The UK SRS: key takeaways

The long-awaited UK Sustainability Reporting Standards (SRS) have now been published. Here’s what you need to know.

Not a new compliance scheme  

The UK Sustainability Reporting Standards will definitely affect your future compliance obligations, but they are not a compliance scheme in themselves. They are a set of standards for compliance schemes to meet. So the publication of the UK SRS doesn’t give businesses any new obligations right now. You just need to be aware that from now on, these rules will affect the UK regulatory landscape. Any future compliance schemes, or any future incarnations of existing schemes like SECR or ESOS, will have to be in line with the UK SRS.

Businesses need to share sustainability risks

The UK SRS is all about requiring businesses to share information on how environmental issues affect their bottom line. The goal is for any “primary user” of your financial reports – that is, any potential investor or lender – to see clearly how sustainability issues could affect the financial health of your business. To achieve this, a business needs to:

• Map out all the sustainability-related risks and opportunities for the business;
• Publish this information in its financial reports;
• Make it clear enough that any reader can understand it and make informed decisions based on it.

Your assessment of risks and opportunities shouldn’t stop at the boundary of the business. If your business already reports on Scope 3 emissions then you will be familiar with the concept that engagement with the environment needs to extend into a company’s value chain. The UK SRS builds on that principle. It means businesses should consider and report any potential sustainability-related issues affecting its suppliers, waste disposal services and so on.

Closely following international standards

The UK SRS didn’t originate in the UK. It’s our adoption into national law of international standards. As we explained in our recent blogpost, the UK SRS is based on global standards from the International Sustainability Standards Board (ISSB). We are one of many countries that has been transposing these international rules so that they work within our own legal landscape. The aim was to achieve the maximum possible alignment with international standards without including any details that clash with UK policy principles. It’s taken a lot of consultation and over two years to get it right.

Two areas: sustainability generally and climate specifically

The UK SRS is actually two documents: UK SRS S1 and UK SRS S2. These are very closely based on the international standards they’re adapting: IFRS 1 and IFRS 2.

• UK SRS S1 covers “general requirements for the disclosure of sustainability-related financial information”.
• UK SRS S2 specifically covers “climate-related disclosures”.

SRS S1 covers all the ways in which environmental issues pose risks to a business. Here are just a few examples of what that could include:

• A company’s water use and whether its sources are under threat of drying up
• Raw materials like metals and the possibility of losing access to the usual source
• Construction plans and how these could be affected by anything from soil erosion to environmental objections

SRS S2 focuses on the climate. Again, here are just a few examples of what that means for a business:

• How sea level rise and flooding could affect business sites
• High temperatures and the effect on the workforce – is there a possibility that relocation will be necessary?
• Reputational risk: will a business lose customers or investors if it’s not perceived as doing enough to cut emissions?

Many businesses are already doing some kind of climate-related reporting, whether that is TCFD reporting or obligations under SECR. Now that the UK SRS has been published, we expect all existing climate reporting schemes to be reviewed to ensure that they are in line with it.

Those are the key takeaways about the UK SRS. The Energy Advice Hub will also be publishing more tailored analysis about how it could affect your business.