UK SRS S2 Finalised: Scope 3 Comply-or-Explain and Everything Listed Companies Must Disclose from 2027

Key Takeaways

• UK SRS S2 (Climate-related Disclosures) was published in final form in February 2026 by the Department for Business and Trade
• Approximately 515 UK-listed companies must report against UK SRS S2 for accounting periods beginning on or after 1 January 2027
• Scope 3 emissions are required on a comply-or-explain basis, with one year of transitional relief for first-time reporters
• UK SRS S2 replaces the existing TCFD-aligned listing rules, creating a more comprehensive climate disclosure framework aligned with ISSB IFRS S2
• Transition plan disclosure is required, with explicit alignment to the UK Transition Plan Taskforce (TPT) Disclosure Framework

What UK SRS S2 Requires

UK SRS S2 is the UK’s endorsed version of ISSB IFRS S2 (Climate-related Disclosures). It represents the most comprehensive mandatory climate disclosure requirement the UK has ever introduced, significantly exceeding the existing TCFD-aligned listing rules. The standard requires disclosure across four pillars:

Governance

Companies must disclose how their governance body (typically the board) oversees climate-related risks and opportunities. This includes: which committee or individual has responsibility, how climate is integrated into board agendas, what expertise the board has on climate matters, and how climate considerations influence strategic decisions, risk management, and remuneration.

Strategy

Companies must describe the climate-related risks and opportunities that could reasonably be expected to affect their business model, strategy, cash flows, access to finance, and cost of capital. This includes:

• Physical risks (acute and chronic): flooding, heat stress, water stress, supply chain disruption
• Transition risks: policy changes, technology shifts, market changes, reputational impacts
• Opportunities: new products/services, resource efficiency, access to capital, resilience
• Climate scenario analysis: at minimum, a scenario consistent with 1.5°C warming and a high-warming scenario
• Transition plan: how the company intends to transition to a low-carbon economy, aligned with the TPT Disclosure Framework

Risk Management

Companies must describe their processes for identifying, assessing, prioritising, and monitoring climate-related risks, and how these processes are integrated into overall risk management.

Metrics and Targets

This is the most operationally demanding pillar. Companies must disclose:

• Scope 1 emissions: Direct emissions from owned/controlled sources (mandatory, no exceptions)
• Scope 2 emissions: Indirect emissions from purchased energy (mandatory, both location-based and market-based)
• Scope 3 emissions: Value chain emissions across all material categories (comply-or-explain, with transitional relief)
• Climate-related targets: Emission reduction targets, net zero commitments, and interim milestones
• Industry-based metrics: Sector-specific metrics derived from SASB standards
• Internal carbon prices: If used in decision-making
• Climate-related financial metrics: Capital deployed to climate, revenue from climate-related products, assets at risk

UK SRS S2 vs TCFD: What’s New

Many UK-listed companies have been reporting against the TCFD recommendations since the FCA made TCFD-aligned disclosure mandatory for premium-listed companies in 2022, extended to standard-listed companies in 2023. UK SRS S2 builds on this foundation but introduces several significant new requirements. The following table identifies what is genuinely additional beyond existing TCFD listing rules.

The practical implication is that companies which have built their climate disclosure around the TCFD four-pillar structure have a solid foundation but will need to add substantial additional content, data processes, and governance to meet UK SRS S2 requirements. The shift from “recommended” to “required” across multiple elements, and the introduction of sector metrics and assurance, represent a step-change in disclosure rigour.

Sector-Specific Metrics

One of the most operationally significant additions in UK SRS S2 is the requirement for industry-based metrics. These are derived from the SASB (Sustainability Accounting Standards Board) industry-specific standards, which ISSB inherited when it consolidated the Value Reporting Foundation in 2022. The purpose is to ensure that climate disclosures capture the risks and opportunities most relevant to each industry, beyond the cross-industry metrics of Scope 1, 2, and 3 emissions.

Companies must identify which SASB industry classification applies to their business and disclose the metrics specified for that industry. For diversified companies operating across multiple industries, metrics for each material industry segment should be disclosed. Three examples illustrate the scope and specificity of these requirements:

Oil and gas (Exploration and Production / Midstream / Refining). Companies must disclose: gross global Scope 1 emissions broken down by source (combustion, process, fugitive, vented); methane emissions as a percentage of total Scope 1 and the methodology used to quantify them (direct measurement vs emission factors); proven and probable hydrocarbon reserves, with sensitivity analysis showing the impact of different carbon price scenarios on reserves valuation; the percentage of reserves in countries with emission-limiting regulations; and discussion of how climate-related risks (stranded assets, demand transition) are reflected in reserves and resource estimates.

Banks and financial services (Commercial Banks / Investment Banking). Banks must disclose: financed emissions — the Scope 3 Category 15 emissions associated with their lending and investment portfolios, typically calculated using the Partnership for Carbon Accounting Financials (PCAF) methodology; the proportion of the lending portfolio aligned with climate-related objectives (green loans, sustainability-linked loans); exposure to carbon-related assets (fossil fuel lending, high-emission sectors); climate-related scenario analysis applied to the loan book, including credit risk under transition and physical risk scenarios; and details of how climate risk is integrated into credit risk assessment and capital allocation decisions.

Real estate (REITs / Real Estate Services). Real estate companies must disclose: energy intensity of the property portfolio, expressed as kWh per square metre (or equivalent) and broken down by property type (office, retail, industrial, residential); like-for-like energy consumption and greenhouse gas emissions across managed properties; the proportion of the portfolio with green building certifications (BREEAM, EPC A/B); capital expenditure on energy efficiency improvements and building decarbonisation retrofits; and the exposure of the portfolio to physical climate risks (flooding, heat stress, coastal erosion) based on property location and climate projections.

These sector metrics require data collection processes that many companies do not yet have in place. For banks, calculating financed emissions across a lending book of thousands of counterparties is a multi-year data infrastructure project. For real estate companies, energy intensity data requires building-level metering and data management systems. Companies should begin gap analysis against the relevant SASB metrics now, even before the first reporting period begins.

The Scope 3 Approach

Scope 3 has been the most debated element of UK SRS S2. The final standard adopts a comply-or-explain approach:

• Companies should disclose Scope 3 emissions for all categories that are material to their value chain
• If a company does not disclose Scope 3 (or specific categories), it must explain why: what efforts were made, what challenges prevented disclosure, and what the timeline is for future disclosure
• First-time reporters receive one year of transitional relief: for the first annual reporting period under UK SRS, companies can defer Scope 3 to the following year

This approach is less prescriptive than the EU’s CSRD, which requires Scope 3 disclosure as part of the ESRS E1 (Climate Change) standard with no comply-or-explain option. However, investor expectations and SBTi requirements mean that most large listed companies will face pressure to disclose Scope 3 regardless of the regulatory flexibility.

Transition Plans: The TPT Connection

UK SRS S2 explicitly references the UK Transition Plan Taskforce (TPT) Disclosure Framework for transition plan disclosure. This means companies must prepare transition plans that address:

• Foundations: Strategic ambition and governance basis
• Implementation strategy: Business operations, products/services, policies and conditions, financial planning
• Engagement strategy: Value chain engagement, industry engagement, government engagement, workforce engagement
• Metrics and targets: Emission targets, financial metrics, progress tracking
• Governance: Board oversight, management accountability, skills and capabilities, incentives

The FCA’s Role

The FCA published Policy Statement PS26/19 in September 2026, confirming the listing rule changes that give UK SRS legal effect for listed companies. Key elements include:

• UK SRS reporting replaces the existing TCFD listing rules (LR 9.8.6R and related provisions)
• Premium and standard listed companies are both in scope
• The first reporting period is for accounting years beginning on or after 1 January 2027
• Companies must include UK SRS disclosures in their annual report or in a clearly cross-referenced separate sustainability report

What You Should Do Now

• Conduct a UK SRS S2 gap analysis against your current TCFD disclosures — identify the additional requirements
• Begin Scope 3 data collection for material categories even if you plan to use the comply-or-explain provision initially
• Develop your TPT-aligned transition plan — this is now a compliance requirement, not a nice-to-have
• Identify your SASB industry classification and map the sector-specific metrics required for your business
• Establish board governance of climate disclosures with clear accountability, reporting lines, and competence
• Engage with your assurance provider — while mandatory assurance is not confirmed from day one, early readiness assessment provides confidence
• Build your data systems to capture Scope 1, 2, and 3 data with audit-quality evidence trails, controls, and methodology documentation

Preparing for UK SRS S2?

Our advisory team conducts UK SRS gap assessments, designs Scope 3 data collection systems, and builds TPT-aligned transition plans for UK-listed companies.

Explore Our Capabilities
Book a Free Call