As the charity sector evolves to meet the demands of transparency, accountability and impact, the revised Statement of Recommended Practice (SORP) for 2026 (expected to be published in Autumn 2025) marks a significant milestone - especially for Tier 3 charities with income over £15 million.
The draft, which has now been through the consultation phase, introduced enhanced sustainability reporting requirements that reflect growing expectations from funders, regulators and the public.
Why this matters
The draft SORP aligns with updates to FRS 102 and introduces a three-tier reporting framework. Tier 3 charities - those with income above £15m - are now expected to go beyond basic compliance and demonstrate leadership in financial sustainability, environmental stewardship, and social governance.
This shift is not just about ticking boxes. It’s about telling a compelling story of how your charity operates, the difference it makes, and the values it upholds.
Understanding the new three-tier framework
The draft SORP introduces the following tiers based on gross annual income:
- Tier 1: Charities with income up to £500,000. These charities will follow simplified accruals accounting and have fewer mandatory disclosures.
- Tier 2: Charities with income between £500,000 and £15 million. These charities must comply with Tier 1 requirements plus additional disclosures, including more detailed reporting on activities and governance.
- Tier 3: Charities with income over £15 million. These organisations must comply with all Tier 1 and Tier 2 requirements, plus enhanced reporting on sustainability, governance and social impact.
This tiered approach was widely supported in the consultation, with the Charity Commission’s reflections on the consultation confirming that 89% of respondents endorsing the move toward proportionality.
Key sustainability requirements for Tier 3 charities
Under the draft SORP, Tier 1 and 2 charities are encouraged and Tier 3 charities are required to report how the charity is responding to and managing environmental, governance and social matters.
The draft SORP gives various examples including:
- The report could provide details of the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities.
- A description of the calculations on which those key performance indicators are based.
- In relation to governance and social matters, reporting may include details of social opportunity, privacy and data security, board diversity and business ethics.
These disclosures are designed to help stakeholders - donors, commissioners and beneficiaries - understand not just what your charity does, but how it does it.
What are key climate-related risks and opportunities for charity sector?
Potential climate-related risks for UK Charities and NFP organisations
1. Operational disruption
- Flooding or extreme weather events could damage charity premises, disrupt services, or affect access to beneficiaries.
- Power outages or transport disruptions could impact staff and volunteer availability.
2. Financial risks
- Rising energy costs due to climate-related supply issues.
- Increased insurance premiums for properties in high-risk areas.
- Reduced donations if donors shift priorities toward climate-focused causes.
3. Reputational risk
- Stakeholders may scrutinise charities that fail to address their environmental impact.
- Lack of sustainability reporting could affect funding eligibility, especially from government or ESG-conscious grant makers.
4. Regulatory and compliance risk
- New environmental regulations (e.g. carbon reporting, waste management) may impose additional compliance burdens.
- Failure to meet the draft SORP sustainability disclosures could affect audit outcomes or public trust.
5. Supply chain vulnerability
- Disruption in sourcing goods or services due to climate impacts on suppliers.
- Ethical concerns around sourcing from regions affected by deforestation or water scarcity.
Potential climate-related opportunities for UK Charities and NFP organisations
1. Funding and partnerships
- Access to new grants and funding streams focused on climate resilience, green innovation, or community adaptation.
- Opportunities to collaborate with local authorities or businesses on sustainability initiatives.
2. Cost savings
- Investing in energy-efficient buildings, solar panels, or electric vehicles can reduce long-term operating costs.
- Digital transformation (e.g. remote services) can cut travel emissions and overheads.
3. Enhanced mission delivery
- Climate action can align with core charitable missions - e.g. improving health, reducing poverty, or protecting vulnerable communities.
- Engaging beneficiaries in sustainability projects can build skills and community cohesion.
4. Reputation and stakeholder engagement
- Demonstrating climate leadership can attract ESG-conscious donors, volunteers, and partners.
- Transparent sustainability reporting builds trust and credibility.
5. Innovation and resilience
- Climate challenges can drive innovation in service delivery, infrastructure, and governance.
- Building climate resilience strengthens long-term viability and impact.
What’s driving the change?
The Charity Commission and other SORP-making bodies have responded to sector-wide calls for more meaningful, proportionate reporting. The consultation revealed strong support for sustainability and impact reporting, especially in the Trustees’ Annual Report module. The aim is to foster trust and confidence by making charity reporting more relevant and accessible.
Preparing for implementation
The revised SORP is expected to take effect for accounting periods beginning on or after 1 January 2026. That means the current financial year is the ideal time to:
- Review your data collection processes to ensure you can capture the necessary sustainability metrics.
- Engage trustees and senior leadership in defining what sustainability means for your charity.
- Use your communication channels - from annual reports to social media - to start sharing your sustainability journey.
- Speak to the UHY Sustainable Business Services team to see how we can support you.
Final thoughts
For Tier 3 charities (and Tier 1 and 2), the revised SORP is more than a compliance update - it’s an opportunity to lead by example. By embracing the new sustainability requirements, you can strengthen your reputation, deepen stakeholder engagement and demonstrate your commitment to doing good, well.
The next step
If you have any enquiries regarding the above, please get in touch with Harriet Hodgson-Grove or your usual UHY charity adviser.
