Environmental, social and governance | UK Regulatory Outlook May 2024

UK Forest Risk Commodities scheme on the back burner

The general election has been called for 4 July and Parliament has been prorogued. What this means for the legislative programme is that any legislation that was not passed during last week's wash-up period will now fall away and we will have to wait to see whether the newly elected government will introduce the legislation, but they are under no obligation to do so. (See our Insight for more on this wash-up period)

For the Forest Risk Commodities Scheme, which will be introduced through provisions in Schedule 17 of the Environment Act 2021, the current government had said that the secondary legislation would be introduced "when parliamentary time allows". However this legislation was not introduced and therefore cannot now be passed and we will have to wait for it to be introduced once the new government is in session. As the scheme is a requirement under the Environment Act, the newly-elected government will have to introduce the relevant regulations, but we will not know more on the timeline of the introduction of the scheme until after the election.

CSDDD receives final vote

The European Parliament adopted its final position on the Corporate Sustainability Due Diligence Directive on 24 April and the Council formally adopted the text position on 24 May.

The rules will apply to EU companies with a minimum of 1000 employees and a net turnover of €450 million. Non-EU companies may also be obligated if they generate €450 million in the EU in the last financial year.

Other requirements include businesses having to integrate due diligence into their policies and adopting transition plans to make their business model compatible with the Paris Agreement global warming limit of 1.5°C. Fines for non-compliance could be of up to 5% of the companies' worldwide turnover, as well as fully compensating victims where damage has been caused due to breaching their due diligence obligations.

The legislation will now be published in the Official Journal of the European Union and enter into force 20 days after its publication. Member States then have two years to implement the CSDDD into national law.

The new rules will be implemented in a phased approach from 2027 to 2029.

Postponement of European sustainability reporting standards

The directive postposing the adoption of the European Sustainability Reporting Standards (ESRS) for certain sectors and third country undertakings has now been formally adopted by both the European Parliament and Council.

The directive delays the adoption of the ESRS to 30 June 2026 in a bid to ease the regulatory burden on companies. The sectors cover oil and gas, mining, road transport, food, cars, agriculture, energy production and textiles. This delay will allow companies to focus on the implementation of the first set of ESRS and limit the reporting requirements to a necessary minimum. 

Corporate reporting: UK Sustainability Reporting Standards

The Department for Business and Trade has published a framework and terms of reference for the development of UK Sustainability Reporting Standards (SRS) that will be based on the IFRS Sustainability Disclosure Standards.

The framework confirms that the stages of work needed to create the SRS are the endorsement of the IFRS Sustainability Disclosure Standards followed by implementation through UK legislation and the FCA rules for listed companies.

The UK government aims to make endorsement decisions on IFRS S1 and IFRS S2 by the first quarter of 2025. Endorsement of the IFRS Sustainability Disclosure Standards does not mean that companies will automatically be obliged to report against the resulting SRS, although it is likely that they will lay the foundation for future legal and regulatory obligations for listed and registered companies. 

European Parliament adopts position on forced labour regulation

Please see Modern slavery.

Regulations to eradicate modern slavery in NHS supply chains to be delayed by general election

Please see Modern slavery.

European Parliament adopts position on right to repair

Please see Products.

European Parliament adopts position on ecodesign for sustainable products

Please see Products.

European Parliament adopt position on packaging and packaging waste regulation

Please see Products.

Environmental Crime Directive published in Official Journal

Please see Environment.

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