UKLR 6.6.6R(7A) and (7B)
Comply or explain under UK SRS: writing the explanation
Under the FCA’s final rules, a listed company never breaches UK SRS by leaving something out; it breaches the rule by leaving something out without saying so.
That makes the explanation the most important paragraph in a first UK SRS report, and the rule is specific about what it contains.
How the rule works
From requirement to report
Every requirement takes one of three routes into the annual financial report.
Open a stage to see the provision behind it.
Each requirement of UK SRS S2, and each material sustainability-related risk or opportunity under UK SRS S1.
The two limbs
Why the S1 and S2 explanations are not the same shape
The S2 explanation is a list of requirements, because S2 is a list of requirements.
The S1 explanation is a list of risks and opportunities, because S1 asks the company to find its own topics.
A company cannot explain an S1 gap it has not identified, which is why the S1 limb starts from the company’s own assessment.
That puts weight on the identification step in UK SRS S1: a thin assessment produces a thin explanation, and the reader can see both.
The rule text is in Appendix 1 of the policy statement and, from 1 January 2027, in UKLR 6.6.
| (7A) — UK SRS S2 | (7B) — UK SRS S1 | |
|---|---|---|
| Disclose | Climate-related financial disclosures under UK SRS S2 | Sustainability-related financial disclosures under UK SRS S1, excluding climate |
| If not | A summary of the S2 requirements not met | The S1-type risks or opportunities identified but not disclosed, or disclosed in part |
| Then | The reasons | The reasons |
| And | Steps taken or planned to disclose in future | Steps taken or planned to disclose in future |
Tool · nothing is stored or sent
A drafting checklist for the explanation
The checklist runs in the order a preparer would draft.
Tick each step as you go; nothing leaves your browser.
The examples of reasons are illustrations, not wording the FCA has approved.
The FCA has said its draft Technical Note 803.1 is out for consultation through Primary Market Bulletin 66, so check the final version before relying on it.
From consultation to rule
Why S2 is not mandatory
The FCA’s consultation, CP26/5, proposed that UK SRS S2 be mandatory for listed companies and UK SRS S1 be comply or explain.
The final rules put both on comply or explain.
Pages written during the consultation often still say climate reporting is mandatory from 2027.
The TCFD-aligned rule was already comply or explain, so for a listed company the legal shape is familiar even if the content asked for is larger.
Frequently asked
Questions people ask
What does comply or explain mean under UK SRS?
A listed company in scope either makes the UK SRS disclosures or explains what it has not disclosed.
For UK SRS S2 the explanation summarises the requirements not met, the reasons, and any steps the company is taking or plans to take to make them in future.
The explanation sits in the annual financial report alongside the disclosures that are made.
How does the UK SRS S1 explanation differ from the S2 one?
They are framed differently.
Under UKLR 6.6.6R(7A) the S2 explanation is about requirements of UK SRS S2 not met.
Under (7B) the S1 explanation is about sustainability-related risks or opportunities the company has identified but not disclosed, or disclosed only in part.
One is a list of requirements; the other is a list of topics.
Does an explanation have to cover every requirement one by one?
The FCA’s draft guidance says not.
Draft Technical Note 803.1, open for comment until 28 October 2026, says an explanation need not go requirement by requirement and need not give a timeframe for future disclosure. It is still in draft.
Is using a transitional relief a failure to comply?
No. A company using the Scope 3 relief or the climate-first relief states that it is using it, and needs to give no further explanation for the matters the relief covers.
The relief statement is a separate item from the comply-or-explain explanation.
Was UK SRS S2 going to be mandatory?
The FCA proposed it in CP26/5 in January 2026: UK SRS S2 would have been mandatory and UK SRS S1 comply or explain.
The final rules in PS26/19 put both Standards on comply or explain.
Can a company that explains a gap still say it complies with UK SRS?
Not with the Standard that has the gap.
The Standards allow an unreserved statement of compliance only when every requirement is met, and the FCA’s draft guidance says an issuer explaining a gap should not also make an unreserved statement of compliance with that Standard.
Sources
Primary sources
Every figure, date and status on this page traces to the instrument’s owner.
Secondary commentary is never the source for a number.
- Financial Conduct AuthorityPS26/19 — full text, including the made instrument (UKLR 6.6.6R(7A), (7B), (8) and UKLR TP 16)
The made rule: UKLR 6.6.6R(7A), (7B) and (8).
- Financial Conduct AuthorityPS26/19: Aligning listed issuers’ sustainability disclosures with international standards (30 September 2026)
The final rules: comply or explain across UK SRS for UKLR 6, 14, 15, 16 and 22.
- Financial Conduct AuthorityFCA Handbook, UKLR 6.6 — annual financial report (as from 1 January 2027)
The rule the new disclosure limbs sit in.
- Financial Conduct AuthorityDraft Technical Note 803.1 (September 2026, for consultation)
Draft guidance on what an explanation should contain; comments by 28 October 2026.
- Financial Conduct AuthorityPrimary Market Bulletin 66
The FCA’s preparation steps and the consultation on its draft guidance.
- Financial Conduct AuthorityCP26/5 — the consultation the final rules replace (30 January 2026)
Cited only for what was proposed, including a mandatory UK SRS S2 that the final rules dropped.
- Department for Business and TradeUK SRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (25 February 2026)
The general Standard, read at the paragraph.
- Department for Business and TradeUK SRS S2 Climate-related Disclosures (25 February 2026)
The climate Standard, including Appendix C on transition.
- Financial Conduct AuthorityFCA Handbook, DTR 4.1 — the annual financial report within four months
Sets when the report carrying the disclosures must be public.
- legislation.gov.ukCompanies Act 2006, s.463 — liability for false or misleading statements in reports
The liability rule for disclosures placed in the strategic report.
- Department for Business and TradeUK Sustainability Reporting Standards: UK SRS S1 and UK SRS S2 — publication page
Where both Standards were published on 25 February 2026.
- Financial Reporting CouncilSustainability reporting developments — frequently asked questions
Confirms a voluntary reporter can use the reliefs without time limits.