The UK government is consulting on changes which could reshape how companies report sustainability information, with a greater focus on financially material issues and less prescriptive requirements around specific environmental and social topics.
The proposals form part of a wider review of the UK’s corporate reporting framework, launched on 7 September. The government says the aim is to simplify reporting, reduce duplication and make annual reports more useful to investors and other users.
Less prescriptive ESG reporting
The government is proposing to remove some of the specific sustainability reporting requirements currently set out in the Companies Act 2006.
These include requirements to report on environmental impacts, employees, social and community matters, human rights, and related policies and due diligence.
The proposal is not to remove sustainability reporting altogether. Instead, companies would have more flexibility to decide which sustainability issues are relevant to their business and financially material to its performance or operations.
This would move the UK towards a less prescriptive approach, with companies no longer required to report on the same set of sustainability topics regardless of the nature of their business.
A more flexible approach to sustainability information
The government is also proposing to give companies more choice over where they present sustainability information in their annual reports.
Companies could include relevant information within their strategic report, as they do now, or potentially put it in a separate section of their annual report. The government says that, wherever it appears, sustainability information should remain focused on issues that are financially material to the business.
The proposals would not remove existing requirements for climate-related financial disclosures. These are being considered separately by the government.
The changes are being proposed as the UK develops its wider sustainability reporting framework. UK Sustainability Reporting Standards S1 and S2 were finalised in February 2026 and are currently voluntary. The Financial Conduct Authority is separately considering how the standards could apply to listed companies.
What could this mean for businesses?
The proposals would shift the emphasis from reporting against a set list of prescribed ESG topics towards identifying and explaining the sustainability issues that are financially material to the business.
For companies, that could mean greater flexibility in how sustainability information is presented, but also more judgement about what information is relevant, material and useful to report.
The government is also considering whether some non-financial reporting should apply only to larger businesses, including whether to introduce a new threshold for “very large” companies.
These are proposals rather than changes to the law. The consultation is open until 30 November 2026, with the government expected to publish its response within six months of the consultation closing.
The outcome of this consultation is expected to shape the UK’s approach to sustainability reporting for years to come. For a broader overview of the proposed changes, read our guide.
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