UK Government Proposes Reforms to Corporate Sustainability Reporting

On 7 September 2026, the UK government published a consultation on “Modernising Corporate Reporting to support long-term economic growth”. The consultation sets out proposals to overhaul the UK’s corporate reporting framework, with implications for non-financial and sustainability-related disclosures. The consultation closes on 30 November 2026.

Background

The government notes that the piecemeal evolution of the UK’s corporate reporting system has resulted in a complex series of regulations and describes the consultation content as an “opportunity to reset the UK’s corporate reporting framework”, with the aim of creating “the most proportionate and effective” reporting system in the world.The consultation builds on an update to the government’s Regulation Action Plan published in October 2025, which contained measures to reduce the burden on businesses from corporate reporting. Statutory instruments will be set out to exempt most medium-sized private companies from producing a strategic report and to exempt wholly owned subsidiaries from producing a strategic report where they are covered by the reporting of a UK parent.

The consultation is guided by five core principles:

1. Clarity of purpose: Reports should be focussed and designed to provide financially material and decision-useful information, primarily to investors and creditors.
2. Flexibility and trust: Companies should be trusted to tailor disclosures, empowering directors to determine material disclosures.
3. Simplicity and coherence: The framework should reduce duplication across company law, accounting standards, and regulatory rules.
4. Proportionality: The reporting system should ensure costs are justified by benefits, with reporting requirements reflecting company size and economic impact.
5. Fit for the future: The system should embrace digital reporting and emerging technologies.

In this article we focus on the potential impacts to corporate sustainability reporting, including the proposed strategic report reforms, climate and sustainability disclosure developments, and related company threshold changes.

Key Sustainability Related Updates

Strategic Report Reform

Key proposals relating to non-financial reporting concern the strategic report, which is currently required to include sustainability related information for a number of companies. The government views the report as having “become too long, complicated and unfocused”. The consultation proposes replacing most existing strategic-reporting requirements with a core set of baseline narrative disclosures covering a company’s business model, performance, resources and relationships, strategy, and principal risk exposures. This principles-based approach would allow companies to explain their performance, strategy, and governance in a way that reflects the size and nature of their business.

In practice, the proposed baseline model would replace the existing disclosure matters in sections 414C(7)(b) and 414CB of the Companies Act 2006,The Companies Act 2006 is the primary legislation governing company law in the UK, applicable to companies incorporated in England, Wales, Scotland, and Northern Ireland. and would supersede the section 172(1) statementA section 172(1) statement requires companies to disclose how directors have fulfilled their duties on a range of matters which includes the impact of the company’s operations on the community and the environment. with disclosures on resources and relationships. This would remove specific mandatory reporting requirements for environmental matters, employees, social matters and social responsibility, community matters, human rights, and anti-corruption and anti-bribery measures.

However, the government emphasises that companies should continue reporting on these topics where they are financially material. The shift is from prescriptive topic requirements to a framework where companies report on matters that are material to their particular business and relevant to investors and creditors.

The consultation also seeks views on how baseline reporting should be produced, with the aim of establishing a single threshold for these requirements.

Climate and Sustainability Disclosures

The consultation does not propose changes to existing mandatory climate-related financial disclosure (CFD) requirements under section 414CB(A1), (2A), and (4B) of the Companies Act 2006.For financial years beginning on or after 6 April 2022, certain UK companies including large companies, AIM-listed companies and companies already subject to non-financial reporting requirements in their strategic reports. These requirements are aligned with the recommendations issued by the Task Force on Climate-related Financial Disclosures. The government is currently conducting a separate post-implementation review of the CFD requirements, expected to conclude by the spring of 2027. The government will use the findings of that review, alongside other evidence, to inform any future changes to CFD requirements.

In addition, the consultation confirms that the government is considering responses to its earlier consultation on the manifesto commitment on transition plans, and that future decisions will have regard to the objectives and context of this wider review of corporate reporting.

Separately, the government published the UK Sustainability Reporting Standards (UK SRS S1 and UK SRS S2) in February 2026, based on the International Sustainability Standards Board (ISSB) IFRS S1 and IFRS S2 standards. The consultation notes that the government will consider how the UK SRS should be reflected in the Companies Act 2006, taking into consideration feedback from this consultation and the CFD post-implementation review. The Financial Conduct Authority (FCA) has also recently consulted on requiring listed companies to disclose climate-related risks and opportunities in accordance with UK SRS S2, with final listing rules expected to be published in autumn 2026.Companies captured under the FCA’s proposed listing rule requirements to report against UK SRS S2, as well as the existing CFD requirements, may choose to use their UK SRS S2 disclosures to meet CFD obligations using section 414CB(6) of the Companies Act 2006, which allows companies to report this information using a national, EU-based, or international reporting framework rather than duplicating the information. For further information on the UK SRS and FCA consultation, refer to this Latham blog post.

The consultation highlights that the UK government strongly supports the financial materiality approach taken by the ISSB, which focuses on providing financially material information to investors and creditors. This approach is mirrored in the UK SRS and is distinct from the “double materiality” approach adopted in the EU under the Corporate Sustainability Reporting Directive, which requires companies to report not only on how sustainability matters affect the company’s financial position (financial materiality), but also on the company’s own impacts on people and the environment (impact materiality). As a result, UK companies with EU operations or EU subsidiaries may continue to face divergent reporting obligations.

The consultation also proposes additional flexibility in where sustainability-related financial disclosures can be located within annual reports. Companies would be able to report climate and other sustainability information either integrated within or in a separate section of the strategic report. This responds to stakeholder feedback that lengthy sustainability disclosures should not “outweigh” other material information in the strategic report.

Separately, streamlined energy and carbon reporting (SECR) disclosures, currently located in the directors’ report, will be relocated following the planned removal of the directors’ report from the annual report. Companies in scope will have flexibility to place SECR disclosures in any section of the first half of the annual report. The Department for Energy Security and Net Zero intends to hold a separate consultation on SECR reform later in 2026.

Company Thresholds and Scope

The consultation seeks views on introducing a new “very large” company threshold for certain non-financial reporting obligations which could make the reporting framework simpler to apply.

The government is also considering whether non-financial reporting disclosures from private companies are necessary to help manage private-company investment risk. The consultation notes that private companies often have a closer relationship with their investors than publicly listed companies, and questions whether the same level of disclosure is needed.

Further Proposals

Beyond the non-financial reporting reforms discussed above, the consultation covers a wide range of other corporate reporting matters, including: simplifying financial reporting requirements by moving detailed obligations from the Companies Act 2006 into accounting standards; extending audit exemptions to certain medium-sized companies; streamlining remuneration and corporate governance reporting; replacing distributable profits and capital maintenance rules with a solvency-based regime; and embracing digital communications, including clarifying that annual general meetings can take place virtually.

Implications and Next Steps

The consultation closes on 30 November 2026, and affected stakeholders may consider responding. The government specifically seeks investor views on the value of non-financial disclosures for assessing private company investment risk and on how strategic reporting information is used in practice. Companies should also monitor parallel developments on climate-related financial disclosures and the UK SRS. The CFD post-implementation review and the FCA’s UK SRS consultation for listed companies will shape the broader sustainability disclosure landscape, and the government has indicated it will ensure these requirements interact coherently.

This article was prepared with the assistance of Samantha Banfield and James Thompson at Latham & Watkins.

Latham & Watkins will continue to monitor developments relating to the UK corporate reporting and sustainability disclosure landscape.