Sustainability insight | 06 Mar 2026 |

Travers Smith's Sustainability Insights: The UK's cautious roll out

Listen now or read the full briefing below

KEY INSIGHTS

The EU's sustainability omnibus is finally passed: The European Union has finalised its dramatic reforms to sustainability reporting rules, hitting fewer private companies and relaxing several related obligations.

The UK confirms a cautious roll out: The UK’s sustainability reporting standards have been finalised, but mandatory rules are being developed that focus on proportionality and cost-benefit analysis – with more news for large private companies expected later in 2026.

Sustainability remains a priority for rule makers: Both the EU and UK remain committed to sustainability as a policy priority, but now openly discuss burdens for companies as well as benefits for society.

A regular briefing for the alternative asset management industry.

Policymakers have slowed their urgent push for broad-based sustainability reporting. Three years ago, most informed observers expected that comprehensive, mandatory sustainability disclosures would soon cover many European private companies – and many of the private equity funds that backed them. But last week, as the EU gave final sign-off on its omnibus package of "simplification" measures, the UK government confirmed its gentle, phased approach to new standards.

The narrative in Europe has clearly changed: the rhetoric has moved from bold and rapid law-making to incrementalism.

The changes in the EU are stark. As we have written before, it is remarkable that the Corporate Sustainability Reporting Directive (CSRD) has been so dramatically scaled back just a few years after it was passed, and before its requirements hit most companies. And, although the UK had already set out on a different path, it has been taking careful note of the deliberations in Brussels.

The EU’s reform package does not only slash the scope of sustainability reporting – catching far fewer private companies and asset managers – it also cuts due diligence obligations, removes a requirement to publish and implement a climate transition plan, and scraps an EU-wide civil liability regime. Moreover, the EU has also taken welcome steps to mitigate the trickle-down impact of the new rules on smaller businesses.

Meanwhile, in the UK, the government published its own sustainability reporting standards (UK SRS) last week. These are closely modelled on the standards published by the International Sustainability Standards Board (ISSB), with some minor modifications. But, for the time being, these standards are available for voluntary use – they are not yet compulsory.

That will change, at least to some extent. The UK's financial regulator, the FCA, is consulting on a rule change that will require their use by many listed companies. And the impact may go wider: the UK government says that it will launch a consultation later this year to determine whether to require "economically significant private companies" to use the standards.

    "There is less blind faith in the power to disclosure to deliver change on the scale needed, and more explicit recognition of the burdens." 

But any changes will not be dramatic. The UK standards, like the ISSB's, comprise a general standard, UK SRS S1, and a climate-specific one, UK SRS S2. S2 is based on – and adds some additional requirements to – the TCFD reporting framework. Reporting on climate-related risks and opportunities is already mandatory for many asset managers and large private companies in the UK, and the new standard is being phased in gradually to allow firms time to adjust. Moreover, the final version of the UK standards even gives companies the option to limit their disclosures to climate-related risks and opportunities permanently – although it is not yet clear whether that option will be available for listed companies when they become subject to mandatory reporting requirements.

The UK government has clearly heard the message that any new requirements must be carefully calibrated, with assumed benefits carefully balanced against burdens for reporting entities. This cost / benefit analysis is perhaps most difficult for private companies. Although the government says that there is broad support for mandatory requirements to apply to large private companies, it has also received a clear message from consultation respondents: "proportionality is the priority".

There are several reasons why some level of mandatory requirement is helpful. As respondents to the UK government's consultation pointed out, mandatory rules can ensure comparability; they can level the playing field; they provide helpful information to debt providers; they ensure that management and board directors have strategically important information available, which supports effective corporate governance.

But those justifications are not a blank cheque. A recent review of evidence from earlier UK disclosure mandates (written by Simon Witney, a Senior Consultant at Travers Smith) reports that "mandatory climate-related disclosure in the UK led to significant, one-off but persistent reductions in corporate … emissions". However – and importantly for private markets – this research does not tell us why listed companies changed their behaviour, and therefore whether we should expect these changes to be replicated in non-listed businesses with one or more dominant shareholders.

It is not yet clear whether the UK government's manifesto commitment to require regulated asset managers and some large companies to adopt and implement Paris-aligned transition plans will be fully met – but the mood music suggests that may also be diluted. Last year's consultation was open to less demanding options, and many respondents supported a "comply or explain" approach (which, as we argued at the time, might actually deliver more useful disclosures); for now, this is also the FCA's chosen approach for listed companies.

Taken together, the EU reforms and the UK's tentative recent steps reflect a different political climate in Europe. There is no change in the view that sustainability impacts – especially, but not only, those relating to climate – are financially material for businesses. The wider societal impacts are also still priorities for lawmakers. There is, however, less blind faith in the power of disclosure to deliver change on the scale needed, and more explicit recognition of the burdens.

Whether the pendulum has swung too far is a matter for debate, but private capital firms will have more time to adjust to impending changes than they might have expected. Many will see this incremental approach, with a focus on what matters most, as positive. The UK still aspires to be a world leader for sustainable finance, but its tentative roll out is in line with global trends.

And regulators will hope that sustainability initiatives remain a priority for firms and their portfolio companies – even if they have made reporting on them less demanding.

Read Simon Witney Profile