The UK Financial Conduct Authority (FCA) has dropped its earlier plan to make climate-related disclosures fully mandatory for listed companies.
In its final Policy Statement PS26/19, published on 30 September 2026, the FCA confirmed that companies will instead follow a “comply or explain” approach under the UK Sustainability Reporting Standards (UK SRS).
The change gives listed firms more flexibility, but it does not remove climate and sustainability reporting. Companies will still need to make relevant disclosures or explain why they have not done so.
The new rules will apply to accounting periods beginning on or after 1 January 2027, with the first annual reports under the framework expected in 2028.
What Has the FCA Changed?
The FCA had previously proposed stricter mandatory climate disclosures as part of its consultation on aligning listed companies with the new UK sustainability standards.
Under the final rules, companies will instead report against UK SRS S1, which covers wider sustainability matters, and UK SRS S2, which focuses on climate-related risks and opportunities, on a comply-or-explain basis.
This means companies cannot simply ignore the framework.
Where a relevant disclosure is not made, the company will need to state this and explain the omission through its reporting.
The FCA has also introduced transition periods to give companies more time to prepare. There will be a one-year relief for Scope 3 emissions reporting and a two-year relief for wider non-climate reporting under S1.
Why Has the FCA Changed Its Approach?
The decision follows concerns about the cost and practical burden of implementing a fully mandatory regime.
According to Reuters, companies raised concerns that tougher requirements could increase reporting costs and affect the international competitiveness of the UK listing market.
The FCA has therefore chosen a more flexible framework while keeping sustainability information within listed company reporting.
Climate disclosure is also not new for many large UK companies. An FCA review found that 92% of FTSE 350 companies complied with existing TCFD disclosure requirements, showing that climate reporting is already well established among many larger listed firms, many of which sit within the financial services sector.
Who Does the New Climate Reporting Rule Affect?
The change is aimed mainly at companies that fall within the FCA’s listed issuer reporting rules.
For these businesses, the main impact is that climate reporting will no longer follow the fully mandatory model originally proposed.
However, “comply or explain” should not be treated as an exemption.
Companies that decide not to provide certain disclosures will still need to consider how that decision is explained in their annual reporting.
Ignoring the change could leave a business unprepared for the new reporting framework when it begins in 2027.
What Should Listed Companies Do Now?
Businesses should use the period before implementation to review their existing sustainability reporting processes.
They should check what climate and sustainability information they already collect, identify gaps, and understand which UK SRS disclosures may apply to them, with accurate bookkeeping underpinning the data behind any disclosure.
Companies should also review how they will handle any areas where they cannot provide full information, especially where an explanation may be required.
The aim should be to prepare early rather than wait until the first reporting cycle approaches, as part of wider tax and business planning.
How Lanop Can Help
The FCA’s decision gives listed companies more flexibility, but it also makes careful reporting and planning important.
Lanop Business and Tax Advisors can help businesses review their reporting processes, financial information, governance requirements, and wider business strategy.
With the new framework taking effect from 2027, early preparation can help businesses understand their obligations and avoid rushed decisions when the first reporting deadlines arrive. Contact Lanop today to book a free consultation with our team.
