On Tuesday 1 September, Mills & Reeve hosted the Charity Sustainability Network at our London office, bringing together representatives from a range of large charities. The event generated thought-provoking discussion on how charities are preparing for the new sustainability reporting requirements introduced by the new Charities SORP 2026.
The session was facilitated by Sarah Williams and Rob Biddlecombe, who provided an overview of the key changes that apply to sustainability reporting, in context of the wider changes to reporting under the new Charities SORP, which take effect for financial periods beginning on or after 1 January 2026.
One of the most significant changes to the trustees’ annual report is the introduction of a tiered reporting framework, designed to reflect the diversity of the charity sector and ensure reporting remains proportionate:
Tier 1: Income up to £500,000
Tier 2: Income between £500,000 and £15 million
Tier 3: Income above £15 million
Sustainability reporting is defined under the Charities SORP as “the practice of disclosing performance across environmental, social and governance areas, sometimes referred to as ESG”. Whilst charities in tiers 1 and 2 may may choose to explain in the report how the charity is responding to and managing ESG matters, for charities in tier 3, sustainability reporting will be mandatory and the report must include a summary of how those charities are responding to and managing these matters.
Whilst the Charities SORP provides some limited examples of the sort of details the report might include (for example around climate-related risks and governance matters) it is deliberately non-prescriptive, leaving scope for charities to consider how best to present their reports in their particular context. In doing so, charities are encouraged to consider the needs of their stakeholders and – as was clear from the discussions – different charities will take differing approaches. For more details on these changes, see our blog.
A key theme throughout the discussion was the need for charities to remain focused on what is proportionate and relevant to their activities, stakeholders and risks. The trustees’ annual report is an opportunity for charities to tell their story and often considered the ‘shop window’ through which charities can engage with the wider public about their activities. The new sustainability reporting requirements are an acknowledgement that stakeholders are increasingly interested in how charities are responding to ESG issues but charities should ensure they think about their own charity context and the overall purpose of the disclosures to be made in the report, which – as the SORP highlights – is to ensure that charities are publicly accountable to their stakeholders for the stewardship of the funds they hold. Where appropriate, the report can be used to signpost readers and external stakeholders to standalone sustainability or ESG reports and underlying evidence for particular statements made.
Reflecting on the discussion, Stephen Last from the Charity Sustainability Network said: “The change in sustainability reporting for SORP 2026 gives charities an opportunity to place greater focus on the story we tell, using our shop window in the annual report to provide a clear narrative for our stakeholders and highlight relevant priorities, risks and activities. This session explored how we can approach the new requirements in a way that is proportionate to each individual charity and produce meaningful sustainability reporting for the sector.”
Key take aways
Consider where sustainability sits within your charity's governance framework and who is responsible for driving and overseeing it.
Ensure there are appropriate reporting lines in place for sustainability and ESG risks and appropriate engagement at board level.
Focus on proportionality in your reporting. The issues that are material for one charity may not be material for another.
There should be a clear link between the sustainability reporting and the key risks to the charity.
Think carefully about the narrative your trustees’ annual report presents to external stakeholders. Less can sometimes be more – providing exhaustive detail in the report may not always be helpful to the overall picture.
Don’t make claims that cannot be supported by evidence or data.
Recognise that the first year of reporting is unlikely to be perfect. The priority should be establishing a good foundation and useful metrics that can be developed over time.
With the first reporting periods under SORP 2026 now underway for some charities, trustees should begin considering how sustainability, governance and risk management are reflected in existing structures and reporting processes to ensure they are well prepared for future disclosures.
Our multi-disciplinary charities and ESG teams can support charities as they prepare for the new SORP requirements, including reviewing governance and reporting frameworks. We can also advise on wider ESG matters, such as environmental compliance, risk management, governance and reporting. Our Environmental, Social and Governance legal services publication provides an overview of this broader support. For advice on environmental law and wider ESG matters, please contact Rob Biddlecombe. To discuss charity law and governance matters, please contact Sarah Williams.
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