FRC Review: Climate Reporting Findings
The FRC has reviewed how UK companies are reporting on climate-related matters and found fewer serious issues, although gaps remain in areas such as targets, Scope 3 emissions and climate-related KPIs.
The Financial Reporting Council (FRC) has published its Annual Review of Corporate Reporting 2025/26. The review covers corporate reporting reviews opened between 1 April 2025 and 31 March 2026.
About the FRC
The Financial Reporting Council (FRC) is the UK regulator responsible for promoting high standards of corporate reporting, audit and corporate governance. As part of its supervisory work, it reviews companies’ annual reports and accounts and challenges companies where it identifies potential non-compliance with reporting requirements.
The FRC does not review every annual report published in the UK. It selects companies for review using a risk-based approach, with some additional rotational and random selection. Reviews may also follow complaints, referrals or other information that raises concerns about a company’s reporting.
This means the findings in the Annual Review of Corporate Reporting 2025/26 reflect the companies selected for review and should not be treated as representative of all UK companies.
In 2025/26, the FRC completed 248 reviews. Where it considers that there is, or may be, a material breach of reporting requirements, it can raise a substantive question with the company. Less significant matters may instead be reported as appendix points for the company to address in future reporting where material and relevant.
Substantive climate-related queries fell to 1%
Substantive queries relating to the Task Force on Climate-related Financial Disclosures (TCFD), Climate-related Financial Disclosures (CFD), Streamlined Energy and Carbon Reporting (SECR) and climate-related narrative reporting arose in 1% of reviews in 2025/26, down from 2% in 2024/25.
All substantive queries in this area related to the Companies Act 2006 CFD requirements. The FRC says the decline indicates that companies are becoming accustomed to these reporting frameworks.
Sustainability-related appendix points were more common, affecting 16% of companies reviewed. These were less significant matters than those giving rise to substantive questions.
The figures measure different things. The 1% relates specifically to reviews that resulted in substantive climate-related queries, while the 16% refers more broadly to companies that received sustainability-related appendix points.
Metrics and targets attracted the most observations
For both TCFD and CFD reporting, the FRC raised the greatest number of observations in the metrics and targets pillar.
In TCFD disclosures, the FRC identified insufficient explanation of performance against targets and of the basis for not disclosing material Scope 3 emissions.
For CFD reporting, the FRC identified:
- lack of clarity over which emissions were covered by targets;
- limited descriptions of climate-related key performance indicators, including the basis for calculation.
The Scope 3 finding does not create a general requirement to disclose Scope 3 emissions in every case. The issue identified by the FRC was insufficient explanation of the basis for not disclosing material Scope 3 emissions.
CFD disclosures must appear in the strategic report
Companies within scope must provide all required CFD disclosures in the strategic report.
Cross-referencing to information outside the annual report and accounts does not comply with the Companies Act 2006 requirements. CFD disclosures are mandatory and not subject to a comply-or-explain approach, although certain exemptions are available.
A separate sustainability or ESG report can contain additional climate information, but it does not replace the CFD disclosures required in the strategic report.
Climate information must remain consistent with the financial statements
The FRC continues to assess whether material information about the effects of climate change is reflected in the financial statements and is consistent with narrative reporting.
It identified no substantive issues in this area during the past two review years.
The FRC also expects the annual report and accounts to tell a consistent and coherent story across narrative reporting and the financial statements.
Looking ahead: UK SRS
UK Sustainability Reporting Standards UK SRS S1 and UK SRS S2 were issued in February 2026.
On 30 September 2026, the Financial Conduct Authority (FCA) finalised new sustainability disclosure rules for listed companies. The rules replace the existing TCFD-aligned requirements and require in-scope listed companies to report against UK SRS on a comply-or-explain basis. They apply to accounting periods beginning on or after 1 January 2027, with first reporting in 2028.
