UK government has opened a consultation to reshape how companies report [ESG Today, consultation].

The tl;dr is it’s looking at a slimmer strategic report: most of the current non-financial disclosure requirements would go, replaced by a shorter set of baseline narrative disclosures, and topics such as environmental impact would only need to be reported where they are financially material.

This matters to anyone who relies on comparable sustainability data: investors, lenders, insurers, supply-chain teams and the SMEs that sit at the end of supply chains. It matters to Perseus as its purpose is to make the data behind emissions reporting easy to share and easy to trust. So, is this good or bad for Perseus? On balance we think this could have a positive impact on Perseus.

What the government is proposing

The consultation covers a lot of ground, but most relevant to sustainability data includes:

• Removing explicit strategic report requirements on environmental matters, employees and diversity, social responsibility, community engagement, human rights, and anti-bribery. Companies would still report on these where they are financially material (ed: one could reasonably suggest that many matters carry financial materiality across the entire economy).
• Testing a single new ‘very large’ company threshold to simplify which companies carry non-financial reporting obligations.
• Asking whether private companies should carry any non-financial reporting obligations at all.
• Letting companies choose where sustainability information sits within the strategic report.
• Considering how the new UK Sustainability Reporting Standards (UK SRS) should be reflected in the Companies Act 2006.

One thing is not changing: existing climate-related financial disclosure requirements stay in place. The government is reviewing them separately, with a conclusion expected by Spring 2027. In parallel, the Financial Conduct Authority (FCA) is consulting on mandatory UK SRS reporting for listed companies.

SME realities are not addressed

The report has a large-company focus and most SMEs sit below its thresholds. However, this does not mean that SMEs are untouched by reporting rules: they feel them second-hand.

ACCA and UK Finance’s recent white paper, Measure what matters, sets out how SMEs respond reactively to sustainability data requests that trickle down supply chains from regulation designed for large organisations and financial services. Requests arrive from multiple customers and lenders in different formats (this directly echoes Perseus’ research).

Half of ACCA’s roundtable participants named lack of standardisation as the biggest obstacle to digital data collection by SMEs, and half named unclear business benefit (a quarter said they do not collect data digitally at all). This further echoes Federation of Small Businesses research that 74% of SMEs simply do not understand the terms Scope 1, 2 and 3.

So, the consultation’s proposals will change what large companies disclose in their annual reports, but they will not change the demand for SME data that flows through supply chains and lending books, and they do nothing to fix the fragmentation that ACCA and FSB highlight. If anything, moving from explicit topic requirements to a ‘materiality judgements’ gives large companies more latitude to ask its suppliers for what it thinks it needs: without shared standards, this could mean more variation, not less.

What does this mean for sustainability data?

We see three potential shifts:

1. a narrowing of ESG transparency. Fewer companies will be required to report on fewer topics and anyone who depends on comparable disclosures, from lenders to supply-chain due diligence teams will see gaps.
2. a decisive shift toward financial materiality. This aligns the UK with the IFRS and ISSB approach and moves it away from the double-materiality model in the EU’s Corporate Sustainability Reporting Directive (CSRD). This could reduce domestic burden but it may also create friction for UK groups operating in EU markets.
3. a risk of a two-tier information landscape. Where mandatory disclosure recedes, voluntary and investor-driven disclosure will fill the gap, but it will do so unevenly and SMEs are likely to carry the cost of that unevenness.

Taken together, these shifts strengthen the case for standards-based, machine-readable reporting rails. If ‘financially material’ is the test, then the data that passes it needs to be discoverable, comparable and assured. If not it will fragment across bespoke company formats, and differing interpretations of reporting frameworks. The ACCA’s recommendations point in the same direction: standardised frameworks and collection methods, open standards developed bottom-up with technology providers, and data collection that accounts for business size and structure, rather than just sector alone.

What does this mean for Perseus?

On balance, we see this as broadly neutral to positive, with some second-order risks to be considered.

The core demand driver for Perseus is unchanged. Banks and financial service providers still need assurable Scope 2 data from their SME customers to produce their own Scope 3 Category 15 (financed emissions) reporting: the consultation leaves climate-related financial disclosure requirements untouched. UK SRS is moving ahead through the FCA, and Perseus is already aligned with the ISSB approach through PCAF and the GHG Protocol. The ACCA paper reinforces this from the lending side with the Prudential Regulation Authority’s SS5/25 expecting banks to identify, measure and monitor climate-related financial risk across their lending, and sustainability data is increasingly part of whether an SME qualifies for green loans, sustainability linked loans or preferential terms.

The shift to financial materiality reinforces the need for Perseus: decision-useful, financially material climate data is exactly what a standards-based data infrastructure delivers and government’s intent to reflect UK SRS in the Companies Act can support, and be supported by, the plumbing Perseus has already built.

ACCA’s findings also map closely onto what Perseus is designed to do:

• Standardisation and open standards. Perseus gives banks, SMEs, energy providers and application vendors one common implementation for consumption, tariff and carbon-intensity data, built on PCAF and the GHG Protocol and developed with members rather than imposed on them.
• Feedback loops. ACCA argues that value lies in closing the loop, so SMEs get insight and finance in return for data. Perseus automates the data flow from meter to application to bank so that personalised recommendations and green finance decisions can follow.
• Digital collection. A quarter of ACCA’s respondents do not collect data digitally: Perseus enables SMEs to automate the data flow by sourcing assured energy data direct from the meter/energy data providers.
• Trusted advisers. ACCA recommends reaching SMEs through accountants and membership bodies. Carbon accounting providers who are rolling out Perseus-enabled products can enable reach hundreds of thousands of UK SMEs.

The risks are indirect:

• Removing explicit environmental, community and human-rights reporting weakens the wider ESG-reporting efforts that support voluntary SME adoption and buy-side engagement.
• A new ‘very large’ threshold could shrink the number of reporters and push more of the SME data conversation into more voluntary and commercial territory.
• Perceptions of ‘dilution’ could undermine overall progress.

What will we do next?

The FSP demand that anchors the business case for Perseus remains, and the direction of travel towards more ISSB-style materiality and UK SRS strengthens the case for Perseus as the delivery mechanism. We need to pay attention to any softer signalling around SME and private-company disclosure.

We plan to respond to the consultation with a focus on making the case that reducing reporting burden and improving data quality are the same job, and that trusted, permissioned data sharing is how you achieve both. The ACCA white paper supports that case with a fresh evidence base, and its recommendations on standardisation, open standards and feedback loops are ones we will amplify.

If you work with SME sustainability data and want to contribute to our response, please get in touch at perseus@ib1.org.