Mandatory Sustainability Reporting In 2026
- Helena Glover
- Mar 4
- 6 min read
A clear compliance guide for UK businesses
For many UK businesses, sustainability reporting still feels confusing: too many acronyms, overlapping rules, and mixed messages about what is mandatory versus best practice.
This article sets out the main sustainability compliance schemes that UK businesses need to understand in 2026, in plain English.
How sustainability reporting now fits into financial reporting
Most UK businesses are familiar with IFRS (International Financial Reporting Standards), which govern how financial statements are prepared.
In recent years, IFRS has been extended to cover sustainability. A new body, the International Sustainability Standards Board (ISSB), has issued two global sustainability standards:
IFRS S1 – sustainability-related risks and opportunities that could affect a company’s financial performance
IFRS S2 – climate-related risks and opportunities
These standards are designed to sit inside the annual report and be treated with the same discipline as financial information.
They only become mandatory when adopted into national law. In the UK, that adoption will happen through UK Sustainability Reporting Standards (UK SRS).
Alongside this future framework, there are existing UK laws that already require climate, energy and carbon disclosures.
UK Sustainability Reporting Standards (UK SRS)
What it is
UK Sustainability Reporting Standards are the UK’s version of the IFRS sustainability standards (IFRS S1 and IFRS S2). In simple terms:
UK SRS = IFRS sustainability standards applied through UK regulation.
Over time, UK SRS will become the main sustainability reporting standard for UK companies and will replace current climate-disclosure rules.
Who is required to comply
As of January 2026, UK SRS are not yet mandatory for any UK company.
The UK government has committed to adopting them, but mandatory reporting has not yet started. The expectation is that UK listed companies will be first, with possible extension to large private companies later.
What must be done
When UK SRS becomes mandatory, in-scope companies will need to disclose:
material sustainability and climate risks and opportunities
governance and oversight of those risks
impacts on strategy and financial performance
metrics and targets, including climate metrics
These disclosures will form part of the annual report, not a separate ESG document.
When this applies
No UK company is required to publish UK SRS disclosures in 2026
2026 is a preparation year, not a reporting year
UK mandatory climate-related financial disclosures (TCFD-aligned)
What it is
UK law already requires certain organisations to include climate-related financial disclosures in their annual reports. These disclosures follow the structure developed by the Task Force on Climate-related Financial Disclosures (TCFD).
Although TCFD began as a voluntary framework, it is now written into UK legislation.
Who is required to comply
This requirement applies to:
UK publicly listed companies
UK private companies with more than 500 employees and more than £500 million turnover
UK LLPs meeting the same thresholds
What must be done
In-scope organisations must include climate disclosures in their annual report, covering:
board oversight of climate risks
how climate risks and opportunities affect the business model and strategy
scenario analysis
risk management processes
metrics and targets, including greenhouse gas emissions
When this applies
This requirement is already in force.
If you are in scope, you must include climate disclosures in your next annual report following the end of your financial year.
Streamlined Energy and Carbon Reporting (SECR)
What it is
Streamlined Energy and Carbon Reporting (SECR) is a UK statutory reporting requirement focused on energy use and carbon emissions. It sits within the Companies Act and is separate from climate-risk disclosures.
Who is required to comply
SECR applies to:
all UK quoted companies (regardless of size), and
UK unquoted companies and LLPs that are “large”
An organisation is classed as large if it meets two of the following:
£36 million turnover
£18 million balance sheet total
250 employees
What must be done
In-scope organisations must include the following in the Directors’ Report:
energy consumption
Scope 1 and Scope 2 greenhouse gas emissions
an energy intensity metric
a description of energy efficiency actions taken during the year
comparative figures (previous year’s data)
When this applies
SECR is already mandatory and applies every year.
If you are in scope, SECR disclosures must appear in your next annual report after your financial year end.
Energy Savings Opportunity Scheme (ESOS)
What it is
The Energy Savings Opportunity Scheme (ESOS) is a UK legal requirement for large organisations to assess their energy use and identify energy-saving opportunities. It is a compliance scheme, not an annual reporting framework.
ESOS operates in four-year phases, each with a qualification date and a submission deadline.
Who is required to comply
ESOS applies to large undertakings, defined as organisations that meet either of the following tests on the qualification date:
250 or more employees, or
turnover above £44 million and a balance sheet above £38 million
Group rules apply, so UK subsidiaries can be in scope due to their group size.
What must be done
ESOS obligations now consist of three elements:
Phase compliance (energy audits or equivalent routes, board sign-off, compliance notification)
An ESOS Action Plan (introduced from Phase 3)
Annual Progress Updates against that Action Plan
When this applies
This is where clarity matters.
ESOS Phase 3 Action Plans were required by early 2025, following a government extension from December 2024 to March 2025.
Organisations that were in scope of Phase 3 must now submit annual progress updates: first update: 5th December 2025 second update: 5th December 2026
Separately:
31st December 2026 is the Phase 4 qualification date
5th December 2027 is the Phase 4 compliance deadline
So, in 2026:
Phase 3 organisations must submit a progress update by 5th December 2026
All organisations should assess whether they will qualify for Phase 4 at year end
Packaging Extended Producer Responsibility (EPR)
What it is
Packaging EPR is a UK regulatory regime that makes organisations financially responsible for the cost of managing packaging waste placed on the UK market.
Who is required to comply
You are in scope if all of the following apply:
you are the responsible organisation for packaging placed on the UK market (for example, a UK brand owner, UK importer, or UK online marketplace)
the responsible organisation has annual turnover of £1 million or more, and
more than 25 tonnes of packaging were supplied or imported to the UK market in the previous calendar year
Different obligations apply depending on:
whether you are classed as a small or large organisation, and
your role in the packaging supply chain.
What must be done
In-scope businesses must register with the regulator, report detailed packaging data and pay EPR fees where liable.
When this applies
Packaging EPR is live
Fees became payable from 2025
2026 is the first full year of ongoing cost exposure for many businesses
EU Corporate Sustainability Reporting Directive (CSRD)
What it is
The Corporate Sustainability Reporting Directive (CSRD) is an EU law requiring in-scope companies to publish sustainability information using the European Sustainability Reporting Standards (ESRS).
Who is required to comply
CSRD is mandatory for companies that meet the scope tests.
For most UK groups, CSRD becomes relevant through EU subsidiaries. An EU entity is generally in scope if it meets at least two of the following:
more than €50 million net turnover
more than €25 million balance sheet total
more than 250 employees
Small EU subsidiaries are not automatically in scope.
What must be done
In-scope EU entities must:
carry out a double materiality assessment
report sustainability information across environment, climate, workforce, governance and value chain topics
UK parent companies often need to provide data and governance support.
When this applies
Many large EU entities will publish their first CSRD reports in 2026, covering the 2025 financial year.
Carbon Border Adjustment Mechanism (CBAM)
What it is
The Carbon Border Adjustment Mechanism (CBAM) is a border carbon charge applied to certain imported goods. It is trade compliance, not corporate reporting.
Who is required to comply
EU CBAM applies to EU importers of goods such as steel, aluminium, cement, fertilisers, hydrogen and electricity. UK exporters are affected because EU customers must report emissions and will require data from suppliers.
UK CBAM is a separate regime that will apply to UK importers.
What must be done
Under EU CBAM, embedded emissions must be calculated and, from 2026, carbon costs apply
Under UK CBAM, detailed requirements are still being finalised
When this applies
EU CBAM definitive regime starts in 2026
UK CBAM starts on 1 January 2027, making 2026 a preparation year
Conclusion
In 2026, sustainability reporting for UK businesses is no longer about ambition or voluntary disclosure. It is about:
understanding which regimes apply to your business
knowing what information you are required to produce
and aligning that work with your financial reporting cycle
Some requirements are already mandatory. Others are not yet in force but are clearly coming. The businesses that fare best will be those that cut through the complexity early and treat sustainability reporting as part of mainstream corporate governance.
If you would benefit from compliance support this year, please get in touch for a free consultation.
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