How to Prepare a UK SRS S2 Climate Report: Complete Step-by-Step Guide

Functional visual created for London Reporting Academy. The visual is illustrative and should be read with the article.

Agree what the organisation is preparing: a voluntary report with a complete UK SRS S2 compliance claim, selected S2-aligned disclosures, a current TCFD report with UK SRS readiness information, or a draft for proposed FCA reporting. The decision changes the gap assessment, relief analysis, approval language and report architecture.

Create a one-page basis paper covering the reporting entity, period, related financial statements, intended report location, applicable legal rules, intended UK and IFRS claims, reliefs under consideration, technical owner, finance owner, legal/company secretarial owner and final approver.

Confirm the S1 materiality method, reporting entity, financial-statement relationship, time horizons, location, timing, comparative approach, judgement disclosures and compliance rules. Add these fields to the S2 disclosure matrix rather than maintaining a separate abstract checklist.

Record every existing legal route: FCA TCFD rules, Companies Act climate regulations, overseas listing requirements, sector rules, lender covenants and group instructions. Decide which requirements are mandatory, proposed, voluntary or contractual.

Output: signed basis-of-preparation paper and regulatory applicability decision.

Assess each S2 requirement across governance, strategy, risk management, metrics and targets, plus relevant S1 requirements. Score readiness based on evidence: not started, initial, defined, controlled or report-ready.

For each gap, record the source paragraph, disclosure question, owner, data/evidence needed, control, deadline, report location and impact on the intended compliance statement. Prioritise gaps that affect materiality completeness, scenario analysis, financial effects, Scope 1-3, industry metrics, report timing or board approval.

Output: approved implementation backlog with critical path and dependencies.

Use business-model, value-chain and finance pathways rather than an ESG topic list. Consider physical hazards and chronic changes, policy and legal change, technology, market demand, reputation, energy and input prices, customer requirements, insurance, financing and climate-related products or services.

For each item, describe the driver, affected activities and geographies, physical or transition classification, short/medium/long horizon, business dependency, possible financial pathway, existing response, evidence sources and owner. Use all reasonable and supportable information available without undue cost or effort.

Output: complete candidate register and source log.

Apply the S1 primary-user test: could omission, misstatement or obscuring of the information reasonably influence resource-allocation decisions? Assess the nature and magnitude of possible effects on prospects, including cash flows, access to finance and cost of capital.

Document why each significant candidate is included, excluded, aggregated or disaggregated. Do not use a single mechanical score as the only decision. Qualitative factors, uncertainty, emerging regulation, concentration and strategic significance can make information material before a precise financial amount is available.

Output: approved material climate risk-opportunity register linked to disclosure requirements.

Map the governing body and management responsibilities for climate matters. Confirm terms of reference, skills and competency assessment, information frequency, oversight of strategy and major transactions, risk integration, target monitoring, remuneration links and management controls.

Draft from actual governance evidence. Avoid stating that the board “oversees climate risk” if minutes, agendas and papers do not show how it does so. Where sustainability oversight is integrated, use an integrated disclosure and avoid unnecessary duplication.

Output: governance evidence map and approved narrative.

For each material risk or opportunity, identify concentration in the business model and value chain, current and anticipated changes, resource allocation, direct and indirect mitigation/adaptation efforts, and progress against previous plans.

If the entity has a climate-related transition plan, disclose it, including key assumptions and dependencies. The standard does not require the creation of a transition plan; it requires disclosure of any plan the entity has. Avoid re-labelling a collection of unapproved initiatives as a formal plan.

Output: strategy-response matrix and transition-plan disclosure pack.

Define the objective: assess resilience of the strategy and business model to relevant climate changes, developments and uncertainties. Select scenarios and time horizons that address the entity’s material exposures. Decide the operational and value-chain scope, key variables, assumptions, financial links and review process.

Use an approach commensurate with the entity’s circumstances. A first-year qualitative or semi-quantitative approach may be defensible if it is company-specific, transparent and useful. An elaborate model is not automatically better if assumptions, data and governance are weak.

Output: scenario-analysis methodology, results, limitations, management conclusions and disclosure text.

Describe processes for identifying, assessing, prioritising and monitoring climate-related risks and opportunities, including inputs, parameters, assumptions, changes from the previous period and integration with overall risk management.

Reconcile the S2 process with enterprise-risk taxonomy, principal-risk reporting, strategy and controls. If climate is treated as a cross-cutting driver rather than a standalone risk, explain how it changes existing risk assessments and monitoring.

Output: risk-management process map, control evidence and links to principal risks.

Confirm Scope 1, Scope 2 and Scope 3 boundaries and data owners. Measure using the GHG Protocol Corporate Standard unless a jurisdictional authority or exchange requires another method for all or part of the entity. Document approach, inputs, assumptions and method changes.

For Scope 2, retain the required location-based amount and explain contractual instruments needed for understanding. For Scope 3, screen all categories, identify included categories, establish estimation hierarchy and data-quality improvement. Financial institutions should address financed-emissions requirements, Category 15 limitations and paragraph B59A where relevant.

Create a metric dictionary covering definition, unit, boundary, period, source system, calculation, estimate, owner, reviewer, comparative treatment and retention. Extend it to transition-risk exposure, physical-risk exposure, opportunities, capital deployment, carbon prices and remuneration.

Output: controlled GHG inventory, metric dictionary and data-quality roadmap.

Identify industry-based metrics associated with the entity’s business models and activities. The specific IFRS S2 Industry-based Guidance is optional to refer to and consider under UK SRS S2, but decision-useful industry metrics are required. Document sources considered, selected metrics, non-use rationale and comparability consequences.

For each climate target, record objective, metric, scope, period, base period, milestones, absolute/intensity form, approval, validation, review process, progress and revisions. For GHG targets, distinguish scopes, gases, gross and net targets, sectoral approach and carbon-credit reliance.

Output: industry-metric selection paper and target register.

Assess first-year comparative relief, C3 non-GHG Protocol transition relief and C4 Scope 3 relief. For each relief, record eligibility, local-rule overlay, disclosure wording, evidence, improvement plan and effect on UK and any IFRS claim.

Do not draft the compliance statement until the disclosure matrix is complete. S1 paragraph 72 requires complete compliance for an explicit and unreserved statement. S1 paragraph 73A permits an S2 claim when C3 or C4 is used if relief use is disclosed alongside the statement, subject to local rules.

Output: relief and claims memo approved by the technical reviewer and legal/company secretarial team.

Plan location early. UK SRS disclosures must form part of general purpose financial reports and be published at the same time and for the same period as the related financial statements. Cross-referenced information must be precise, accessible on the same terms and at the same time, and must not reduce understandability.

Use a cross-reference register containing source section, destination, exact heading/page or URL, publication date, access control, owner, authorisation status and contingency if the destination changes.

Output: final annual-report architecture and controlled cross-reference map.

Establish data-owner attestations, preparer-reviewer segregation, reconciliations, calculation checks, model and estimate governance, change control, evidence retention, disclosure committee review and management representations. Internal audit can test high-risk workstreams before final drafting.

Run a dry close using the proposed annual-report timetable. Recalculate selected metrics, trace narrative claims to evidence, challenge scenario and financial-effect assumptions, check consistency with financial statements and test every cross-reference.

Output: evidence index, control results, remediation log and assurance-ready file.

The board or authorised committee should receive a decision paper rather than only the draft report. The paper should state reporting basis, material risks and opportunities, scenario conclusions, financial effects, significant judgements, Scope 3 and other data limitations, reliefs, unresolved findings, consistency with financial statements, compliance wording and proposed representations.

Approval should be recorded with the final version, source-set version, open non-critical actions, publication location and update triggers.

Output: signed approval record and publication-ready package.

Illustrative wording - adapt to facts and applicable rules: “These climate-related financial disclosures have been prepared for the year ended [date] using UK SRS S2 together with the relevant requirements of UK SRS S1. The reporting entity and period are the same as those of the related consolidated financial statements. The Group has applied the transition relief in UK SRS S2 paragraph [C3/C4] and describes the use and effect of that relief below. [Only include an explicit and unreserved compliance statement after the complete requirements and local-rule position have been verified.]”

This is not model compliant wording. Entity facts, report location, relief use, local regulation and the intended claim must be reviewed.