The Labour government has confirmed that it will continue the Conservative government's work in developing a Sustainability Disclosure Requirements (SDR) regime for the UK. This initiative is central to the government's wider strategy to improve sustainability across the economy and to stimulate investment to forward the transition to net zero.
The UK SDR regime aims to enhance transparency in corporate sustainability practices and performance, standardise reporting on these issues, and address greenwashing. By doing so, it will enable investors and other stakeholders to more easily assess and compare companies' sustainability credentials, facilitating more informed decisions about resource allocation.
So where are we with the UK SDR, and what does 2025 hold for progress? The key components of the SDR framework include the following.
The UK Sustainability Reporting Standards (UK SRS)
The UK SRS will be a set of standards for corporate sustainability disclosures in the UK.
In 2023, the International Sustainability Standards Board published its first set of international sustainability disclosure standards (ISSB Standards), which are poised to become the global baseline for such disclosures. Over 30 jurisdictions worldwide, including the UK, are currently in the process of implementing the ISSB standards into national law.
The UK government is expected to reach a decision on whether the ISSB Standards should be endorsed for use in the UK in Q1 2025. Subject to a positive endorsement decision, the ISSB Standards will form the basis of the UK SRS.
During 2025, both the government and the FCA are expected to consult on requirements to disclose against the UK SRS for "economically significant" and listed companies respectively. Whatever the outcome of those consultations, it is not expected that any changes introduced would be effective for accounting periods beginning before 1 January 2026.
Transition plan disclosures
Also in 2023, the Transition Plan Taskforce published a Disclosure Framework for producing "gold standard" private sector transition plans, accompanied by detailed guidance.
Currently there is no mandatory requirement for companies to produce or disclose a transition plan which sets out how they intend to shift towards operating in a low carbon economy. Although, under the UK Listing Rules, listed companies are expected to disclose one if they have one.
However, the ISSB Standards include a requirement for companies to disclose details about their transition plan, if they have one. They also contain many disclosure requirements that are relevant to transition planning. Given this overlap, the FCA intends to consult on "strengthening its expectations" on transition plan disclosures for listed companies as part of its wider consultation on the UK SRS. Additionally, the government intends to consult on how the largest UK private companies can effectively disclose their transition plans, recognising the central role these plans play in attracting investment to support the broader transition to a climate-resilient economy.
Investment products: sustainability disclosure and labelling regime
In 2024, the FCA introduced rules and guidance to help consumers navigate the market for sustainable investment products including investment labels, naming and marketing rules, an anti-greenwashing rule for all FCA-authorised firms, and disclosure rules.
UK green taxonomy
A green taxonomy is, in short, a type of "dictionary" which helps end-users determine whether what a company actually does is considered environmentally sustainable by reference to certain criteria.
In November 2024, the government published an initial consultation on the value case for a UK green taxonomy which closed on 6 February 2025. This consultation does not deal with the classification criteria itself. It is rather intended to establish which types of organisations could benefit from a UK Taxonomy and how one would fit in with the government's plans for the wider UK SDR framework. We expect that more concrete proposals will follow in 2025 once the responses have been reviewed.
2025 – more how and when, than what and why
So where does that leave the UK SDR? Well, the government's commitment to achieving net zero by 2050 and to mobilising significant investment to support this transition is set. We know what it is aiming to achieve with the UK SDR and why. Expectations are high that 2025 will provide clarity on how the key aspects of the UK SDR will be implemented, and when.
Meanwhile, developments on sustainability reporting at EU level remain unsettled. On 27 February 2025, the Commission adopted proposals for two Omnibus Directives aimed at simplifying sustainability reporting and due diligence obligations. The proposed changes to sustainability reporting will remove around 80% of companies from the scope of the Corporate Sustainability Reporting Directive (CSRD), focusing the reporting on the largest companies. They will also postpone reporting requirements for some of the companies currently in scope of the CSRD which are required to report as of 2026 or 2027, to 2028. EU Taxonomy reporting obligations will be reduced as well. Changes are also proposed to sustainability due diligence requirements to reduce burdens on business, simplify requirements and increase harmonisation, with companies getting more time to prepare for compliance. In total, amendments are proposed to CSRD, CSDDD, CBAM and the scope of application of the EU Taxonomy to achieve these aims.
Harnessing emerging technologies
The rich variety of sustainability requirements both here in the UK and in the EU continues to highlight the challenge that businesses face in keeping up to date with new requirements, standards and frameworks. It also underscores the importance of good quality data collection, analysis and reporting processes. Businesses that can effectively leverage new technologies (including the use of distributed ledger technology and AI-driven solutions such as synthetic data) are likely to fare well in weathering the changing regulatory landscape and, critically, in minimising the cost of both the initial and ongoing compliance burden.
