Corporate reporting is rapidly evolving, with numerous new standards and requirements being established to guide companies towards more responsible and sustainable ways of doing business. As the UK prepares to introduce its own standards, companies have a unique opportunity to lead in this new era of increased transparency and accountability.
Over the last five years, corporate reporting has, in regulatory terms, progressed at warp speed. Initially limited and niche, it has now taken centre stage. In the last twelve months alone, we have seen significant progress in this area with the adoption of new, comprehensive European Sustainability Reporting Standards (ESRS), which require up to 1,400 data points for large companies. As a consequence, many European multinationals have gone from scepticism to acceptance, before becoming something akin to champions of sustainability disclosures.
While up to 1,000 UK companies need to implement ESRS in 2025 due to their EU operations, the UK isn’t directly subject to these standards and many companies can watch, wait, and learn from their implementation ahead of the UK’s own move towards comprehensive and standardised sustainability reporting. Now is arguably the perfect time to take stock and get ahead of the curve before the UK Government takes further action.
This year, the UK Government is set to publish the exposure drafts of its Sustainability Reporting Standards (UK SRS) during the first quarter. A significant milestone for UK businesses, these standards will provide a comprehensive framework for sustainability reporting in the country, ensuring that companies disclose relevant and comparable information to their stakeholders.
It’s also worth noting that the previous government appointed a Sustainability Disclosure Technical Advisory Committee (TAC) back in May 2024. TAC is formed of a chair and members from a range of relevant professional backgrounds, who are now meeting monthly to assess IFRS Sustainability Disclosure Standards on a technical basis and provide independent recommendations on endorsement to the Business and Trade Secretary for the development of the UK SRS.
Additionally, the Financial Conduct Authority (FCA) is expected to make it mandatory for companies to develop and publish Climate Transition Plans, in line with the UK Transition Plan Taskforce (TPT) Disclosure Framework, which was published in October 2023. Climate Transition Plans are designed to enhance the existing requirements for UK-listed companies to conduct TCFD climate reporting. The FCA plans to simultaneously consult on the implementation of the UK Sustainability Reporting Standards and on transition plan disclosures for businesses, following the planned government announcement in early 2025.
On the surface, the move towards mandatory UK sustainability reporting might seem like just another regulatory requirement. The reality is that it’s about so much more than just mere compliance. In my opinion, it’s a great opportunity to rethink how we define business purpose, how we do business, and create long-term value for all stakeholders. In management accounting terms, this means the measured application of our Global Management Accounting Principles (GMAP) so that the company’s sustainable value story is already part of the operations being reported on, not a creation of the reporting itself.
Companies that embrace these principles will be better equipped to adapt to future challenges, attract investment, build lasting relationships with stakeholders, and consequently be ready for the UK’s new reporting landscape. Yes, there will be a learning curve, and yes, there will be upfront costs, but by investing in their finance teams and fostering collaboration across strategy and operations, UK companies can turn these reporting obligations into a strategic advantage. They can be used as a component of business strategy to drive innovation, efficiency, and resilience in a rapidly changing world.
To retain a competitive advantage, it would be wise for UK companies to proactively address and communicate how sustainability-related risks, opportunities, and impacts affect performance and prospects, cost of capital, and access to capital in their annual reports. The CGMA Business Model Framework is a good starting point for this process.
To stay ahead of the curve, UK companies should also know what standards are coming and how these can be applied – our Sustainability and Business Toolkit provides a comprehensive overview of these standards. It’s also important to use forward-looking tools such as scenario planning and predictive analytics to assess how risks and opportunities may impact long-term financial performance; ideally, this reporting should already capture what is happening within the organisation. Once companies have a good handle on their data, they should perform a gap analysis to ensure they have all the necessary information and processes in place, including identifying missing or incomplete information, to effectively integrate sustainability metrics into their financial reporting.
The final piece of the puzzle is developing a method to integrate sustainability metrics—such as carbon footprints, supply chain impacts, and diversity goals—into financial reporting. This may require finding new information sources, creating new methodologies, and designing new frameworks. Integrating sustainability metrics into financial reporting is crucial because it provides a comprehensive view of a company’s performance. This holistic approach can demonstrate how sustainability initiatives contribute to financial success, such as how reducing emissions can lead to cost savings and revenue growth and drive long-term value creation.
The landscape of reporting in the UK is evolving, and adapting to these changes will be crucial for companies to maintain a competitive edge and ensure compliance. By proactively understanding and preparing for these changes, and leveraging the right tools and strategies, companies can not only navigate this new environment successfully but also lead the way in a new era if corporate reporting.
