ESG compliance in the UK: a guide for SMEs
The UK has its own evolving ESG regulatory landscape, distinct from the EU post-Brexit. While the UK has not yet enacted a CSRD equivalent, several mandatory frameworks already apply to large companies — and create supply chain pressure on SMEs.
Educational content only. The information on this page is provided for general awareness and does not constitute legal, financial, or professional advice. Regulatory requirements vary by jurisdiction, company structure, and sector. Always consult a qualified adviser before making compliance decisions.
The current regulatory landscape
The UK's approach to ESG regulation is currently more fragmented than the EU's, but it is developing rapidly. The key frameworks are:
- TCFD-aligned reporting — mandatory for premium-listed companies, large AIM companies, and large LLPs since 2022. Requires disclosure of climate-related risks and opportunities.
- SECR (Streamlined Energy and Carbon Reporting) — mandatory for large UK companies (over 250 employees or over £36m turnover) since 2019. Requires annual disclosure of energy use and Scope 1 and 2 emissions in the Directors' Report.
- Modern Slavery Act 2015 — requires companies with over £36m annual turnover to publish an annual statement on steps taken to prevent modern slavery in their operations and supply chains.
- Green Claims Code — enforced by the Competition and Markets Authority (CMA). Applies to all businesses making environmental claims in marketing. Greenwashing can result in enforcement action.
UK Sustainability Disclosure Standards (UK SDS)
The UK is developing its own sustainability reporting standards aligned with the ISSB (International Sustainability Standards Board) framework. The Financial Reporting Council (FRC) and FCA are consulting on mandatory UK SDS requirements for large UK companies, expected to apply from 2026–2027. These will cover:
- Climate-related disclosures (IFRS S2-aligned)
- General sustainability disclosures (IFRS S1-aligned)
- Supply chain and value chain information
While UK SDS will initially apply only to large companies, it will create the same supply chain pressure as CSRD: large companies will need ESG data from their SME suppliers to complete their own disclosures.
What about CSRD — does it apply to UK businesses?
CSRD is an EU regulation and does not directly apply to UK companies. However, UK businesses are affected in two ways:
- UK subsidiaries of EU companies — if your business is a subsidiary of an EU parent subject to CSRD, the parent's reporting obligations will flow down to you.
- Supplying to EU companies — if you supply goods or services to large EU companies, they will ask you for ESG data as part of their CSRD value chain reporting. This is the most common route by which UK SMEs are affected.
Practical priorities for UK SMEs
Ensure your marketing and product claims comply with the Green Claims Code. The CMA is actively investigating greenwashing.
If you have over £36m turnover, check your SECR obligations and ensure your Directors' Report includes the required energy and emissions data.
Begin collecting Scope 1 and 2 emissions data. This will be required for UK SDS and is already being requested by large corporate buyers.
Prepare for UK SDS supply chain requirements. If you supply to large UK companies, expect ESG questionnaires.
Key resources
Manage your United Kingdom ESG compliance
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