ESG Knowledge Update | February 2025

Legal and regulatory news

European Union

The European Commission, in a communication published on 29 January, has proposed a "competitiveness compass" for the EU. The communication sets out proposals for what the EU needs to do over the next five years to "regain its competitiveness and secure its prosperity." On 5 February, the Commission published details of its "toolbox for safe and sustainable e-commerce". Its work programme for 2025, which sets out the planned initiatives of the new Commission, was published on the 11 February.

The compass, toolbox and work programme contain a number of overlapping ESG measures. The simplification omnibus packages aim to reduce the regulatory burden and favour speed and flexibility. The new Clean Industrial Deal aims for the EU to meet its agreed decarbonisation objectives. There are also more ambitious sustainability requirements for e-commerce imports.

The first simplification omnibus package, as expected, was published on 26 February. It simplifies the Corporate Sustainability Reporting Directive, EU Taxonomy Regulation and the Corporate Sustainability Due Diligence Directive. Future simplification packages will introduce a new definition of small mid-caps for those companies bigger than small to medium-sized enterprises (SMEs) but smaller than large companies. The Commission has stated that "thousands of companies in the EU will benefit from tailored regulatory simplification in the same spirit as SMEs." The EU intends to undertake a review of its CBAM (carbon border adjustment mechanism) in 2025 and of the REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals) Regulation.

Measures in the Clean Industrial Deal include the Industrial Decarbonisation Accelerator Act to increase demand for EU-made clean products by introducing sustainability, resilience and "made in Europe" criteria in public and private procurements. The adoption of the Circular Economy Act is planned for 2026. The aim is to have 24% of materials "circular" by 2030.

Sustainability requirements for products placed on the EU market will be strengthened under the Ecodesign for Sustainable Products Regulations. A working plan to determine priority products to be regulated will be published in April this year. This will be followed in July by rules on the destruction of unsold consumer products. Textiles will be among the first product groups targeted.

In the meantime, in respect of sustainability requirements, on 19 February, the European Parliament and Council reached a provisional agreement to amend the Waste Framework Directive that aims to reduce textile and food waste across the EU. The most notable change is the introduction of the extended producer responsibility for textile producers and fashion brands. This means that these businesses will be required to pay a fee to help with waste management costs in line with the "polluter pays" principle.

The Packaging and Packaging Waste Regulation (PPWR) entered into force on 11 February and will apply from 12 August 2026, except for article 67(5), which is regarding an amendment to the single use plastics directive to ban polystyrene cups. This will apply from 12 February 2029. Measures that the PPWR will introduce include all packaging placed on the EU market must be recyclable by 2030, plastic packaging must contain a minimum percentage of recycled content, PFAS (per- and polyfluoroalkyl substances) restrictions for food contact materials, and a harmonised labelling system for sorting and disposal of waste.

United Kingdom

The House of Commons Joint Committee on Human Rights ran a new inquiry into forced labour in global supply chains. This follows on from Parliament's Modern Slavery Act Committee report on the Modern Slavery Act 2015, which found the UK to be falling behind other nations. The new inquiry builds on the government's response to the previous report in whichit recognised the need to conduct a review of both legislative and non-legislative measures to tackle forced labour and increase transparency in global supply chains. The inquiry will review whether these measures are effective or if changes are required.

The Independent Anti-Slavery Commissioner's  2024-2026 strategic plan was published on 11 February. The plan sets out three primary objectives to guide its actions: preventing modern slavery and revictimisation, protecting victims, and prosecuting offenders and supporting victims through the criminal justice system. As part of the first objective, the commissioner plans to "make prevention everyone's business" and push for mandatory human rights supply chain due diligence obligations to be implemented in the UK, as well as pressing the government to strengthen its policy response to forced labour in domestic and global supply chains.

The government has published its new policy statement on national procurement, which contracting authorities must have regard to in line with section 13 of the Procurement Act 2023. The statement outlines the government's policy on national priorities with a focus on three main areas for delivering value for money: driving economic growth, delivering social and economic value, and building commercial capability.

The Deposit Scheme for Drinks Containers (England and Northern Ireland) Regulations 2025, were made on the 23 January, came partially came into force on 24 January and will come fully into force on 1 October 2027. The regulations establish a deposit return scheme (DRS) in England and Northern Ireland.

The government has published new guidance on the DRS. This outlines the drinks containers in scope of the scheme. These include single-use closed bottles and cans made from polyethylene terephthalate (PET) plastic, steel or aluminium that contain between 150 millilitres and 3 litres of liquid. It guides on the responsibilities of suppliers, producers and retailers, and information on the deposit management organisation to be appointed in April and on enforcement authorities.

Defra has provided an update on its digital waste tracking (DWT) project that aims to establish a single, centralised electronic system for tracking the amount and type of waste produced and its final destination. It will impact how businesses records and report their waste data. Originally DWT was due to come into effect in April this year, but Defra has now confirmed the scheme will be in place from April 2026 to allow businesses enough time to prepare.

The Financial Conduct Authority (FCA) has published its climate-change adaptation report, which outlines challenges faced by financial services firms. The FCA highlights three major issues around adaptation to climate change: data and modelling to help financial services quantify and manage climate risks; barriers and enablers to insurance underwriting for climate risks and in consequence lending and investment; and barriers and enablers to financial services in allocating capital to adaptation.

The Financial Reporting Council (FRC) on 21 January released its review of the quality of Climate-Related Financial Disclosures (CFD) of AIM and large private companies. This is the first review of the mandatory CFD reporting requirements under the Companies Act 2006. The FRC's review found that the quality of reporting was inconsistent. There were areas of improvement identifiable for most of the 20 companies assessed.

The UK government has announced new measures to reform the planning consent process for offshore wind developments to accelerate the construction of these projects. The initiative will streamline the consent process for up to 13 major offshore wind projects, potentially generating up to 16GW of electricity and unlocking up to £30 billion in investment.

The government's 10-year infrastructure strategy is a comprehensive plan aimed at enhancing investment in critical infrastructure to support economic growth, housing, clean energy and improved public services. The strategy highlights that infrastructure plays a pivotal role in achieving the government's missions, which include meeting clean energy targets by 2050.

International

The acting  chairman for the US Securities and Exchange Commission (SEC), Mark Uyeda, asked for the legal proceedings against the SEC's climate-related disclosure rules to be paused while it reconsiders the rules. Uyeda commented that he originally voted against the rule's and that they are "deeply flawed and could inflict significant harm on the capital markets and our economy."

The Taskforce on Nature-related Financial Disclosures (TFND) has issued its final sector guidance for apparel, textiles and footwear, beverages, construction materials, engineering, construction, and real estate. Draft guidance has also been issues on an additional three sectors: fishing, marine transportation and cruise lines, and water utilities and services. The guidance is designed to assist companies globally in their assessment of nature-related issues.

The International Financial Reporting Standards has published a new guide to assist companies in applying the International Sustainability Standards Board rules for reporting climate-related information.

Market news

A survey of 1,600 global business leader found that 85% of companies will continue with climate reporting even if regulations change… Mars and Nestle invest $27 million to help cut dairy-related emissions…  the TFND has launched a new platform designed to help practitioners expand their knowledge of nature-related issues and of its recommendations and guidance… Bloomberg launches climate risk management solution to help investors assess climate risks and opportunities.

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