ESG Knowledge Update: March 2025

Legal and regulatory news 

European Union 

The Council of the EU has approved the so-called "stop the clock" directive which forms part of the European Commission's proposed EU Omnibus Package. The directive postpones by two years the application of the Corporate Sustainability Reporting Directive (CSRD) for large companies that have not yet started reporting, and by one year the transposition deadline and first phase of application (covering the largest companies) of the Corporate Sustainability Due Diligence Directive (CSDDD).

A vote for the "stop the clock" proposals has been scheduled by the European Parliament for 1 April. Parliament remains divided, however, with various political groups expressing differing views on the proposal. The proposals will only enter into force once the Parliament and Council have reached an agreement on the final version of the text. 

The European Financial Reporting Advisory Group (EFRAG), which has been mandated by the Commission to prepare the EU sustainability reporting standards (ESRS) that companies will need to apply when they report under CSRD, has undertaken a mapping exercise with the Carbon Disclosure Project (CDP), a widely adopted voluntary environmental disclosure platform. The exercise allows companies that apply ESRS 1 to be better equipped to complete CDP disclosures and companies disclosing through the CDP platform to prepare for CSRD reporting. 

The Commission has published an action plan for the European automotive industry, including a relaxation of the CO2 standards regulation, which would have resulted in significant fines for carmakers that had not met their targets for electric vehicle take up. The amendment will allow carmakers to meet their compliance targets over a three-year period (2025-2027) rather than on an annual compliance cycle. The overall target for a 100% reduction in CO2 emissions from new cars and vans registered in the EU from 2035 remains. 

United Kingdom 

The Financial Conduct Authority (FCA) and Prudential Regulation Authority have dropped proposed rules and expectations aimed at improving diversity and inclusion in regulated firms in response to "the broad range of feedback received, expected legislative developments and to avoid additional burdens on firms at this time" (see below for the expected legislative developments mentioned). The rules had been the subject of consultation in 2023 and had been anticipated for some time. The FCA will be setting out its next steps on tackling non-financial misconduct by the end of June this year. 

As part of its proposed draft Equality (Race and Disability) Bill, the government has opened a consultation to seek views on how to implement mandatory ethnicity and disability pay gap reporting for large employers (more than 250 employees) in Great Britain, with changes likely to be implemented in 2026. At present, employers with more than 250 employees are only under a statutory duty to report on their gender pay gaps. 

The Home Office has updated its statutory guidance on transparency in supply chains under section 54 of the Modern Slavery Act 2015. This is the first time it has been updated since it was first published in 2015. Section 54 obligates businesses with an annual turnover of £36 million or more that supply goods or services and conduct business in the UK to publish an annual slavery and human trafficking statement. The updated guidance outlines how businesses should comply with both the letter and "spirit" of the law, and goes into a lot more detail on what the "spirit" means. 

Large organisations within scope of the extended producer responsibility (EPR) scheme for packaging must submit their July-December 2024 data by 1 April 2025. Small organisations must also submit their January-December 2024 data by this date. Businesses that place packaging on the UK market should check whether they fall within scope of the EPR and if so, submit the relevant data by the deadline. 

The Department for Transport has launched a new consultation on the revenue certainty mechanism that will support investment into sustainable aviation fuel in the UK. The government is proposing that the revenue certainty mechanism should be funded by industry and that the preferred approach is to introduce a levy on suppliers of jet fuel. The government intends to introduce a Sustainable Aviation Fuel (Revenue Support Mechanism) Bill in this Parliament and to have laid all the required legislation by the end of 2026. 

International 

The Science Based Targets initiative (SBTi) has published an initial draft of its revised Corporate Net-Zero Standard for public consultation. The much-anticipated SBTi paper sets out greater flexibilities for tackling "scope 3" emissions (so-called supply-chain emissions), including allowing companies to set targets for green procurement and revenue generation instead of setting an emissions reduction target. 

The US has stated that it "rejects and denounces" the UN's Sustainable Development Goals and will no longer reaffirm them as a matter of course. The statement was made in remarks by the US Mission to the UN prior to a vote of the General Assembly. 

US 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."

Canada's prime minister, Mark Carney, has cancelled a Canadian consumer carbon tax which was due to take effect on 1 April 2025 and has proposed to replace it with a system of incentives. The move comes as Canadians take to the polls for a general election on 28 April. 

The IFRS Foundation has launched a Jurisdictional Roadmap Development Tool to support jurisdictions and policy makers in adopting or otherwise using the IFRS Sustainability Disclosure Standards - currently, IFRS S1 (general requirements for disclosure of sustainability-related financial information) and IFRS S2 (climate-related disclosures) – which took over from the Taskforce on Climate-related Financial Disclosures in 2023. 

Market news 

Active Super, a superannuation fund, has been fined AUS$10.5 million for greenwashing following action taken by the Australian Securities and Investments Commission… Nasdaq-owned carbon-crediting platform Puro.earth has announced that it has issued over 1 million carbon removal certificates since its first issuance in 2019, representing 1 million tonnes of verified carbon removal… A new report finds that 37% of the over 4000 companies in 2024 who had responded to the CDP with their climate commitments are increasing their ambitions, while 16% are decelerating their goals.

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