On 7 September 2026, the government launched its consultation on modernising corporate reporting. The consultation runs until 30 November 2026, and proposes wide-ranging changes to the UK’s corporate reporting framework, including the provisions that currently underpin non-financial reporting, or what has become known as environmental, social and governance (ESG) reporting.
This briefing focuses on the sustainability-related reporting proposals within the consultation and taken as a whole, the consultation points towards a reporting framework that places greater emphasis on investor decision-useful information and financially material sustainability risks and opportunities. This is consistent with the publication of the UK’s Sustainability Reporting Standards (SRS), UK SRS S1: General Requirements for Disclosure of Sustainability related Financial Information and UK SRS S2: Climate-related Disclosures, which were endorsed and published by the government on 25 February 2026, and are currently available for voluntary use. While the consultation does not propose mandatory reporting against UK SRS, it may signal a future pathway towards broader adoption of UK SRS-based reporting within the UK’s corporate reporting framework.
1. Potential reframing of large parts of existing non-financial reporting requirements
Many of the UK’s existing ESG reporting requirements are currently found in Sections 414C and 414CB of the Companies Act 2006.
Section 414C
Under Section 414C(7), quoted companies[1]must currently report, or explain why they have not reported, certain ESG information in their strategic report where such disclosure is necessary for an understanding of the development, performance or position of the company.
These disclosures include information on:
- Environmental matters (including the impact of the company’s business on the environment)
- The company’s employees
- Social, community and human rights issues
- Related policies and the effectiveness of those policies
The consultation proposes removing these prescriptive disclosure requirements and replacing them with a more principles-based strategic reporting framework. The proposed “baseline strategic report” would enable companies to explain their performance, strategy and risks in a way that focuses on issues important to their ability to generate value.
In practice, this means that ESG issues would not disappear from corporate reporting. Rather, companies would be expected to disclose ESG matters where they are material to the company’s strategy, performance, risks and long-term value creation. This approach is closely aligned with the International Sustainability Standards Board (ISSB) framework and with the UK SRS standards, which focus on sustainability-related risks and opportunities that affect enterprise value and investor decision-making.
The consultation also proposes replacing the Section 172(1) statement with disclosures relating to resources and relationships, further reinforcing the move towards financially material strategic reporting. This represents a significant shift away from a stakeholder-focused reporting model towards a model based primarily on financial materiality, and alignment with international trends.
Section 414CB
Section 414CB currently sets out the content requirements for the non-financial and sustainability information statement applicable to certain public-interest entities, including quoted companies, banks and insurers with more than 500 employees.
The current requirements include reporting on:
• Environmental matters (including the impact of the company’s business on the environment)
• Employee matters
• Social matters
• Respect for human rights
• Anti-corruption and anti-bribery matters
• Related policies and due diligence processes
• Outcomes of those policies
• Principal risks and adverse impacts arising from business relationships, products and services
• Non-financial key performance indicators
The consultation proposes removing much of this prescriptive ESG reporting framework and replacing it with a broader strategic reporting model centred on performance, strategy, risks and value creation. Again, the focus would move away from mandatory topic-based disclosures towards reporting on ESG matters that are financially material to the business.
One of the most striking features of the consultation is that it does not seek to eliminate sustainability reporting; rather, it seeks to place greater emphasis on sustainability information that is relevant to strategy, risk and long-term value creation.
2. Climate-related financial disclosures are not affected
Importantly, the consultation expressly excludes from reform the existing climate-related financial disclosure requirements contained in sections 414CB(A1), (2A) and (4B) of the Companies Act 2006. The government states that these requirements are currently subject to a separate postimplementation review, and that no proposals regarding their future are included in this consultation.
These climate-related financial disclosures (CFD) currently require reporting on the basis of Task Force on Climate related Financial Disclosures (TCFD), namely reporting on:
- Climate governance, risks and opportunities
- Climate-related risks and opportunities
- Risk management processes
- Impacts on strategy and business model
- Climate-related metrics and targets
The consultation is, however, seeking views on where sustainability-related financial disclosures should be located within annual reports and accounts. It proposes greater flexibility, allowing climate and sustainability information to be included throughout the strategic report, within a dedicated sustainability section of the strategic report or potentially elsewhere within the front end of the annual report.
The consultation further recognises that certain listed companies may become subject to both the existing Companies Act climate-related financial disclosure regime and the Financial Conduct Authority’s (FCA’s) sustainability disclosure requirements. The government notes that companies may in due course be able to use UK SRS disclosures to satisfy aspects of their Companies Act climate disclosure obligations, helping to reduce duplication and improve consistency across reporting frameworks. The consultation also refers to the FCA’s work to align listed company sustainability disclosures with UK SRS. That process has now culminated in the FCA publishing final rules requiring in-scope listed issuers to disclose sustainability-related and climate-related financial information by reference to UK SRS S1 and UK SRS S2 on a comply-or-explain basis. The new regime will replace the FCA’s existing TCFD-based disclosure framework for accounting periods beginning on or after 1 January 2027.
3. Transition plans remain under consideration
Although the consultation does not propose new transition plan reporting requirements, it repeatedly refers to the government’s separate consultation on climate transition plans.
In particular, the government notes that it sought feedback on the extent to which UK SRS S2: Climate-related Disclosures provides useful information on the contents of a transition plan.
This suggests that the government continues to view transition plans as an important component of the future UK sustainability reporting framework and sees a close relationship between:
- Climate-related financial disclosures
- Transition plans
- UK SRS S2
However, the location, content and legal framework for transition plan reporting remain subject to separate consultation processes and no decisions have yet been taken.
What does this tell us about the future of ESG reporting in the UK?
The government’s direction of travel is becoming increasingly clear. Rather than requiring companies to report against a prescribed list of ESG topics, future reporting is likely to focus on sustainability-related matters that are financially material to investors and creditors.
This does not mean that ESG reporting will disappear. On the contrary, ESG issues that affect strategy, risk, resilience or long-term value creation will remain highly relevant.
For example, environmental impacts are likely to remain central to reporting by mining, energy and infrastructure companies, while human rights and supply chain issues may continue to be highly material for sectors such as textiles, consumer products and manufacturing.
Climate-related reporting is clearly here to stay. The consultation strongly suggests that future reforms will seek greater coherence between climate-related financial disclosures, transition plan reporting and the newly endorsed UK SRS. Any decision to replace, integrate or streamline the existing CFD regime would follow the separate post-implementation review and would require further consultation.
The location of those disclosures is also under review, with the government proposing greater flexibility as to where sustainability and climate-related information appear within annual reports.
Companies and stakeholders wishing to influence these reforms have until 30 November 2026 to respond to the consultation.
[1] A quoted company means a UK incorporated company whose equity share capital is officially listed in the UK or a European Economic Area (EEA) state or admitted to dealing on the NYSE or NASDAQ stock markets.
