Legal briefing | 23 Oct 2026 |

Travers Smith's Sustainability Insights: Sustainability reporting: retreat or reset?

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KEY INSIGHTS

Reporting burden eases globally: Regulators worldwide are scaling back sustainability disclosure requirements, with the UK taking a measured approach that favours flexibility and proportionality.

Flexibility replacing prescription: The FCA is moving away from mandatory, metric-heavy reports towards a "comply or explain" model aligned with international standards, giving firms greater discretion over how they communicate material sustainability information.

Less reporting, harder judgements: Reduced mandatory disclosure does not mean reduced responsibility, as firms must still make rigorous, defensible assessments of materiality and be prepared to justify their approach to investors and the FCA alike.

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Worldwide, reporting has become the poster child for the unnecessary burdens placed on companies in the name of sustainability. Culling reporting requirements, as a result, becomes the way that regulators demonstrate that they are listening to and supporting business. The EU, Australia, Brazil and of course the US have cut current or proposed sustainability reporting rules in the past year.

Unlike the EU, which was widely seen as having gone too far, too fast with its originally broad and far-reaching CSRD reporting framework, the UK has adopted a more cautious approach. As we have previously noted, it seemed to have learned from the EU's "mistakes" and taken time to consider the difficult balancing act between driving useful sustainability disclosures on the one hand and proportionate burdens on the other. Recent developments have led to questions over where exactly that balance lies.

Many private markets firms will have welcomed the announcement earlier this year that the UK's financial regulator, the FCA, was rethinking requirements for firms to prepare climate-related disclosures for certain financial products (so called "TCFD product reports"). These metric-heavy, prescriptive reports often replicated – in a different format – information investors already requested from firms, and were too technical to be of general interest. Few, therefore, considered that removing this compliance-led product level reporting would deprive investors of decision-useful information. Investors will still request fund-by-fund emissions data, and firms will still provide it. The revised rules require a baseline of emissions data to be available at least once per year, and retail-facing communications to describe climate risks where they may have a material financial effect on the product. That assessment comes with its own challenges.

In September, the FCA attracted criticism from some when it published its final rules for reporting by listed companies in line with the UK Sustainability Reporting Standards (UK SRS S1 on general sustainability and S2 on climate). The FCA's consultation on the new rules had already attracted criticism, by proposing indefinite "comply or explain" treatment for scope 3 emissions and non-climate sustainability topics, but other climate reporting under SRS S2 would have been mandatory in all cases – a step up from the current "comply or explain" TCFD requirements. Under the final rules, companies may "explain" non-compliance with any part of the standards.

Many smaller listed companies will well welcome this approach, feeling that further mandatory sustainability reporting was overly burdensome. However investors, asset managers and lenders will continue to need consistent data from companies – if not available in the market, companies will still have to respond to the various custom information requests instead. When deciding on an approach, companies must resist equating "comply or explain" with voluntary reporting – the FCA expects a "clear, concise and cogent", issuer-specific rather than generic explanation.

At the same time, asset managers are waiting to see whether the FCA will replace the current requirement for firms to produce entity-level TCFD reports with UK SRS climate reporting, and potentially supplement climate reporting with general sustainability reporting. Private companies had separately expected that, by now, the Government would have consulted on whether or not to replace the current patchwork of climate and sustainability reporting rules (for example, climate financial disclosures under the Companies Act) with UK SRS reporting. We also await the Government's decision on whether or not it will fulfil its election manifesto promise of requiring certain businesses to adopt mandatory climate transition plans, a topic on which it has been silent for over a year. None of these expected developments have yet occurred, nor are expected imminently. The Government has instead focused on its "Modernising Corporate Reporting" reforms, via which it proposes to strip back the specifics of non-financial information reporting (a pre-Brexit EU legacy), including on environmental matters, employees, social, community and human rights. Instead, companies would need to make their own assessment of financially material matters which they should be disclosing.

In combination, these various developments (or lack thereof) give pause for thought about the direction of travel of the UK's sustainability reporting framework, and possibly even sustainability more generally. The debate around the cost – and value – of the UK's legally binding net zero by 2050 target has been reopened this year, with the opposition Conservative Party pledging to repeal the Climate Change Act.

Rather than a step away from away from sustainability, the FCA's recent policy changes could be viewed as a step away from the assumption that more reporting necessarily produces better information or outcomes. The direction of travel is towards fewer mandatory reports, greater flexibility in how firms communicate material information, and closer alignment with international standards. That will be welcomed by many firms.

Flexibility comes at a cost, however. It will reduce standardisation and therefore comparability for consumers of this information. Determining whether climate risk is material, selecting material sustainability topics for disclosure, and formulating an appropriate explanation of any reporting gaps, may be manageable for managers with mature sustainability processes. Smaller listed companies (that these concessions are designed to protect) may find this more difficult, and must ensure appropriate governance around decision making. They should be able to defend their assessments internally, to investors and, if required, to the FCA.

We should hesitate before branding the FCA’s emerging approach as a regulatory retreat, or assume that it will spread to other rules. Reporting that is poorly used or insufficiently tailored is being removed, and new reporting burdens are being avoided where companies are not yet able to bear them. Reporting should support capital allocation, market integrity and investor scrutiny and should, for the benefit of larger businesses, be aligned with international standards. For firms, less reporting for reporting's sake should free up resources for the real work of improving sustainability outcomes.

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