ESG governance · the UK statements, by provision
ESG governance: what a UK board must disclose
ESG governance in UK law is not one duty but a set of statements, each with its own population: the section 172(1) statement, the climate governance disclosure in the strategic report, the Code’s comply-or-explain statement and, for listed companies from 2027, UK SRS S1 ¶27 disclosures or an explanation.
None of them requires a particular structure — not a committee, not a chief sustainability officer.
Each asks the company to describe the structure it has.
Which statements apply
The governance statements, by kind of company
Pick the kind of company and the panel lists every governance statement it owes, with the provision and the document each lives in.
A listed commercial company carries the most: the s.172(1) statement, the climate governance disclosure, the board diversity statement, the Code statement with Provision 29 and, from periods beginning on or after 1 January 2027, the UK SRS governance disclosures.
A large private company may owe only two, and a medium-sized one none at all beyond approving its strategic report.
The profiles are simplified; each row has its own test, which the provision beside it sets.
Where governance sits among the three ESG pillars, and which other duties sit beside it, is on the ESG pillars.
Which governance statements apply?
A traded company: inside s.414CA and the listing rules
6 statements
- Section 172(1) statement — how the directors had regard to the matters in s.172(1)(a)–(f).Strategic reportCA 2006 s.414CZA(1); disapplied for medium-sized companies by s.414CZA(2)
- Board approval of the strategic report, signed by a director or the secretary; a knowing or reckless approval of a non-compliant report is an offence.Strategic reportCA 2006 s.414D(1)–(2)
- Governance arrangements for assessing and managing climate-related risks and opportunities.Strategic report — non-financial and sustainability information statementCA 2006 s.414CB(2A)(a)
- Governance body or individual overseeing sustainability-related (S1 ¶27) and climate-related (S2 ¶6) risks and opportunities, and management’s role — or an explanation.Annual financial reportUKLR 6.6.6R(7A)–(7B); UKLR 14.3.24R(4); periods beginning on or after 1 January 2027
- Whether the three board diversity targets were met at a chosen reference date, which were not and why; numerical data on the board and executive management.Annual financial reportUKLR 6.6.6R(9)–(10)
- How the Principles of the Code were applied and whether the Provisions were complied with, or why not; the Provision 29 declaration on material controls, including narrative and ESG reporting controls, for years beginning on or after 1 January 2026.Annual report — corporate governance statementUK Corporate Governance Code 2024 (commercial companies and closed-ended investment funds categories)
Simplified profiles: each statement has its own test, which the provision beside it sets.
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The legal foundation
Section 172: the duty, the statement and the offence
Every UK director owes the duty in section 172 of the Companies Act 2006: to act in the way they consider, in good faith, most likely to promote the success of the company for the benefit of its members as a whole.
In doing so they have regard, among other matters, to six listed ones — including employees, suppliers and customers, and the impact of operations on the community and the environment.
The environment has been among the six since the Act; it was not added later as a sustainability duty.
The disclosure is the section 172(1) statement: the strategic report describes how the directors had regard to matters (a) to (f), unless the company qualifies as medium-sized for the year.
It was inserted by SI 2018/860, and it is the oldest statutory ESG governance disclosure most companies make.
Section 414D attaches the board to it: the strategic report is approved by the board and signed by a director or the secretary, and a director who knew it did not comply, or was reckless as to whether it did, and failed to take reasonable steps commits an offence.
That is an offence about approving a non-compliant report, not a quality standard for climate prose.
| s.172(1) | Directors have regard to |
|---|---|
| (a) | The likely consequences of any decision in the long term |
| (b) | The interests of the company’s employees |
| (c) | Business relationships with suppliers, customers and others |
| (d) | The impact of operations on the community and the environment |
| (e) | A reputation for high standards of business conduct |
| (f) | Acting fairly as between members |
UK SRS S1 ¶27
What UK SRS asks a board to say, limb by limb
UK SRS S1 ¶26 sets the objective: to let users understand “the governance processes, controls and procedures an entity uses to monitor, manage and oversee sustainability-related risks and opportunities”. ¶27 sets the content.
| Limb | The entity discloses | In short |
|---|---|---|
| (a) | The governance body or bodies — board, committee or equivalent — or individuals responsible for oversight, identified | Who |
| (a)(i) | How responsibilities appear in terms of reference, mandates, role descriptions and related policies | Mandate |
| (a)(ii) | How the body determines whether the right skills and competencies are available or will be developed | Skills |
| (a)(iii) | How and how often the body is informed about sustainability-related risks and opportunities | Information |
| (a)(iv) | How it takes them into account in strategy, major transactions and risk management, including trade-offs | Decisions |
| (a)(v) | How it oversees target-setting and progress, and whether related metrics are in remuneration policies | Targets and pay |
| (b)(i) | Whether management’s role is delegated to a specific position or committee, and how it is overseen | Management |
| (b)(ii) | Whether management uses controls and procedures, and how they integrate with other internal functions | Controls |
The standard names a board, a committee or “equivalent body charged with governance”, or an individual, so it fits any structure a company actually runs.
Where oversight of sustainability and climate is integrated, UK SRS S2 ¶7 says the company avoids duplication by giving integrated governance disclosures rather than separate ones for each risk.
The S2 text matches IFRS S2, now held on the IFRS Foundation’s standards navigator, and governance is not among the UK amendments.
For listed companies the FCA’s final rules (PS26/19) apply these disclosures on a comply-or-explain basis for periods beginning on or after 1 January 2027, finalising CP26/5.
A company that cannot make the S2 governance disclosures summarises what it has not met, why, and what it plans to do (UKLR 6.6.6R(7A)(b)); for S1 beyond climate there is a two-year relief, stated if used.
The paragraph-level reading of the general standard is on UK SRS S1, and what comply or explain requires on UK SRS compliance.
Companies Act climate disclosures
The climate governance disclosure already in force
Before UK SRS, the Companies Act already asked for climate governance.
Section 414CB(2A)(a) requires a description of the company’s governance arrangements in relation to assessing and managing climate-related risks and opportunities.
It applies to traded companies, banks, insurers, AIM companies and companies with turnover over £500 million, each with more than 500 employees, for financial years beginning on or after 6 April 2022.
Unlike the strategy, scenario, target and KPI limbs, the governance limb cannot be omitted with an explanation: the relief in s.414CB(4A) reaches only (e) to (h).
The TCFD’s recommendations, which shaped these provisions, made governance the first of four pillars — board oversight and management’s role — and the recommendations page still sets them out; this site’s reading is on the TCFD framework.
The regulators’ reviews suggest governance is the part companies find easiest to describe; the harder questions are what the board did with what it was told.
What reviewers found
In 2022 the FCA reviewed 171 premium-listed companies’ TCFD statements: over 90% self-reported consistency on the Governance and Risk Management pillars, fewer on Strategy and Metrics and Targets.
In January 2025 the FRC found “inconsistent quality among the companies selected” in AIM and large private companies’ climate disclosures.
Sources: FCA, July 2022 · FRC, 21 January 2025
UK Corporate Governance Code 2024
The Code: controls, not a sustainability report
The UK Corporate Governance Code 2024 applies to companies listed in the commercial companies or closed-ended investment funds categories, wherever incorporated, on a comply-or-explain basis.
It has applied to financial years beginning on or after 1 January 2025, with Provision 29 applying from financial years beginning on or after 1 January 2026.
Provision 29 asks the board to declare the effectiveness of the company’s material controls, and the FRC says those extend to controls over reporting, “such as narrative and ESG reporting controls”.
That is the Code’s ESG hook: a declaration about controls, not a disclosure of sustainability performance.
Commercial companies add a board diversity statement under UKLR 6.6.6R(9): whether, at a chosen reference date, at least 40% of the board are women, at least one of the chair, chief executive, senior independent director or chief financial officer is a woman, and at least one director is from a minority ethnic background — and if not, which targets were missed and why.
UKLR 6.6.6R(10) adds numerical data on the ethnic background and gender identity or sex of the board and executive management, in the format the rules prescribe.
The FRC’s sustainability reporting FAQs explain how the Code sits beside the newer standards.
The FRC’s answer to “why is there no reporting requirement related to sustainability-related matters?” is that the Listing Rules and the Companies Act already require climate-related disclosures, so a Code requirement “risked duplication”.
Private companies
Private companies: one statement added, two removed
Private companies are outside the Code, and most of their governance disclosure is the s.172(1) statement.
The largest add a statement of corporate governance arrangements under Schedule 7 Part 8 to SI 2008/410.
It applies in a year when a company has more than 2,000 employees, or turnover of more than £200 million and a balance sheet total of more than £2 billion — either limb, and the money limb needs both.
The statement says which corporate governance code, if any, the company applied, how, and where and why it departed from it; an unquoted company publishes it on a website.
A company that must already give a corporate governance statement, a community interest company and a charitable company are exempt.
Two statements went the other way: the employee-engagement statement and the statement on business relationships with suppliers, customers and others in Schedule 7 Part 4 (including paragraph 11B), and the disabled-persons statement in Part 3, no longer apply for financial years beginning on or after 6 April 2025.
The s.172(1) statement survives, and it already asks how directors had regard to employees and to suppliers and customers.
Board, committee or individual
The ESG committee question, answered by the text
“Does a company need an ESG committee?” is one of the questions people search most on this subject, and no UK instrument says yes.
UK SRS S1 ¶27(a) asks the company to identify the governance body or bodies — “which can include a board, committee or equivalent body charged with governance” — or the individuals responsible, and to describe how responsibilities sit in their terms of reference.
A whole-board model, a dedicated sustainability committee, or oversight through the audit or risk committee can each be disclosed honestly; what the standard tests is whether the description is specific.
The management side is ¶27(b): whether responsibility is delegated to a named position or management committee, how the board oversees it, and which controls support it.
Many companies give that management role to a sustainability lead; the role itself is described on chief sustainability officer.
Remuneration is the limb most often left vague: ¶27(a)(v) asks whether and how sustainability-related performance metrics are included in remuneration policies, and S2 ¶29(g) asks for the percentage of executive remuneration recognised in the period that is linked to climate considerations.
How governance feeds strategy and targets is on ESG strategy, and how a board decides which topics reach it at all on double materiality and the double materiality assessment.
Assurance
Assurance is a board decision, disclosed, not required
No UK rule requires sustainability disclosures to be assured.
From 2027 a listed company states, under UKLR 6.6.6R(8)(d), whether it obtained third-party assurance over any of its UK SRS disclosures and, if so, the provider, what was assured and to what level, the standards used and where any published report is.
In PS26/19 the FCA said it is not requiring explanations where assurance is not sought, to keep a proportionate approach while the market is young, and it deliberately did not name a standard.
The FRC’s ISSA (UK) 5000, listed among its assurance standards, is effective for periods beginning on or after 15 December 2026 and is for voluntary use: it binds a provider that claims to follow it, and nobody else.
What makes a disclosure assurable is governance — clear ownership, documented method, an evidence trail — which is the subject of ESG data management.
The standards themselves say nothing about assurance; the obligation, such as it is, is the FCA’s statement.
A structured way to test a board’s readiness is the UK SRS readiness assessment, and the wider reporting picture is on how ESG reporting works.
Test yourself
Six governance claims, true or false
Each statement is one we see repeated about board duties and ESG.
The false ones tend to invent a structure the rules never required, or keep a statement the rules have since removed.
The true ones are the duties that already bind every board.
ESG governance: true or false?
UK SRS requires a listed company to have a sustainability committee.
Directors must have regard to the impact of the company’s operations on the community and the environment.
A medium-sized company must include a section 172(1) statement.
From 1 January 2026, the Code’s Provision 29 declaration covers ESG reporting controls.
Large private companies must still publish an employee engagement statement in the directors’ report.
Under the FCA’s final rules, a listed company that obtains no assurance must explain why.
0 of 6 answered.
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Frequently asked
ESG governance, answered
What is ESG governance?
The way a board and its management oversee environmental, social and governance risks and opportunities: who is responsible, what information they receive, how sustainability enters strategy, risk and target-setting, and which controls support it.
In UK reporting it becomes a set of specific statements: the section 172(1) statement, the climate governance disclosure in section 414CB(2A)(a) and, for listed companies from 2027, UK SRS S1 ¶27 and S2 ¶6 disclosures or an explanation.
Does a UK company need an ESG committee?
No UK rule requires one.
UK SRS S1 ¶27 asks a company to identify the body — a board, a committee or an equivalent body — or the individual responsible for oversight, and to describe how responsibilities are reflected in its terms of reference.
A whole-board model, a dedicated committee or the audit or risk committee can each be disclosed.
Who is responsible for ESG in a UK company?
The directors.
Every director owes the duty in section 172 of the Companies Act 2006 to promote the success of the company having regard to six matters, including employees, suppliers and customers, and the impact of operations on the community and the environment.
Management roles can carry delegated responsibility, and UK SRS S1 ¶27(b) asks how that delegation is overseen.
What does UK SRS require on governance?
UK SRS S1 ¶27 asks for the body or individual responsible for oversight; how responsibilities appear in terms of reference; how skills are secured; how and how often the body is informed; how it weighs sustainability in strategy, major transactions and risk, including trade-offs; how it oversees targets and whether related metrics are in remuneration policies; and management’s role and controls.
UK SRS S2 ¶6 asks the same about climate.
Are UK SRS governance disclosures mandatory?
No. Under the FCA’s final rules, companies listed in UKLR 6, 14, 15, 16 and 22 report against UK SRS on a comply-or-explain basis for accounting periods beginning on or after 1 January 2027, governance included.
A company that does not make a disclosure explains what is missing, why and what it plans.
How does section 172 relate to ESG governance?
Section 172 is the legal duty; the section 172(1) statement under section 414CZA is the disclosure of how directors met it.
Every company preparing a strategic report gives the statement unless it is medium-sized.
It is the oldest statutory hook for ESG governance and predates UK SRS by more than a decade.
Does the UK Corporate Governance Code require sustainability reporting?
No. The FRC dropped a proposed sustainability reporting requirement because the Listing Rules and the Companies Act already require climate disclosures.
The Code’s ESG link is Provision 29: from financial years beginning on or after 1 January 2026, the board declares the effectiveness of material controls, which extend to narrative and ESG reporting controls.
Does ESG reporting need to be assured?
No UK rule requires it.
From 2027 a listed company states whether it obtained third-party assurance and, if so, the provider, scope, level and standards used; it need not explain an absence of assurance.
ISSA (UK) 5000, issued by the FRC, is for voluntary use.
Do private companies have to report on governance?
The largest do.
A company with more than 2,000 employees, or turnover over £200 million and a balance sheet over £2 billion, that is not required to give a corporate governance statement, states which governance code it applied, how, and any departures, under Schedule 7 Part 8 to SI 2008/410.
The employee and stakeholder engagement statements in Part 4 no longer apply for financial years beginning on or after 6 April 2025.
Who has to report on ESG in the UK?
There is no single ESG duty.
Quoted and large unquoted companies report energy and carbon under SECR; companies preparing a strategic report and not medium-sized give a section 172(1) statement; traded, banking, insurance, AIM and high-turnover companies with more than 500 employees give climate disclosures; and listed companies report against UK SRS or explain from 2027.
Modern slavery and gender pay gap duties have their own thresholds.
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.
- legislation.gov.ukCompanies Act 2006, section 172
The duty to promote the success of the company and its six matters.
- legislation.gov.ukCompanies Act 2006, section 414CZA
The section 172(1) statement, disapplied for medium-sized companies.
- legislation.gov.ukCompanies Act 2006, section 414D
Board approval of the strategic report, and the offence.
- legislation.gov.ukCompanies Act 2006, section 414CB(2A)(a)
The climate governance disclosure for the s.414CA population.
- Department for Business and TradeUK SRS S1 (PDF), ¶¶26–27
The governance disclosures, limb by limb.
- Department for Business and TradeUK SRS S2 (PDF), ¶¶5–7 and 29(g)
The climate twin, integrated disclosure and remuneration.
- Financial Conduct AuthorityPS26/19 (PDF), Appendix 1 and the response to Question 10
UKLR 6.6.6R(7A)–(8); the assurance statement and why no explanation is needed where none is sought.
- Financial Conduct AuthorityFCA Handbook, UKLR 6.6.6R(9)–(10)
The board diversity targets statement and data.
- Financial Reporting CouncilUK Corporate Governance Code 2024
Scope, comply or explain, Provision 29 from 1 January 2026, and why the Code has no sustainability reporting requirement.
- legislation.gov.ukSI 2008/410, Schedule 7 Part 8
The statement of corporate governance arrangements for the largest private companies.
- legislation.gov.ukSI 2008/410, Schedule 7 Part 4, as at 5 April 2025
The engagement statements omitted for financial years beginning on or after 6 April 2025.
- legislation.gov.ukThe Companies (Miscellaneous Reporting) Regulations 2018 (SI 2018/860)
Inserted the s.172(1) statement and Part 8.
- Financial Conduct AuthorityReview of TCFD-aligned disclosures by premium listed commercial companies (July 2022)
Governance was the pillar most companies self-reported as consistent.
- Financial Reporting CouncilCFD by AIM and large private companies — thematic review (January 2025)
“Inconsistent quality among the companies selected”.
- Financial Reporting CouncilISSA (UK) 5000 (PDF)
The UK sustainability assurance standard, issued for voluntary use.