Sustainability/ESG

Water sector reform

In the biggest shake-up of the water sector since privatisation, the UK government has confirmed that Ofwat will be abolished. Its functions will be merged with water functions across the Environment Agency (EA), Natural England and the Drinking Water Inspectorate to form a new single, powerful regulator.

We reported earlier in 2025 that, in a move to promote action to restore the river’s and the surrounding catchment’s ecological and chemical health, Lewes District Council had agreed to recognise the legal rights of Sussex’s River Ouse, in a charter to protect the river’s fundamental right to “exist, thrive, and evolve”. Basingstoke and Dean Borough Council, Test Valley Borough Council and Southampton City Council have now similarly formally recognised rivers within their authorities.

Granting rights to rivers and other natural resources could have significant implications for businesses operating near, or impacting, them. For example, companies discharging into or abstracting from these rivers/areas may face heightened scrutiny. Developers may face more rigorous environmental assessments and/or planning requirements, which could affect timelines, costs and viability.

Share your views on sustainability and transparency reporting proposals

We’ve reported previously that the government is considering implementing mandatory disclosure of climate transition plans for UK businesses. The government has launched three linked consultations on key sustainability and transparency reporting proposals: The long-awaited ISSB-aligned UK Sustainability Reporting Standards (for background context, see our briefing on ESG and environmental reporting); mandatory disclosure of climate transition plans (see our briefing on climate transition planning); and a new proposal to establish a voluntary sustainability assurance registration regime. The consultations are open until 17 September 2025.

In related news, the IFRS Foundation has published new guidance on climate transition plan disclosures.

The International Court of Justice has delivered its Advisory Opinion on Climate Change. It opines that states are subject to binding climate obligations under international treaties, international law, and human rights law. These include duties to mitigate climate change, and to cooperate and implement adaptation measures. The Opinion has direct implications for states, in recognising their climate obligations. It also has implications for private entities and businesses across all sectors, both as the subject of climate regulation and in terms of increased risk of climate- related litigation.

The UK government has published the Net Zero Technology Outlook, which offers independent analysis of the technologies the UK must prioritise by 2050 to deliver on its net zero commitments. The report covers industry; transport; heat and buildings; agriculture, land use and waste; and power.

Forced labour in global supply chains

UNICEF and the International Labor Organization has published a report which finds that 138 million children around the world are involved in child labour, including 54 million children engaged in hazardous work likely to jeopardise their health, safety, or development. The sector with the largest number of child labourers is agriculture, with factory work and mining also having significant numbers.

The House of Commons Joint Committee on Human Rights has published its report on forced labour in global supply chains. The report finds that the UK’s current legal and regulatory frameworks are inadequate for confronting the complexity of abuses in global supply chains. It makes various recommendations to the government, so this is ‘one to watch’.

The Home Office has published a new, optional reporting template, designed to help businesses comply with modern slavery, forced labour and child labour supply chain reporting requirements.

The EU Deforestation Regulation (EUDR) will begin to apply to medium and large-sized operators and traders on 30 December 2025 and to micro and small enterprises on 30 June 2026. The EU Commission has published updated guidance and FAQs which aim to simplify and clarify measures and procedures under the EUDR.

The Climate Change Agreements (Administration and Eligible Facilities) (Amendment) Regulations 2025 come into force on 1 January 2026. They provide for a new phase of the Climate Change Agreement scheme to 31 December 2030. This is a voluntary scheme where participants agree with the government to reduce their energy use and emissions in exchange for a reduced climate change levy tax for non-domestic users. See the explanatory memorandum for information.

The EA and the Department for Environment, Food and Rural Affairs (Defra), have launched a consultation, open until 21 October 2025, on wide-ranging reforms to the environmental permitting regime for industrial emissions in England. The proposals cover innovation and tech; agile standard setting; proportionate, coherent regulation; and effectiveness, efficiency and transparency of regulation.

The EU and China have issued a joint statement on climate action.

Corporate/corporate reporting

Mandatory identity verification comes into force on 18 November 2025

The mandatory identity verification regime under the Economic Crime and Corporate Transparency Act 2023 will come into effect from 18 November 2025. Identity verification will be required for newly appointed company directors, LLP members and people with significant control (PSCs), with a transition period being put in place for existing directors, LLP members and PSCs. From the same date, companies will no longer be required to maintain statutory registers of directors, directors’ residential addresses, secretaries and PSCs. However, a register of members must still be maintained. 

The International Sustainability Standards Board has published exposure drafts of proposed amendments to the Sustainability Accounting Standards Board Standards and to the Industry-based Guidance on Implementing IFRS S2. The consultation closes on 30 November 2025.

The European Securities and Markets Authority has released a thematic note clarifying expectations for sustainability communications made by financial institutions and asset managers.

The FCA’s sustainability reporting requirements web page has been updated to clarify its intention to simplify and enhance the overlapping disclosure regimes, so FCA sustainability reporting change is on the horizon.

Also in FCA news, the regulator has issued a follow up letter providing an updated view on the sustainability-linked loans market.

Digitisation Taskforce recommendations

The Digitisation Taskforce has delivered its final recommendations for modernising how shares in UK listed companies are held. It recommends a staged approach to removing paper share certificates in listed companies and moving to a digitised, fully intermediated system.

The FCA, PRA and HM Treasury have all issued consultations, open until 7 October 2025, setting out proposed reforms to the Senior Managers and Certification Regime (SMCR).

A draft of the Companies (Directors’ Report) (Payment Reporting) Regulations 2025 has been laid before parliament. The regulations introduce new annual reporting requirements for large companies on payment practices and performance with respect to suppliers. They come into force on 1 January 2026.

Data protection/cyber security/tech and digital

The European Commission has published the general purpose AI (GPAI) model guidelines under the EU AI Act. The Commission hopes that the guidelines will provide legal certainty by clarifying who is in scope of the EU AI Act rules for GPAI models and how the rules apply.

On 2 August 2025, key obligations under the EU AI Act became applicable, particularly those concerning GPAI models, and Article 78 addressing data confidentiality and intellectual property rights. The EC has clarified that full enforcement will be progressive: providers currently have until August 2026 to achieve compliance without risk of immediate enforcement action. Existing GPAI model providers have an extended deadline until August 2027.

The EC has also published a template for summarising the sources used to train AI models.

The UK and France have launched a joint initiative to strengthen the resilience of critical infrastructure (such as power supplies, transport, and emergency services) against hostile threats by developing advanced navigation and timing systems that are resistant to signal jamming. This includes collaboration on technologies like e-LORAN, a ground-based alternative to GPS; and broader partnerships in AI supercomputing and research.

On 20 August 2025, key provisions of the Data (Use and Access) Act 2025 (DUAA) came into force. In related news, on 21 August, the Information Commissioner’s Office launched two consultations on draft guidance to help organisations with new DUAA compliance obligations.

The Joint Committee on Human Rights has launched an inquiry and call for evidence into how human rights can be protected in the age of AI.

The Council for Science and Technology has advised the UK government on how to build an AU chip design industry in the UK.

The Competition and Markets Authority (CMA) has published its final report on its market investigation into the supply of public cloud infrastructure services in the UK.

Commercial/general

The Chancellor has released the July 2025 Mansion House speech, in which she launched the Financial Services Growth and Competitiveness Strategy. The speech and supporting documents can be accessed here.

The Department for Business & Trade (DBT) is consulting, until 23 October 2025, on a package of proposed legislative measures to address late, long and disputed business-to-business payments.

The European Commission has published its proposed budget for 2028–2034.  The budget includes major shifts in climate funding, digital innovation, defence investment and new environmental and corporate levies.

The CMA has published guidance on its approach to its market reviews, market studies and market investigations, and how it intends to embed its “4Ps” (pace, predictability, proportionality and process) framework. The new approach will apply to all markets projects considered and launched after 24 July 2025 (including existing cases, where appropriate).

The Cabinet Office has announced a major overhaul of businesses in scope of the National Security and Investment Act 2021. The aim is to cut red tape and facilitate investment where national security risks are shown to be low. Certain internal reorganisations and the appointment of liquidators are to be removed from scope. Definitions for various sectors are to be amended to clarify which transactions are in scope. In addition, new sectors for water and sewerage supply, critical minerals and semiconductors will be created. Timings haven’t yet been confirmed.

In DBT v The Information Commissioner, the Supreme Court has confirmed that public authorities may aggregate public interest factors for and against disclosure when applying multiple exemptions under Freedom of Information Act 2000. (This cumulative approach is only permitted when more than one qualified exemption is relied upon in relation to the same item of information.) The judgment brings welcome certainty, but public authorities should update their approaches to assessment and decision making accordingly.

The Joint Contracts Tribunal (JCT) has released the Target Cost Contract 2024. It’s the final piece in the publication of the JCT 2024 Edition suites. See our briefing for more information.

People

The DBT has launched a call for evidence, open until 9 October, on unpaid internships, unpaid work trials, voluntary work and work shadowing. It’s part of the government’s ‘Make Work Pay’ agenda.

Among recent proposed changes to the Employment Rights Bill, is the proposal is to ban the use of Non-Disclosure Agreements (NDAs) in relation to harassment or victimisation. The proposal is wide in scope. It may apply not only to employees and workers, but could also extend to contractors and people in training or work experience positions. See our briefing for further information.

Following the widely reported decision of the Supreme Court in For Women Scotland Ltd v Scottish Ministers (see our earlier briefing), the Equality and Human Rights Commission has indicated that it will provide an updated Code of Practice on Services, Public Functions and Associations. In the meantime, we’ve now had one of the first court decisions dealing with transgender issues since the ruling. In Haynes v Thompson, the County Court held that it was bound by the Supreme Court’s decision and dismissed a claim that the exclusion of a trans woman from a women’s pool competition constituted direct gender reassignment discrimination. This continues to be a complex and difficult area for employers and service providers to navigate, as is the wider question of how to deal with competing beliefs and protected characteristics.