FRC Strategic Report 2026: What UK Directors Must Now Disclose

The FRC’s updated Guidance on the Strategic Report, published in February 2026, introduces new disclosure expectations for UK directors that go beyond what many boards have built into their reporting processes — creating restatement risk for companies whose annual reports rely on pre-2025 templates.

The revision aligns the strategic report framework with two significant developments: the UK Corporate Governance Code 2024, which introduced enhanced requirements for internal control and risk reporting, and legislative changes to directors’ report disclosures that came into effect for financial years beginning on or after 1 January 2025. While directors are personally accountable for the accuracy and completeness of the strategic report. Companies that fail to reflect the updated guidance in their 2025/26 annual reports face audit qualification risk, FRC enforcement scrutiny, and the reputational exposure that follows a public filing correction.

What Has the FRC Changed in Its Strategic Report Guidance?

The February 2026 update to the FRC’s Guidance on the Strategic Report reflects three primary changes. First, the integration of UK Corporate Governance Code 2024 provisions — particularly the strengthened requirements under Provision 29 on material controls and the enhanced risk management disclosure expectations. Directors must now demonstrate in the strategic report that the board has reviewed the effectiveness of material controls and can articulate the basis for that assessment, not merely assert that controls are effective. Second, the guidance now reflects the updated Streamlined Energy and Carbon Reporting (SECR) framework, requiring companies within scope to disclose data centre energy consumption separately where it is material — a change with direct implications for technology-intensive companies deploying AI infrastructure at scale. Third, the FRC has incorporated updated expectations on climate-related financial disclosures, aligning with the ISSB’s IFRS S1 and S2 standards and requiring companies to demonstrate how climate risks are integrated into the principal risk disclosures rather than reported as a standalone environmental section.

According to the FM Magazine review of the updated guidance, the FRC’s revision reflects legislative changes including those to directors’ report disclosures, with the expectation that boards treat the strategic report as a genuinely integrated document rather than a collection of stand-alone narrative sections. The Slaughter and May governance review of the updated UK Corporate Governance Code noted that the reforms represent a substantive increase in director accountability at the board level, not merely a reporting upgrade.

• Executive Action: Commission a gap analysis between your current strategic report template and the FRC’s February 2026 updated guidance — focusing specifically on material controls disclosure, SECR energy reporting, and climate risk integration into principal risks.
• Confirm with your audit committee chair that the board’s review of material controls effectiveness (Provision 29) is documented in a form that can be reflected in the strategic report with the specificity the FRC now requires.
• Require your company secretary and reporting team to update the annual report template for the 2025/26 reporting cycle before the half-year reporting deadline, not retrospectively before sign-off.

What Does the Updated Guidance Mean for Director Personal Accountability?

The FRC’s updated strategic report guidance operates alongside proposed reforms to director accountability that are materially more significant for individual executives. The UK government has confirmed that a consultation will seek views on granting the new Corporate Reporting Authority (CRA) — the FRC’s successor body — powers to impose civil regulatory sanctions on directors personally for serious failures of corporate reporting duties. This is not yet enacted, but the consultation signals a clear direction: the existing model in which companies are sanctioned for reporting failures while individual directors bear no direct financial consequence is under review.

For directors serving on audit committees and boards of FTSE-listed companies, this has immediate implications for how they approach strategic report review and approval. The standard of review must move from a procedural sign-off — confirming that sections have been completed — to a substantive challenge of the accuracy, completeness, and consistency of the disclosures with the FRC’s updated expectations. Directors who cannot demonstrate that they engaged in substantive review of the strategic report will be exposed if the CRA’s proposed sanctions regime comes into effect. Use the INFORMD governance assessment tools to evaluate your board’s current reporting review process against the FRC’s updated expectations.

• Executive Action: Arrange a dedicated board or audit committee session on the FRC’s updated strategic report guidance, focusing on the material controls disclosure, climate risk integration, and the proposed CRA accountability framework.
• Ensure that directors’ D&O insurance coverage has been reviewed in light of the proposed CRA civil sanctions regime — this is a material change to individual liability exposure.
• Request that the company secretary produce a written assessment of the board’s process for reviewing and challenging strategic report disclosures, and whether it meets the standard the FRC and proposed CRA regime would expect.

How Should Boards Treat Climate and Sustainability Disclosure in the Strategic Report?

One of the most significant substantive changes in the FRC’s updated guidance concerns climate-related financial disclosures. The FRC now expects companies within the TCFD and emerging ISSB S1/S2 reporting scope to integrate climate risk disclosures into the strategic report’s principal risk section rather than treating them as a separate environmental narrative. This means climate risks must be assessed using the same risk quantification methodology as financial, operational, and regulatory risks — and must be presented with the same specificity, including likelihood, financial magnitude, and time horizon.

For many boards, this is a step-change. The common approach of including a TCFD section that cross-references climate scenarios without connecting them to the principal risk register and financial sensitivity analysis will no longer meet the FRC’s expectations. Boards must now ensure that the process for identifying and quantifying climate-related financial risks is owned at board level, documented in board minutes, and reflected in a strategic report that demonstrates genuine integration rather than parallel disclosure. Explore the INFORMD governance and compliance briefing library for further guidance on TCFD, ISSB, and FRC reporting requirements. The INFORMD technology strategy review template also includes a section on material risk integration for boards updating their reporting frameworks.

• Executive Action: Review your TCFD or ISSB climate risk disclosures against the FRC’s updated requirement that climate risks appear in the principal risk section with quantified financial impact ranges — not as a standalone TCFD appendix.
• Confirm that board minutes for the risk review process reflect discussion of climate risk quantification — this is the evidence that the FRC and auditors will look for to demonstrate board-level ownership.
• Task your chief risk officer and CFO jointly with producing a climate financial sensitivity analysis that can be referenced in the strategic report principal risk disclosures for the 2025/26 annual report.

What Are the Practical Steps for Companies Preparing Their 2025/26 Annual Report?

For companies with December 2025 or March 2026 financial year-ends, the 2025/26 annual report is the first that must fully reflect the FRC’s February 2026 guidance update. The practical implications are significant. The strategic report cannot be produced from the prior year template without a structured update process. The audit committee must review the FRC guidance update as a formal agenda item — not leave it to the reporting team to absorb. External auditors must be asked specifically whether they are treating the updated FRC guidance as applicable to the current year’s report and what additional audit procedures they have applied as a result. And the board must collectively confirm that the strategic report they are approving meets the standard they would be prepared to defend to the FRC, auditors, and — under the proposed CRA regime — a regulator with civil sanction powers.

• Executive Action: Set the FRC’s February 2026 updated Guidance on the Strategic Report as a required board pack item for the annual report review cycle, with a written compliance confirmation from the company secretary.
• Ask your external auditor formally whether the updated FRC guidance changes their audit approach for the strategic report and principal risk disclosures — document their response.
• Brief new and recently appointed NEDs specifically on the material controls (Provision 29) and climate risk integration requirements, as these represent the most significant change from prior year reporting expectations.

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