Sustainability Reporting and Audit in the UK

Sustainability reporting has moved from the margins of corporate reporting to centre stage. The UK government’s February 2026 publication of the final domestic standards confirmed what many boards already expected: mandatory disclosure is coming, and it’s coming fast. For businesses subject to these new requirements, the question isn’t whether to report, but how to get it right.

At Audit Group, we’re already helping clients prepare. As ICAEW-regulated auditors, we bring the same rigour to sustainability assurance that we apply to financial statements. This guide to sustainability reporting and assurance covers what’s changing, who’s affected, and how to get ready.

What’s changing in UK sustainability reporting?

The reporting landscape has shifted rapidly since 2021, when the Task Force on Climate-related Financial Disclosures (TCFD) recommendations became mandatory for premium-listed businesses. That framework set the baseline, but the new standards go much further.

The new framework is closely aligned with the International Sustainability Standards Board (ISSB) standards – specifically IFRS S1 general requirements for disclosure of sustainability-related financial information, and IFRS S2, covering climate-related disclosures. The ISSB developed these to create a global reporting framework, and the UK has endorsed them with minor modifications to produce the UK sustainability reporting standards for the domestic context.

Here’s how the standards board frameworks connect:

• TCFD – the original climate-related financial disclosure framework covering board oversight, strategy, risk management, and metrics. Now superseded, but its structure lives on in the new S2 standard.
• ISSB standards – the international sustainability reporting standards that form the backbone of the new framework. IFRS S1 general requirements cover overall disclosure, while IFRS S2 climate-related disclosures covers the climate side.
• CSRD – the EU’s Corporate Sustainability Reporting Directive, which uses European Sustainability Reporting Standards. Relevant for businesses with EU operations, though the UK takes a different approach.
• The new standards – the final domestic framework. Two standards built on the international framework, incorporating existing reporting practices and designed around the statutory reporting cycle.

The government response to the 2024 consultation proposed a phased rollout. Premium-listed businesses reporting under the current rules will transition first, with mandatory application beginning for accounting periods starting on or after 1 January 2027.

Which UK companies need to report?

The scope is expanding in stages. Currently, businesses making these disclosures include premium-listed entities, large private companies, and certain financial institutions regulated by the FCA (Financial Conduct Authority).

Under the new standards, the scope broadens to cover:

• Phase 1 (2027 onwards) – UK-traded companies already disclosing under existing rules. Mandatory application of UK SRS begins here, with these businesses transitioning from their current regime to the new standards.
• Phase 2 (2028 onwards) – Large public interest entities (PIEs), including banks, insurers, and companies with over 500 employees.
• Phase 3 (expected 2029-2030) – Extension to large private companies meeting two of three size thresholds under current law (turnover above 36m, balance sheet above 18m, or more than 250 employees).

If your company doesn’t fall into these categories yet, don’t switch off. The direction is clear. And stakeholder expectations – from investors, lenders, and customers – often run ahead of regulation. Many mid-sized companies are already choosing to disclose sustainability information voluntarily, because their supply chain partners or funders ask for it.

What you need to disclose

The disclosures build on the four pillars that the original framework established. If you’ve already been reporting, the structure will feel familiar. But the standards require more depth.

The four pillars are: board oversight (how the board oversees risks and opportunities, including board-level arrangements), strategy (what risks exist and how they affect the business model, including scenario analysis), risk management (how you identify and manage those risks, integrated with broader enterprise processes), and metrics and targets (greenhouse gas emissions, energy use, progress against targets). The disclosure requirements expect your reporting practices to align with the sustainability disclosure standards and produce figures that can withstand independent assurance.

Do sustainability reports need to be audited?

Yes – and the requirements are getting tighter. The Financial Reporting Council (FRC) issued the International Standard on Sustainability Assurance (UK) 5000 in November 2025, giving providers a clear benchmark.

Right now, most companies to disclose voluntarily get a limited review – the provider checks the information and states whether anything has come to their attention suggesting it’s materially misstated. It’s roughly equivalent to a review engagement for your accounts. A reasonable engagement is closer to a full examination: more testing, more evidence gathering, and a positive opinion. The government has signalled that the market will move from limited to reasonable engagements in stages.

The consultation proposed that UK assurance providers who conduct independent third-party assurance will need FRC oversight. This brings quality and consistency to the market. Even if you’re not yet required to get a formal review, having someone independent check your processes can help build trust with investors and stakeholders. The level of assurance you choose depends on your size, sector, and stakeholder expectations.

Will UK SRS be mandatory?

Yes. The new sustainability reporting requirements will become mandatory, starting with listed companies in 2027. The phased implementation means companies reporting at different times, but mandatory sustainability reporting for large businesses is confirmed policy.

The FCA has already launched consultation CP26/5 on transitioning from the current regime to the new standards. This isn’t a question of “if” anymore. The international sustainability reporting momentum is global – the EU’s CSRD is already in force, and most major economies are aligning their domestic frameworks accordingly. The UK doesn’t want to fall behind.

For companies in the 2027 wave, that means your first filing under the new rules could cover the year ending 31 December 2027, published in 2028. Preparation needs to start now.

What are ESG reporting requirements in the UK?

ESG – environmental, social and governance – is the broad umbrella. Current UK rules come from multiple sources:

• Streamlined Energy and Carbon Reporting (SECR) – requires large businesses to report energy use and greenhouse gas emissions in their directors’ report. In place since April 2019.
• Existing disclosure regime – mandatory for premium-listed entities, large private companies, and regulated financial firms. Being replaced by the new standards.
• Companies Act s172(1) statement – requires directors to explain how they’ve considered interests including environmental impact. A key piece of corporate governance.
• Modern Slavery Act reporting – covers supply chain transparency and labour practices for companies with turnover above 36m.
• Gender pay gap reporting – required for employers with 250+ staff.

The new standards don’t replace all of these. UK SRS disclosures focus primarily on sustainability-related financial information – the things that affect a company’s financial position, performance, and prospects. Think of it as the investment-grade layer. The narrative reporting elements in the strategic report continue alongside, covering broader environmental and social context.

Companies with EU operations also need to consider the CSRD, which uses the ESRS framework and has a broader double-materiality approach. If your group has EU subsidiaries, you may need to report under both the UK and EU regimes. Our sustainability services team can help you work out which regimes apply.

Is ESG still relevant in 2026?

Absolutely. Despite some headlines about “green backlash” in certain markets, the regulatory direction on ESG and sustainability in the UK hasn’t changed. If anything, 2026 marks the year it moved from voluntary best practice to hard law.

The sustainable finance agenda is driving this. Investors need reliable sustainability information to allocate capital, price climate risk, and meet their own disclosure requirements. The Global Reporting Initiative (GRI) and national regulators are all converging on a common set of disclosure standards. The UK’s approach is part of that convergence.

Sustainability performance is also becoming a factor in lending decisions, insurance pricing, and supply chain selection. For mid-market businesses – the kind we work with most – credible reporting can open doors that were previously reserved for larger firms with dedicated teams. Good sustainability practices give you an edge.

Common pitfalls in sustainability disclosures

Having reviewed disclosures across a range of sectors, we see the same issues coming up repeatedly:

• Boilerplate disclosures – copy-pasting generic language about climate change without connecting it to your specific business. Regulators see through it.
• Scope 3 gaps – many companies report Scope 1 and 2 greenhouse gas emissions competently but struggle with Scope 3 (supply chain and downstream carbon emissions). The standards expect Scope 3 where it’s material.
• Disconnected processes – sustainability data in spreadsheets, financial data in another system, with no link between them.
• No scenario analysis – Both the old and new frameworks require climate scenario analysis. A surprising number of companies skip it or treat it as a tick-box exercise.
• Verification as an afterthought – if you’re going to need independent review, the time to think about data quality is before you publish. The UK sustainability assurance market is maturing fast. Getting your controls right from the start saves money.

Getting your company ready: a practical roadmap

Whether you’re in the first wave or preparing for later phases, here’s what we recommend:

1. Work out your timeline. Check which phase your company falls into based on size, listing status, and sector. Large PIEs have until 2028. Below the thresholds? You still have time, but voluntary early adoption sends a positive signal.
2. Gap analysis against the standards. Compare your current disclosures against the full requirements. Identify what you already do well and what’s missing.
3. Fix your data. Map your sources for greenhouse gas emissions, energy use, and other metrics. Establish clear ownership, documentation, and internal controls – the same principles that underpin reliable accounts, applied to different data.
4. Integrate with your annual report. The disclosures sit alongside your financial statements. They need to tell a consistent story. Your disclosures should align with those in your strategic report.
5. Prepare for scrutiny. Even if formal verification isn’t required yet, prepare as though it is. The International Auditing and Assurance Standards Board (IAASB) framework, reflected in UK ISSA 5000, sets out what providers will look for.
6. Talk to your auditor early. At Audit Group, we’re already having these conversations – reviewing readiness, identifying risks, and advising on best practice before the mandatory deadline hits.

How Audit Group can help

As part of Jack Ross Chartered Accountants (est. 1948), we’ve been helping businesses for over 75 years. We bring that experience to assurance of sustainability reporting under the new requirements.

Our services include:

• Gap analysis of current disclosures against the new requirements
• Readiness assessments ahead of sustainability assurance engagements
• Limited and reasonable assurance over published figures
• Advisory on internal controls, quality assurance, and reporting processes
• Integration of sustainability disclosure with statutory examination work

We work primarily with mid-market and owner-managed businesses across Manchester and the North West. We’re not a Big Four firm charging Big Four fees, but we deliver the same quality and consistency that the FRC and your stakeholders expect.

If you’d like to talk about your obligations, our team can review your current position and help you plan ahead. For broader support with reporting and governance, risk management, and strategy, our advisory and assurance services team works alongside us to give you a joined-up approach.

Get in touch on 0161 832 4451 or contact us online to arrange an initial conversation.