Hiding to nothing: the risks of the new non-financial reporting regime

1. Drivers of non-financial reporting

The modernisation of non-financial reporting is driven by a desire to streamline a framework that has become cluttered with lengthy, complex requirements. The primary aim is to focus solely on decision-useful information.

Regulatory changes

The UK government is working to update and rationalise existing non-financial reporting requirements. This includes initiatives such as the “Non-Financial Reporting review,” which aims to update and simplify the annual report’s structure to incorporate sustainability-related requirements. Secondary legislation has already increased company size thresholds and removed several low-value, obsolete, or overlapping disclosure requirements from the directors’ report, such as information on financial instruments and R&D activities.

A key direction is to establish an improved, acronym-rich regime for sustainability-related financial disclosures to provide rigorous, comparable information for investors. This involves developing the UK Sustainability Reporting Standards (UK SRS), which are based on IFRS Standards 1 and 2 issued by the International Sustainability Standards Board. The Financial Conduct Authority is expected to consult on transitioning listed companies from the current TCFD framework to UK SRS 2 and to introduce UK SRS 1.

Investor and stakeholder expectations

Investors and customers are exerting pressure for sustainability to be genuinely “built-in” to businesses, rather than “bolted on”. Sustainability reporting adopts an ‘inside-out’ view, emphasising a company’s impact on society and the environment (people, planet, profit). According to a recent EY survey*, 88% of investors have increased their use of ESG information, and 92% agree that short-term performance risks outweigh the long-term benefits of many ESG initiatives. Consequently, high-quality, integrated reporting is crucial to address this investor outlook.

2. Impact on narrative development

The move towards integrated non-financial reporting encourages companies to link their internal identity with their external narrative, essentially urging them to articulate what makes them unique.

Unifying proposition and identity

We believe every company has a difference, “the thing that makes you, you”, which is vital for competitiveness. Design, narrative, and connected business communications are practical tools to express this difference.

Integration and strategic alignment

Non-financial reporting requires that information be connected, even if it appears disparate. Draft UK SRS 1 demands information that helps users understand the linkages between disclosed technical items and other parts of the annual report, such as the business model and its outcomes. For a commitment to sustainability to be credible, it must be integrated into the overall strategy and principal risk disclosures. This unified approach compels companies to demonstrate a sustainable value proposition aligned with their core strategy and culture.

Fostering trust

The public expects companies to have a societal purpose, a plan to deliver it, and proof they are on track. When a company is perceived as genuinely addressing all three, it fosters trust. By clearly stating its purpose and providing evidence that its performance aligns with it, a company uses narrative reporting to define and embrace its difference.

3. General reception

Public reception to detailed non-financial reporting will likely vary, depending primarily on how seriously companies utilise the opportunity the new approach provides. Reporting can build trust, but can also lead to scepticism.

Clarity builds trust

Public interest in companies revolves around clarity and authenticity. High-quality reports that offer a “fair, balanced and understandable assessment” of a company’s position and prospects will be well received. The public wants to see compliance and positive impacts.

Disclosures that illustrate how the Board considered stakeholder input during decision-making and reveal high standards of business conduct will reinforce trust.

Information overload fosters scepticism.

Poor execution of non-financial reporting—particularly when sustainability sections are not integrated into the main strategic narrative and appear more like topical inserts—can lead to perceptions of greenwashing or lip service. Failing to report negative outcomes alongside positive impacts can harm credibility.

There is also a risk of overload. The influx of new data and metrics, particularly E&S metrics, can obscure material issues if reports lack focus. Stakeholders expect a clear, consistent story. If the narrative becomes too lengthy, complex, or repetitive, it may frustrate the audience and undermine the clarity the new regime aims to deliver.

_{* Setting the stage, September 2025}

Get in touch

If you’d like to discuss this, or any other subject, please get in touch with Richard Costa, Consultancy Director, at richardc@gather.london

We’d love to know what you think.