Environmental, social and governance | UK Regulatory Outlook June 2024

UK general election 2024: ESG aspects

As the UK approaches its general election, the two main contenders to form the next government, the Conservative and Labour parties have unveiled their manifestos, each with mentions of ESG components.

The Conservative manifesto pledges to end human trafficking and modern slavery. It also commits to the integration of ESG factors into defence procurement and the continuation of the UK-wide deposit return scheme (DRS). Financial reporting requirements are also on the Conservative agenda, with plans to increase the employee threshold, potentially reclassifying more companies as medium-sized which will mean taking more businesses out of scope of the reporting requirements.

Labour's manifesto, while omitting direct reference to modern slavery, places a strong emphasis on environmental commitments. The party promises to achieve the Environment Act targets and advocates for a shift towards a circular economy to minimise waste (see Products for additional information). Labour also supports the introduction of a Carbon Border Adjustment Mechanism (CBAM) to align with the UK's climate goals.

Beyond the manifesto, Labour's recent paper, "Financing Growth", outlines its plans for sustainable finance. This includes a commitment to the Sustainability Disclosure Requirements in line with the International Sustainability Standards Board, and an exploration of nature-related finance, leveraging voluntary carbon markets and natural capital partnerships.

Council adopts formal position on Green Claims Directive

The Council of the EU has agreed its position on the green claims directive, which sets out what types of information companies need to provide to justify their environmental marketing claims. The Council's position widens the scope of the original proposal by applying to both written and oral claims that companies use voluntarily in their marketing of green credentials. The Council's approach also sets out that environmental claims and labels must be independently verified before being published, although a simplified procedure allows certain claims to bypass this requirement if technical documentation is provided.

With regard to ecolabelling schemes, the Council has outlined that those registered under EN ISO 14024 type 1 ecolabeling schemes will be exempt from verification if they are officially recognised in a Member State and comply with the new rules, adding that recognition by one Member State would be sufficient for the whole EU market.

For climate-related claims, companies must detail the specific type and quantity of carbon credits used and distinguish between contribution claims and offset claims. In offset claims, these require companies to provide evidence of a net-zero target as well as the percentage of total greenhouse gas emissions that have been offset.

Now that the Council has adopted its approach, negotiations with the European Parliament can begin during the new legislative cycle in July.

Council adopts EU Nature Restoration Law

Please see Environment.

Please also see our latest international ESG Knowledge Update, for a round-up of legal, regulatory and market news.