UK SRS S1 Proportionality: 'Undue Cost or Effort' and Commensurate Approaches

Technical status. UK SRS S1 was published for voluntary use on 25 February 2026. Future mandatory UK rules may alter the availability or operation of reliefs. The FCA consultation had closed by 2 August 2026, but final listed-company rules had not yet been issued.

Limitation. Educational analysis. It does not determine whether a particular cost or effort is undue, whether quantitative financial effects are required in a specific case, or whether future regulatory rules modify the relief.

Teams often use “proportionality” as a broad argument for doing less: the entity is small, the system is new, Scope 3 information is difficult, or the first report is being prepared quickly. UK SRS S1 does not provide a general proportionality exemption on those grounds.

Instead, it contains specific mechanisms attached to specific requirements. The entity must locate the exact provision, apply its conditions and continue to meet the disclosure objective using the information and capabilities available.

Three concepts need to be separated:

1. information available without undue cost or effort — a limit on the information-gathering effort required in specified circumstances;

2. an approach commensurate with skills, capabilities and resources — a method for preparing particular information, notably anticipated financial effects; and

3. specific quantitative reliefs — circumstances in which separate quantitative information need not be provided, with prescribed qualitative and combined-information consequences.

These concepts overlap, but they are not interchangeable.

The first control is a proportionality register. For each proposed relief or adjusted approach, record:

the exact UK SRS paragraph;

the disclosure requirement and objective;

the information requested;

the mechanism available;

the conditions that must be met;

what the entity must still disclose;

the evidence supporting the judgement;

the owner, reviewer and approver; and

the next reassessment date.

Do not accept a statement such as “the team applied proportionality due to limited resources”. It does not identify the provision, the information omitted, the alternative information provided or the benefit-cost judgement.

Figure 1. UK SRS S1 uses several targeted mechanisms; none creates a blanket size exemption. Original London Reporting Academy practitioner visual.

Paragraph B6 requires the entity to use all reasonable and supportable information available at the reporting date without undue cost or effort to:

identify sustainability-related risks and opportunities that could reasonably be expected to affect prospects; and

determine the breadth and composition of the value chain relevant to each risk or opportunity.

B8 says the information covers entity-specific factors and external conditions and can include past events, current conditions and forecasts. B9 lists possible internal and external sources and contains an important deeming rule: information used to prepare the financial statements, operate the business model, set strategy and manage risks and opportunities is considered available without undue cost or effort.

B10 confirms that an exhaustive search is not required. The assessment depends on entity-specific circumstances and balances the costs and efforts for the entity against the benefits of the resulting information for primary users. It can change over time.

What this means in practice

The entity does not need to prove that it searched every database, supplier and technical study. It should be able to show that it:

1. started with information already used by the business;

2. considered relevant external sources and known gaps;

3. prioritised information likely to affect the conclusion;

4. assessed the incremental effort of further search;

5. considered the benefit to users; and

6. used the reasonable and supportable information available.

The mechanism limits the search effort. It does not permit the entity to ignore information already held by procurement, finance, risk, operations or strategy because the sustainability team has not integrated it.

A defensible assessment considers both sides.

Incremental cost and effort

Relevant factors may include:

direct data-purchase or specialist cost;

time required within the reporting timetable;

availability and reliability of source information;

system changes and manual reconstruction;

value-chain access and contractual rights;

need for scientific, engineering or valuation expertise;

geographic dispersion;

data protection or legal constraints; and

whether a less burdensome alternative would answer the same user question.

The assessment should focus on incremental effort, not the total cost of the reporting programme.

Benefit to primary users

Relevant factors may include:

magnitude and likelihood of effects on prospects;

importance of the issue to capital allocation or stewardship decisions;

sensitivity of financial effects to the missing information;

need to understand concentrations or vulnerable assets;

effect on comparability and trend analysis;

degree of uncertainty reduced; and

risk that omission would make the disclosure incomplete or misleading.

The more decision-useful the missing information is, the stronger the expectation that the entity will make reasonable efforts to obtain it.

Figure 2. A judgement record balances incremental effort against user benefit and documents what information was still used. Original London Reporting Academy practitioner visual.

Paragraph 34 requires information about current and anticipated financial effects. Paragraph 37 says that, in preparing anticipated financial-effect disclosures, the entity must:

use all reasonable and supportable information available without undue cost or effort; and

use an approach commensurate with the skills, capabilities and resources available for preparing those disclosures.

This wording recognises that anticipated financial effects can require scenario analysis, valuation, modelling and cross-functional judgement. A first-time reporter may use a simpler but still disciplined approach than an entity with mature models.

Examples of commensurate approaches

A less mature entity might:

identify affected financial-statement line items and directional effects;

use ranges rather than a single point estimate;

quantify selected high-confidence effects and describe others qualitatively;

use management planning horizons already applied in budgeting;

start with material assets, products or geographies rather than modelling every exposure; and

disclose uncertainty and a time-bound improvement plan.

A more mature entity with established scenario and valuation systems would normally be expected to use them. The commensurate approach is relative to available skills and systems; it is not permission to disregard mature internal analysis.

Paragraph 38 says the entity need not provide quantitative information about current or anticipated financial effects when:

the effects are not separately identifiable; or

measurement uncertainty is so high that the resulting quantitative information would not be useful.

Paragraph 39 adds that anticipated financial effects need not be quantified when the entity does not have the skills, capabilities or resources to provide the quantitative information.

These are targeted conditions. A general statement that “financial effects are difficult” is insufficient.

The continuing requirements in paragraph 40

When the entity concludes that separate quantitative information is not required under paragraphs 38-39, paragraph 40 still requires it to:

1. explain why quantitative information was not provided;

2. provide qualitative information, including the likely affected financial-statement line items, totals or subtotals; and

3. provide quantitative information about combined financial effects with other risks, opportunities and factors unless that combined information would not be useful.

A qualitative disclosure therefore needs to be financially connected and specific. It is not a generic risk paragraph.

Paragraphs 77-82 require disclosure of the most significant uncertainties affecting amounts reported. The entity identifies amounts subject to a high level of uncertainty and explains sources, assumptions, approximations and judgements.

The Standard also states that reasonable estimates are an essential part of reporting and do not undermine usefulness when accurately described and explained. Even high uncertainty does not automatically make an estimate useless.

Before invoking a quantitative relief, ask:

Can a range be provided?

Can a subset of the effect be quantified reliably?

Can sensitivity or scenario information be provided?

Can the affected line items and direction be identified?

Can combined effects be quantified?

Would a transparent estimate be more useful than silence?

Entity size can affect:

resource availability;

system maturity;

cost of external data;

degree of value-chain influence;

sophistication of modelling; and

the effort considered undue.

But the assessment remains linked to a specific requirement and the value of the information. A small entity with a concentrated, potentially material risk may need to make substantial efforts because the information is highly important to users. A large entity may reasonably limit a search for immaterial detail even though it has greater resources.

The statement “we are too small” should be replaced with a requirement-specific analysis.

Example A — value-chain screening

Facts. A retailer has 8,000 suppliers. It has expenditure, country and category data for all suppliers, detailed audit data for 600 strategic suppliers and no direct data for the rest.

Defensible approach. The entity uses the complete expenditure and location population, existing risk systems and strategic-supplier information to identify priority risk concentrations. It does not contact every supplier. It explains the screening approach, estimates and limitations, and plans targeted data collection for categories where further information could change the conclusion.

Weak approach. It limits the value-chain assessment to the 600 audited suppliers because those are the only records held by the sustainability team.

Example B — anticipated water-related financial effects

Facts. A manufacturer has identified two water-stressed sites. It can quantify planned resilience capital expenditure and historical interruption costs but cannot reliably estimate the probability and full cost of future restrictions.

Defensible approach. It quantifies planned capital expenditure and historical current effects, provides qualitative information on affected assets and line items, discloses the scenario and uncertainty, and explains why a complete point estimate is not useful. It considers a range and combined effects.

Weak approach. It states that financial effects are “not quantifiable” without identifying line items, available amounts or the uncertainty analysis.

Example C — first-year skills limitation

Facts. A first-time reporter lacks an integrated model for biodiversity-related financial effects but has site assessments, investment plans and asset-level risk ratings.

Defensible approach. It uses the information already available, identifies affected assets and planned expenditure, provides a qualitative and partial quantitative disclosure, records the skills/resource judgement and commits to an approved improvement plan.

Weak approach. It omits the topic until a complete model can be purchased.

A judgement memo should include:

reporting requirement and paragraph;

material risk or opportunity;

information requested;

available internal and external information;

searches and enquiries performed;

additional information considered but not obtained;

incremental cost and effort;

expected benefit to primary users;

alternative approaches assessed;

conclusion and information used;

qualitative, range or combined information provided;

significant uncertainty;

improvement action and timetable;

preparer, technical reviewer and approver; and

review trigger.

The memo should be prepared when the decision is made, not reconstructed during assurance.

B10 says the assessment can change as circumstances change. The entity should reassess proportionality when:

the risk or opportunity becomes more material;

data becomes available internally or externally;

a supplier or system relationship changes;

new modelling capability is acquired;

an assurance finding identifies a weakness;

the reporting timetable changes;

a regulator specifies a method; or

the information becomes important to management decisions.

Board or audit-committee oversight should focus on significant judgements, unresolved data gaps, improvement commitments and consistency with internal decision-making.

1. Using “proportionality” without a paragraph

Correction: identify the exact relief or approach and its continuing disclosure requirements.

2. Ignoring information held outside the sustainability team

Correction: B9 deems key finance, business-model, strategy and risk information available without undue cost or effort.

3. Treating an exhaustive search as the only alternative to doing nothing

Correction: perform a targeted, risk-based search focused on information likely to change the conclusion.

4. Equating uncertainty with uselessness

Correction: consider ranges, partial quantification, sensitivity and transparent estimates.

5. Providing no financial connection after invoking paragraphs 38-39

Correction: meet paragraph 40 with reasons, affected line items, qualitative information and combined quantitative information where useful.

6. Making the judgement permanent

Correction: set an update trigger and reassess as information and capability improve.

7. Using entity size as the sole reason

Correction: balance entity-specific incremental effort against the benefit of the particular information.