The revised Charities Statement of Recommended Practice (SORP) 2026, effective for financial periods beginning on or after 1 January 2026, introduces significant changes to charity reporting.
Among the most notable developments is the increased emphasis on environmental, social and governance (ESG) considerations and sustainability disclosures.
Tier 3 Reporting Explained
SORP 2026 introduces a tiered approach to reporting.
- Tier 1: Income up to £500,000
- Tier 2: Income between £500,000 and £15 million
- Tier 3: Income above £15 million
Tier 3 charities face the most comprehensive requirements.
For these, tier 3 charities, their Trustees’ Annual Report must include:
- Governance arrangements for managing environmental and social risks, including board oversight and decision-making processes.
- Policies and objectives relating to sustainability and social impact, and how these align with the charity’s strategy.
- Progress reporting against those objectives, supported by qualitative or quantitative measures where possible.
- Impact narrative, explaining how activities contribute to wider social and environmental outcomes.
- Risk management disclosures, identifying ESG-related risks and opportunities and how these are addressed.
While carbon emissions reporting is not mandatory, Tier 3 charities are expected to demonstrate how climate-related risks and sustainability considerations influence governance and operations. Tiers 1 and 2 are encouraged, but not required, to adopt similar practices.
Why This Matters
These changes reflect growing expectations from regulators, funders and stakeholders for greater transparency and accountability. ESG reporting is no longer optional for large charities—it is integral to demonstrating responsible governance and building trust.
Practical Steps for Trustees
- Review governance frameworks to ensure ESG responsibilities are clearly defined at board level.
- Update reporting processes to incorporate sustainability and governance disclosures into annual report templates.
- Collect relevant data on environmental and social objectives to support progress reporting.
- Embed ESG in strategy and risk management, ensuring these considerations inform decision-making.
- Train trustees on ESG issues and their legal and reputational implications.
- Prepare “apply or explain” statements for areas where full compliance is not yet possible.
For advice on implementing the new SORP requirements and integrating ESG into governance and reporting, please contact our Charity team.
For more general information about the new charities SORP please see our blog Top Five Takeaways.
If you have any questions please contact Sarah Williams [email protected] or Neil Burton [email protected]
To find out more about Mills and Reeve’s growing ESG practice, please click here Environmental, social and governance legal advice | Mills & Reeve
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