UK SRS S1 and S2 Overview

UK SRS S1: General requirements for disclosure of sustainability-related financial information. Provides the framework and methodology for all sustainability reporting — materiality framework, connectivity principle, disclosure architecture.

UK SRS S2: Climate-related disclosures applying S1's framework specifically to climate risks and opportunities, including emissions and transition plans. Climate-specific requirements, GHG emissions disclosure, scenario analysis.

Why UK SRS S1 and S2 came together

Evolution Path:

• TCFD (2017): Task Force on Climate-related Financial Disclosures established climate reporting framework
• ISSB (2021): International Sustainability Standards Board created global baseline standards
• UK Endorsement (2026): UK adopted and amended IFRS S1 and S2 as UK SRS

The relationship is fundamental: S1 is the framework, S2 is its first application. S1 establishes general requirements for materiality assessment, reporting boundaries, and disclosure principles that apply to all sustainability topics. S2 then applies these principles specifically to climate-related risks and opportunities.

This two-standard approach allows entities to start with climate (using S2's climate-only relief) while building capabilities for broader sustainability reporting under S1.

Future topic-specific standards (S3, S4, etc.) will follow the same pattern, applying S1's framework to specific sustainability themes.

How UK SRS S1 and S2 are structured

Both standards follow the four-pillar architecture inherited from TCFD:

Each pillar requires disclosure of current state and forward-looking information, with quantitative metrics where possible and qualitative explanation where quantification is not yet feasible.

UK SRS S1 — the General Requirements

UK SRS S1 provides the foundational framework for all sustainability reporting:

Core requirements:

• Materiality assessment: Single materiality (financial) for UK implementation
• Reporting boundaries: Consistent with financial reporting boundaries
• Disclosure timing: Annual sustainability reporting aligned with annual reports
• Connectivity principle: Clear links between sustainability and financial information

Key features:

• Building blocks approach for topic-specific standards
• Proportionality for smaller entities through comply-or-explain
• Safe harbour provisions for forward-looking information
• UK-specific materiality approach (single financial materiality)

UK SRS S2 — Climate-related Disclosures

UK SRS S2 applies the S1 framework specifically to climate:

Climate-specific requirements:

• Physical risks: Assessment of acute and chronic climate risks
• Transition risks: Technology, market, policy, legal, reputation risks
• Climate opportunities: Resource efficiency, energy source, markets, resilience
• GHG emissions: Scope 1, 2, and 3 emissions with transitional reliefs

Transitional reliefs:

• Scope 3 relief: Comply-or-explain until 1 January 2028
• Comparative period: First-year implementation relief
• Climate-only relief: Focus on climate before broader sustainability

How UK SRS S1 and S2 work together

In practice:

1. Start with S2: Most entities will begin with climate disclosures under S2
2. Use S1 framework: Apply S1's materiality and disclosure principles
3. Build capability: Develop systems for broader sustainability topics
4. Expand scope: Add non-climate sustainability topics under S1 framework

Reporting sequence:

• Year 1: S2 climate disclosures (proposed mandatory from January 2027)
• Year 3: S1 broader sustainability (comply-or-explain from January 2029)
• Future: Additional topic standards (S3, S4, etc.) following S1 framework

The six UK amendments to IFRS S1 and S2

The UK made six targeted amendments to IFRS S1 and S2 to address UK market conditions:

1. Single materiality: Financial materiality only (not double materiality)
2. UK-specific transition provisions: Tailored implementation timeline
3. Scope 3 relief extension: Comply-or-explain until 1 January 2028
4. UK legal framework alignment: Integration with UK company law
5. Proportionality provisions: Enhanced comply-or-explain for smaller entities
6. Safe harbour clarifications: UK-specific forward-looking information protections

Who must comply, and when

Mandatory scope (FCA CP26/5 proposal):

• Premium listed companies: Mandatory from 1 January 2027
• Large PIE companies: Mandatory from 1 January 2027
• Estimated 515 entities initially

Timeline:

• S2 (climate): Mandatory from 1 January 2027
• S1 (broader sustainability): Comply-or-explain from 1 January 2029
• Scope 3 emissions: Comply-or-explain relief until 1 January 2028

Voluntary adoption: Available for any UK entity from publication date.

How UK SRS interacts with existing UK regimes

SECR (Streamlined Energy and Carbon Reporting):

• UK SRS S2 climate data can support SECR requirements
• No formal cross-referencing yet permitted
• DESNZ considering interaction to reduce duplication

TCFD disclosures:

• UK SRS S2 supersedes TCFD for in-scope entities
• Four-pillar structure maintained with enhanced requirements
• Transition period allows gradual adoption

Non-financial reporting:

• UK SRS may influence s172 strategic reports
• Enhanced connectivity between financial and sustainability information
• Board oversight requirements aligned with corporate governance

Implementation preparation

Key preparation steps:

1. Materiality assessment: Identify climate risks and opportunities
2. Data systems: Establish GHG emissions measurement capabilities
3. Governance setup: Board and management oversight structures
4. Legal review: Understand disclosure obligations and safe harbours
5. Assurance planning: Consider independent verification requirements

For detailed implementation guidance, including compliance statement rules and common pitfalls to avoid, see the UK SRS reporting guidance.