How UK SRS S1 Defines Materiality

The Definition

Under UK SRS S1, sustainability-related financial information is material if omitting, misstating, or obscuring it could reasonably be expected to influence decisions that primary users of general-purpose financial reports make on the basis of those reports. Primary users are defined as existing and potential investors, lenders, and other creditors.

This is not the same as financial statement materiality. Financial statement materiality asks whether information would change the numbers in the accounts. Sustainability materiality under UK SRS asks whether information about sustainability-related risks and opportunities would influence an investor's assessment of the company's prospects — even if the financial impact has not yet materialised in the accounts.

Single Materiality vs Double Materiality

UK SRS uses a single materiality approach, consistent with IFRS S1 globally. The focus is on how sustainability matters affect enterprise value — the “outside-in” perspective. A company considers sustainability risks and opportunities through the lens of their potential effect on the company's cash flows, access to finance, cost of capital, or business model over the short, medium, and long term.

This differs fundamentally from the double materiality approach used in the EU Corporate Sustainability Reporting Directive (CSRD). Under CSRD, a company must also consider the “inside-out” perspective — how the company's activities impact people and the environment, regardless of whether those impacts affect enterprise value. A UK company subject to both UK SRS and CSRD will need to apply both materiality lenses, which may result in a broader set of disclosures under CSRD than under UK SRS.

How to Assess Materiality in Practice

UK SRS does not prescribe a specific materiality assessment methodology, but requires companies to disclose the process and judgements they used to identify material sustainability topics. In practice, a robust materiality assessment typically involves identifying a long list of potential sustainability topics relevant to the company's industry and value chain, assessing each topic against the materiality definition (could omission influence investor decisions), engaging with relevant stakeholders (investors, analysts, industry bodies), and documenting the rationale for including or excluding each topic.

The SASB Standards — which UK SRS references as a permissive resource — provide industry-specific lists of sustainability topics likely to be material. While not mandatory, they offer a practical starting point for companies building their materiality assessment for the first time.

Why This Matters

The materiality definition determines the boundary of a company's UK SRS disclosures. A well-conducted materiality assessment protects the company from both under-disclosure (which risks regulatory challenge) and over-disclosure (which creates reporting burden without corresponding value to investors). It is also the foundation for the statement of compliance — a company cannot claim compliance with UK SRS if it has not applied the materiality definition rigorously and disclosed its process for doing so.