FCA publishes finalised rules requiring listed companies to report against the UK Sustainability Reporting Standards on a comply or explain basis

Earlier today, the Financial Conduct Authority (FCA) published a Policy Statement (PS) setting out its final rules to align listed issuers’ sustainability and climate disclosures with the UK Sustainability Reporting Standards (UK SRS). These comprise a climate standard, UK SRS S2, and a broader sustainability standard, UK SRS S1. The UK SRS are based on the International Sustainability Standards Board standards IFRS S1 and S2, widely seen as setting a ‘global baseline’ for sustainability and climate change disclosures. The rules will replace the existing Task Force on Climate-related Financial Disclosures (TCFD) aligned disclosures in the UK Listing Rules (UKLRs). 

The rules will apply to accounting periods beginning on 1 January 2027, with first reporting in 2028.

The FCA consulted on its approach in January 2026, and the final rules in the PS reflect feedback from participants. Most significantly:

• The final rules adopt a ‘comply or explain’ approach across the UK SRS. This is a change from the consultation proposal, which advocated for mandatory disclosure of UK SRS S2, except for Scope 3 emissions which could be provided on a comply or explain basis. The FCA states that the switch to a comply or explain approach will allow issuers to “focus on providing high-quality, decision-useful information, rather than applying the standards mechanically in a way that could produce lengthy disclosures of limited value to investors”. The FCA notes that a mandatory approach may be disproportionately burdensome for small companies. 
• The timings first set out in the consultation have not changed. The rules will apply to accounting periods beginning on 1 January 2027, with first reporting in 2028. A one-year transitional relief will apply for Scope 3 disclosures (forming part of UK SRS S2) and a two-year transitional relief will apply for UK SRS S1 disclosures. In both cases, there is no requirement to ‘explain’ during the relief period, but the use of the relief should be disclosed. 
• UK SRS S2 and UK SRS S1 disclosures and/or any explanations are to be included in companies’ annual reports, with cross-referencing to another report permitted. Issuers may use cross-referencing to another report to meet disclosure requirements for UK SRS S2 and S1 where permitted under UK SRS S1, and a reference to “another report” has now been added to the UKLRs. Paragraphs B45 to B47 of Appendix B to UK SRS S1 set out how information is to be included by cross-reference: information can be made available in another report provided that the information is available on the same terms and at the same time as the annual report, and that the complete set of disclosures must not be made less understandable by including information by cross-reference. 
• Issuers will be required to disclose whether and where they have published a climate-related transition plan, if they have one, or state why they have not published one. The FCA is clear that this is not a requirement to produce a transition plan. Issuers in the secondary listing and depositary receipts categories of the UKLRs will be out of scope of this requirement.
• Issuers will be required to specify, in their annual financial report, whether or not they have obtained third-party sustainability assurance over their disclosures relating to UK SRS. The FCA will keep the case for mandating sustainability assurance under review. 
• International companies in the secondary listing category and the depositary receipts category of the UKLRs will be required to produce UK SRS reporting on a comply or explain basis, in a change from the consultation proposal. They will also need to provide transparency about third-party assurance.
• The FCA intends to provide updated information regarding its supervisory approach to UK SRS in the second half of 2027, in time for the first reporting season under the new rules. 

Alongside the PS, the FCA has also published the following:

• A new Technical Note (TN) 803.1 which sets out the FCA’s expectations and examples for the level of detail it expects from issuers when preparing disclosures, including when choosing to explain rather than comply. 
• An updated TN 801.4 (which will become TN 801.5) and proposed deletion of TN 802.3 to reflect the move from TCFD to UK SRS disclosures. The FCA is consulting on the new TN and changes to its existing TNs until 28 October 2026 and aims to finalise the guidance before the new rules come into force.
• Primary Market Bulletin 66, which sets out an overview of the new rules, some practical considerations for reporters, and the consultation on the TNs. 
• Details of a webinar it will be hosting on 19 October where it will present the new rules and guidance.