If the UK Government maintains its current emphasis on sustainable finance and strong corporate governance, the UK Sustainability Reporting Standards (UK SRS) will likely come into force before long. The introduction would mark a structural shift in how companies report on performance. It will require companies to show how sustainability drivers connect directly to their financial outcomes, linking items such as emissions, resilience, and transition plans to capex, revenues, and costs.

For those UK PLCs in scope, this will be more than an additional compliance exercise. It represents a rewiring of how sustainability, finance, and risk functions interact, and it will challenge existing reporting and governance structures. As ever, there is an opportunity to strengthen investor confidence and demonstrate good corporate governance for those that get ahead.

At its core, UK SRS expects companies to treat sustainability data like financial data – verifiable, comparable, and decision-useful. The standards will push sustainability considerations and implications into the financial statements, demanding a different approach to how sustainability is embedded than many will be used to. We also recognise that this is all happening against the backdrop of a challenging UK economy. However, we believe the capital markets will continue to scrutinise how companies manage long-term value creation, making credible sustainability-linked financial disclosures even more critical.

What will UK SRS require in practice?

• Quantification of financial impacts: Companies will need to link sustainability inputs (such as carbon prices, resource constraints, regulatory shifts) to their P&L, balance sheet, and cash flow assumptions. Finance and sustainability teams must learn to model together, not in parallel.
• Boards will be in focus: Companies will be expected to evidence accountability, mandates, skills, and remuneration links. Some Boards will need to revisit their terms of reference, reporting structures and documentation of decision-making and their impacts.
• Materiality and measurement uncertainty: Companies must be able to show how sustainability topics are assessed through a lens of financial materiality, with board oversight, and detail as to how assessment assumptions, estimations and uncertainty are measured and managed.
• Scope 3 data and engagement: Value-chain emissions data, already recognised as a challenge for most, will become a core expectation. Over time, this will require deeper supplier and customer engagement, along with consistent boundaries and transparent methodologies.
• Scenario analysis: Companies will need to demonstrate how their business model performs under different temperature or policy pathways and across different time horizons. While many companies will be accustomed to this practice already, having followed the TCFD framework, these exercises remain complex and data heavy. Scenario analysis is increasingly important to investor understanding of sustainability-related risks and opportunities, and the UK SRS will only enhance this view.
• Connected information: Companies will need coherent narrative for where sustainability metrics, strategic decisions and financial impacts cross over, and will also need to be able to explain potential differences. It won’t be enough to simply describe past performance.
• Data quality and systems: UK SRS assumes audit-ready information. Many organisations will need to rethink or enhance their data infrastructure, controls, and ownership processes to get there.

For most, the gap between the status quo and readiness is wide. Most listed companies today report sustainability data and financial data through separate channels, often using different systems, processes, and teams. Few will have established the modelling frameworks or governance processes needed to tie sustainability impacts to financial statements with confidence. As a result, for many, the biggest challenge will be organisational. The focus will need to be on breaking down the gap between finance and sustainability; educating Boards to sign off on sustainability-linked financial reporting; and establishing governance controls that are robust enough to withstand audit and investor scrutiny.

So, how do you prepare?

While we wait to understand how the UK Government will implement a new potential sustainability reporting regime, and the timelines for adoption, there is still work that companies can do to set themselves up for success:

• Align financial and sustainability teams and build shared accountability for climate and ESG data.
• If not already done, begin to model the financial impacts (positive and negative) of key sustainability drivers.
• Strengthen or build internal controls, policies, and documentation of non-financial data.
• Start to bring the Board, ESG Committees and senior management along the journey and ensure they understand their new oversight responsibilities.

For some, UK SRS will just be seen as yet another demanding compliance burden. Our challenge to our clients is to try and see it as an opportunity to better connect sustainability with value, and to fully embed sustainability considerations within strategy and operations – including finance.

In the long run, those that can demonstrate clear and quantified links between sustainability and financial performance and prospects will not only benefit from meeting compliance requirements but will also set themselves up for stronger oversight, better understanding of performance drivers (financial and sustainability-based), and improved engagement with investors, and other stakeholders.

In summary, the direction of travel is clear: sustainability disclosures will no longer be treated as non-financial data. Companies will soon need to assess their preparedness for this shift, and determine how to build the governance, data, reporting and decision-making frameworks to turn it into an advantage.

At SIFA Strategy, we work with Boards and management teams to navigate these kind of shifts and how to help organisations to embed sustainability properly across governance, finance, data, and reporting process. With the right preparation, companies can strengthen the link between sustainability, strategy and value creation and meet the raised bar that may be set by UK SRS and other sustainability-related legislation across the globe.

To support the ongoing transition, we are currently conducting research into how these trends are being assessed and implemented across the UK small- and mid-cap market, particularly the readiness of companies to understand and quantify their sustainability-linked financial impacts. We will publish our findings and recommendations in early 2026.