Environmental, social and governance | UK Regulatory Outlook March 2025

Divided opinions over the EU Omnibus package

The EU Omnibus Package was debated in the European Parliament earlier this month. The European Parliament remains divided, with various political groups expressing differing views on the proposal. The centre-right EPP pushes for an urgent procedure as well as saying further changes are required, while the centre-left criticises the proposal for not delivering on simplification. The Greens argue it undermines the green transition.

In the Council of the EU, there is broad consensus among ministers and they are supportive of the "stop the clock" delays to both the Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive (CSDDD). 

It seems highly likely that the Omnibus Package will be subject to extensive debate and subsequently is likely to mean changes will be made along the way. A vote for the "stop the clock" proposals to go through the urgent procedure has been scheduled by the European Parliament for Tuesday 1 April 2025. The omnibus will only enter into force once the European Parliament and Council of the EU have reached an agreement on the final version of the text.

Across the Atlantic, Republican senator Bill Hagerty (Tennessee) and representative Andy Barr (Kentucky) have proposed the PROTECT USA Act. This proposes to prohibit certain US entities participating in any foreign sustainability due diligence regulation, including the EU CSDDD. “American companies should be governed by US laws, not unaccountable lawmakers in foreign capitals” said Senator Hagerty. “The European Union’s ideologically motivated regulatory overreach is an affront to US sovereignty. I will use every tool at my disposal to block it.”

Energy Savings Opportunity Scheme phase 4 underway in UK

Following the end of Phase 3 of the Energy Savings Opportunity Scheme (ESOS) (5 June 2024), there was a string of non-compliance by businesses who were caught on the relevant qualification date (31 December 2022). There have therefore been a number of compliance and enforcement notices issued by the Environment Agency.

Phase 4 is now under way, with the compliance deadline set for 5 December 2027. Below are some key considerations businesses should consider to ensure compliance with ESOS:

• Recognise that the existence of one single large UK undertaking within a corporate group will trigger ESOS and necessitates compliance across the entire UK corporate group.
• Incorporate ESOS into corporate due diligence questionnaires to evaluate the risk of non-compliance when acquiring a company.
• Be aware of the importance of engaging with Environment Agency when ESOS compliance questions arise (especially on reputation) and seek advice for best practice.
• Seek advice in complex scenarios, such as intricate group structures (including funds and overseas companies), recently dissolved companies, undertakings nearing qualification, and joint ventures.

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