Joyce & Sustainability

Why SMEs Should Prepare ESG Metrics to Meet Corporate Supplier Demands

What Is Sustainability Reporting? Everything You Need To Know

Sustainability reporting involves disclosing an organisation’s environmental, social, and governance (ESG) practices. Internally, it serves as a practical guide for driving sustainability goals and tracking progress over time. Externally, it functions as a formal disclosure to key stakeholders, including shareholders, investors, clients, customers, and the general public.

The Evolution of Global Sustainability Reporting Standards

Sustainability reporting is evolving from voluntary claims with different sustainability reporting frameworks in different countries to more structured standards. To align sustainability reporting across the globe, the International Sustainability Standards Board (ISSB) has developed the IFRS Sustainability Disclosure Standards (S1 and S2). These standards aim to provide a global standard for sustainability reporting.

UK Sustainability Reporting Standards (UK SRS): What Companies Need to Know

At present, large companies in the UK disclose their sustainability practices in alignment with the Task Force on Climate-related Financial Disclosures (TCFD).

The UK government launched the UK Sustainability Reporting Standards (SRS) for voluntary adoption in early 2026. The 2026/27 financial year acts as a transition period for affected businesses. Mandatory reporting under the new standards will begin for financial years starting in 2027.

The UK SRS complies with the Sustainability Disclosure Requirements (SDR), a framework that is significantly broader than the current TCFD remit. Consequently, future mandatory reporting in the UK will move beyond climate specific data to cover a wider array of sustainability matters. While it will retain TCFD style climate requirements.

Scope of the UK Sustainability Reporting Standards (SRS)

The upcoming SRS will apply to a broad range of entities. The primary groups subject to these regulations include listed companies overseen by the Financial Conduct Authority (FCA), large private companies regulated by the Department for Business and Trade (DBT), and various financial institutions.

What should small and medium‑sized enterprises (SMEs) pay attention to?

While SMEs are not yet legally required to report, UK SMEs should focus on the following four key areas:

✦ Strategy 1: Collect Carbon Data

As an SME, if you supply goods or services to a large or listed firm, you will likely receive detailed questionnaires requesting your: carbon emissions data, energy and fuel usage records, and waste and water management practices.

✦ Strategy 2: Access to Finance and Green Lending

UK banks and insurers are increasingly integrating ESG risks into their lending criteria. SMEs that can demonstrate a clear sustainability commitment often benefit from increased investor appeal for those seeking external growth capital.

✦ Strategy 3: Comply with Public Procurement Requirements (PPN 06/21)

If your business bids for UK government contracts over £5 million (and increasingly for smaller NHS or local authority contracts), you must have a Carbon Reduction Plan (CRP). This plan must include a commitment to achieving net zero by 2050, current carbon emissions, and publication of this plan on your company website.

✦ Strategy 4: Prepare for Regulatory Compliance

The UK government is developing voluntary standards for SMEs to prevent an administrative nightmare. Instead of aiming for full IFRS/ISSB compliance immediately, SMEs should conduct a materiality assessment to identify which ESG issues actually matter most to your specific business and customers.

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