Mind the (reporting) gap…

While the EU has been the leader in developing all-encompassing and unified non-financial reporting requirements, such as the Non-Financial Reporting Directive (NFRD) and Corporate Sustainability Reporting Directive (CSRD), the UK’s non-financial reporting regime, although rooted in longstanding requirements, remains fragmented. However, businesses must now prepare for the upcoming UK Sustainability Reporting Standards (UK SRS) in order to streamline reporting requirements and avoid last-minute compliance scrambles.

When it comes to sustainability reporting in the UK, there is currently no all encompassing regulation. At the moment there is a combination of various regulations and reporting requirements. These requirements span environmental, social, and governance (ESG) metrics and are shaped by various regulations and codes, including the Companies (Miscellaneous Reporting) Regulations 2018, Companies Act 2006 amendments, Corporate Governance Code and listing requirements set by the Financial Conduct Authority (FCA). Here’s an overview of the current and upcoming reporting obligations.

Note, that the strategic report and directors report are required sections within an annual report.

Current Non-Financial Reporting Requirements

The Companies (Miscellaneous Reporting) Regulations 2018

Section 172(1) Statement:

• All UK companies that are required to prepare a strategic report must, unless qualifying as medium-sized, include a statement in their strategic report detailing how directors have considered factors such as employee interests, environmental impact, as well as relationships with suppliers and customers when promoting the company’s success.

CEO pay ratio:

• Companies with shares registered on the LSE and with more than 250 employees are required to disclose CEO pay ratio annually. Companies must publish the ratio of their CEO’s total remuneration to the median, 25th percentile (lower quartile), and 75th percentile (upper quartile) total remuneration of their full-time equivalent UK employees.

Employee engagement:

• Companies with more than 250 UK employees must report on how directors have engaged with employees, considered their interests, and reflected these considerations in decision-making. This disclosure can be included with the S.172 statement as long as a statement is included in the directors report. 

Engagement with suppliers, customers, and others:

• Large companies must summarise their engagement with stakeholders such as suppliers and customers. This disclosure can be included with the S.172 statement as long as a statement is included in the directors report. 

Corporate governance statement:

• Very large private or unlisted public companies (with over 2,000 employees or turnover exceeding £200 million globally) must provide a statement about their corporate governance arrangements in the directors report. 

Streamlined Energy and Carbon Reporting (SECR):

• SECR mandates that eligible companies—encompassing quoted companies, large unquoted companies, and large LLPs—report detailed data on their energy use (by fuel type) and greenhouse gas emissions (including Scope 1 and Scope 2, with optional Scope 3 disclosures) within their annual reports.

Listing Requirements (2021 and 2022)

Task Force on Climate-related Financial Disclosures (TCFD):

• Since 2021, all UK companies defined as premium-listed have been required to state, in their annual report, whether their disclosures are consistent with TCFD recommendations, or to explain why not (a comply or explain basis). Standard issuers were to follow similar rules from January 2022. These measures also form part of a wider strategy by the UK government and regulators to address climate risk and are just a first step to much greater climate-related disclosure by all companies. The UK Government is now looking at the adoption of the ISSB standards, to further align UK companies on their climate disclosures, see the UK SRS below. 

Disclosure of Diversity on Company Boards and Executive Committees:

• In April 2022, the FCA introduced Listing Rules requiring companies to disclose on a “comply or explain basis”, in their annual report, whether they meet specific board diversity targets. Where a listed company fails to meet any of the targets mentioned above, it must set out which targets and the reasons why. The targets include: 
  • at least 40% of individuals on its board of directors are women;
  • at least one of the following senior positions on its board of directors is held by a woman: (i) the chair, (ii) the chief executive, (iii) the senior independent director, and/or (iv) the chief financial officer; and
  • at least one individual on its board of directors is from a minority ethnic background.

The Companies Act 2006 Amendments (2022)

The Companies Act 2006 is an act of the Parliament of the United Kingdom which forms the primary source of UK company law. The Companies Act was amended in 2022 to incorporate the following non-financial disclosures:

Climate-Related Financial Disclosures (CFD):

• Mandatory since 2022, CFD applies to entities with over 500 employees that are traded companies, banking institutions, insurance firms, AIM-listed entities, or private companies with turnover exceeding £500 million. Disclosures include climate risks, opportunities, governance processes, strategy impacts, risk management approaches, and metrics used to assess climate-related issues. CFD disclosures are similar to that of TCFD, however, they must be integrated into the annual report within the Non-Financial Sustainability Information Statement. 

Non-Financial Sustainability Information Statement:

• Large traded companies, banks and insurance companies with over 500 employees must provide enhanced disclosures on environmental matters, social responsibility, human rights, anti-corruption measures, and bribery prevention within the strategic report. 

The Corporate Governance Code Reforms (2024)

• Coming into effect on January 1st 2025, The 2024 UK Corporate Governance Code, published by the FRC, emphasises strengthening boards’ accountability for internal controls and risk management, requiring a declaration on their effectiveness in the annual report, and focusing on outcomes-based reporting and embedding company culture.

Other Reporting Obligations

Gender Pay Gap Reporting:

• Employers with over 250 employees are required to annually disclose pay disparity between male and female employees through statutory calculations.

UK Stewardship Code (2024)

• The UK Stewardship Code applies to asset owners, asset managers, and service providers who invest money on behalf of UK savers and pensioners. In 2024, the FRC revealed significant changes to the UK Stewardship Code. The main changes include eliminating the need for annual updates of contextual information unless there are new reports or significant alterations.

Most Recent Non Financial Reporting Requirements

The UK Modern Slavery Statement 2015 (Updated 2025)

On 25 March 2025, the UK Government published updated guidance on the content to be included in modern slavery statements. Whilst the guidance does not change the core requirements of the Modern Slavery Act 2015 (MSA 2015) or make reporting on the existing six areas mandatory, it provides more detailed and practical information on what the UK Government and other stakeholders expect to be disclosed in these statements. It also sets out how organisations can comply with the spirit of the MSA 2015 reporting requirements, rather than simply following regulatory reporting. 

The Sustainability Reporting Standards (UK SRS)

The UK Sustainability Reporting Standards (UK SRS), derived from the IFRS’s ISSB S1 (general sustainability disclosures) and S2 (climate-related disclosures), will consolidate existing frameworks into a unified mandatory regime for UK-listed companies. The UK government initially planned to publish draft standards for consultation in Q1 2025 but they have not yet been released and the process now expected to conclude by Spring 2025. If endorsement of the regulations are complete by mid-to-late 2025, the standards may apply to accounting periods starting on or after 1 January 2026.

This transition will phase out standalone TCFD reporting by integrating its principles into ISSB-aligned UK SRS, while assumed to reference the SASB standards.  The FCA will use the UK SRS to mandate investor-facing disclosures for listed entities, subject to consultation, while the government considers extending requirements to economically significant unlisted companies. 

Companies currently complying with TCFD should begin to prepare for expanded ISSB requirements. Alongside this, While the UK Transition Plan Taskforce (TPT) framework is currently voluntary, the UK government and the Financial Conduct Authority (FCA) have signaled their intention to make transition plan disclosures mandatory for UK-regulated financial institutions and corporates in the future, likely based on the TPT framework. The Government will consult in the first half of 2025 on how to best implement credible transition plans, specifically in terms of the ambition to become the global hub for transition finance. Alongside this, following the consultation on the UK SRS, the FCA intends to consult on strengthening expectations on transition plan disclosures.

The Equality (Race and Disability) Bill

Currently, there is an open consultation on mandatory ethnicity and disability pay gap reporting for large employers (those with 250 or more employees). The consultation seeks views on how ethnicity and disability pay gap disclosures can be integrated with the current gender pay gap disclosures. The draft bill was announced during the King’s Speech of 2024. 

Your best next steps

The UK regulatory environment, as there is no one set specific reporting regulation, requires preparedness, adaptability and organisation. For this, are three specific calls to action: 

1. Understand your regulatory environment and map what is currently mandatory, what is best practice and what is coming down the line for you.
2. Prioritise requirements based on commercial, regulatory and stakeholder pressures and develop a clear roadmap for implementation. 
3. Work smarter, not harder and begin to capture and measure GHG emissions, the common denominator across many regulations.

We Are Here to Help

In the midst of a changing regulatory environment, Position Green has the experience to stay ahead of an uncertain landscape. Our combination of advisors and software allows us to provide public and private organisations with a clear line of sight when it comes to complex and intertwined mandatory sustainability reporting requirements.