The UK government announced on Monday the launch of a major overhaul of its corporate reporting system, including significant potential changes to non-financial disclosure requirements by companies, such as proposals to remove mandatory reporting on issues including environmental impact, employee diversity, social responsibility, and human rights from its core law governing corporate reporting.

While the new consultation notes that reporting on these topics would still be required where financially material, it could also change which companies are required to provide non-financial disclosures in areas including environmental, social and human rights matters and climate-related financial disclosures, with the government stating that it is testing the establishment of a new “very large” company threshold to simplify which companies are covered by certain non-financial reporting obligations.

The new consultation sets out a broad series of proposals described by the government as designed to “modernise the UK’s corporate reporting framework,” to support growth and strengthen the UK’s competitiveness, ensuring that companies’ annual reports deliver decision-useful, financially material information.

One of the key focus areas of the consultation is reform of the strategic report, the primary narrative and non-financial disclosure component of UK companies’ annual reports, with the government stating in the consultation that “companies have indicated to us that the strategic report has lost its way and has become too long, complicated and unfocused.”

In its new document, the government stated that it is proposing “to remove most existing strategic reporting requirements and replace them with a core set of baseline narrative disclosures.”

Specific disclosures proposed for removal include information about environmental matters and the impact of a company’s business on the environment; information about a company’s employees including employment policies, engagement, diversity, and any actions taken to ensure fair treatment and development; how a company engages with social matters relevant to the business and addresses social responsibility; how a company engages with the communities in which it operates; a company’s approach to upholding human rights across its operations and supply chains, and; measures in place to prevent corruption and bribery.

The document stated:

“This would not mean that companies should stop reporting on these specific topics where these are financially material to their performance or operations, even though the explicit topic requirements are proposed to be removed. The proposal is for the information topics covered in the strategic report to reflect the nature of the company.”

Notably, the new consultation does not impact existing climate-related financial disclosure requirements, although the government noted that it is conducting a separate review of the regulations that introduced these requirements, which is expected to be completed by Spring 2027.

The new proposed reforms come alongside other ongoing moves impacting the sustainability-related disclosure environment in the UK, including the government’s recent release of UK Sustainability Reporting Standards (UK SRS), based on the sustainability and climate-related standards developed by the IFRS Foundation, and an ongoing consultation by the Financial Conduct Authority (FCA) into introducing mandatory reporting requirements for listed companies based on the UK SRS.

In its new consultation, the government said that it will consider how the new UK SRS should be reflected in the Companies Act 2006 – its primary law governing corporate reporting.

The initiative to update the UK’s corporate reporting system may also impact which companies are required to provide certain non-financial disclosures, with the government testing the creation of a single new “very large” company threshold to unify disparate requirements currently in place for different topics, although it did not provide details on which companies would be included in the “very large” category.

As part of its inquiry into which companies should be required to provide non-financial reporting, the government also said that it is looking “to consider whether nonfinancial reporting disclosures from private companies are necessary to help manage private company investment risk.”

In addition to the proposed reporting requirement changes, the government’s consultation is also looking to add flexibility to where sustainability-related disclosures can be made by companies, with a new proposal that companies can decide “to report climate and other sustainability information anywhere in the strategic report, including either integrated in the strategic report… or in a separate section of the strategic report, which refers to this information.”

The consultation is open until November 30, 2026.

Click here to access the consultation.