | nmt1 £632k | nmt £1m | nmt £10.2m | nmt £15m | nmt £36m | nmt £54m | £36m+ | £54m+ |
| Balance sheet total | nmt £316k | nmt £500k | nmt £5.1m | nmt £7.5m | nmt £18m | nmt £27m | £18m+ | £27m+ |
9Additionally, this announcement included planned changes to the Directors' Report, including the removal of low-value, obsolete or overlapping requirements that have been deemed as no longer necessary.
10Further to this announcement, on the 16 May 2024 the Government also launched a consultation seeking views on raising the employee threshold for medium-sized companies to 500 employees and introducing an exemption for these medium-sized companies from the requirement to produce a strategic report. This consultation will close on 27 June 2024.
11Decisions about the implementation of the IFRS Sustainability Disclosure Standards in relation to Companies Act 2006 requirements and the scope of entities that will be required to disclose this information, will be taken in the context of existing reporting requirements and any future reforms to the UK's non-financial reporting framework.
Financial accounting requirements
12Information disclosed in an entity's financial statements is not within the remit of the TAC. However, the TAC should be aware of how requirements in company law and accounting standards relating to the financial statements interact with IFRS Sustainability Disclosure Standards. This will also support the TAC in assessing whether the standards support connectivity.
13The UK Endorsement Board (UKEB) endorses and adopts international accounting standards issued by the International Accounting Standards Board (IASB) for use by UK companies. This includes UK-adopted IFRS Accounting Standards and related interpretations. Listed companies in the UK are required to prepare their consolidated financial statements in accordance with UK-adopted international accounting standards.
14Other companies prepare their individual or group accounts either as Companies Act accounts or in accordance with UK-adopted international accounting standards. Companies Act accounts are prepared in accordance with provisions of the Companies Act 2006 and accounting standards issued by the FRC, which are also referred to as UK Generally Accepted Accounting Practice (UK GAAP).
International reporting requirements
15Some UK entities will be required to disclose information in accordance with reporting requirements that are prescribed by other jurisdictions. Each jurisdiction has different timelines and effective dates that will affect UK entities at different times. The most notable of these jurisdiction-specific requirements is the EU's Corporate Sustainability Reporting Directive (CSRD) which mandates the use of the European Sustainability Reporting Standards (ESRSs).
16Jurisdiction-specific requirements will impact UK entities to varying degrees and will lead to some entities needing to comply with multiple sustainability-related reporting requirements. No UK body has the authority to amend these requirements. However, the implementation of sustainability-related reporting in the UK should take into consideration the cost and burden to entities which are required to comply with multiple jurisdictional requirements.
17The TAC will be provided with updates of international standard setting activities and will be asked to discuss the interoperability of IFRS S1 and IFRS S2 during the technical assessment of the standards.
Next steps
18In the technical assessment of IFRS S1 and IFRS S2, the TAC should be cognisant of existing corporate reporting obligations in the UK and how the requirements in IFRS S1 and IFRS S2 interact with these obligations. When preparing the technical papers for future TAC discussions, the Secretariat will refer to existing corporate reporting obligations where appropriate.
Questions for the TAC
(i) Does the TAC have any comments on the summary provided in this paper?
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