Sustainability/ESG

With ESG regulations evolving rapidly, businesses must look beyond internal policies to engender sustainability and responsibility throughout their supply chains. In our recent article, we explore the latest developments in ESG supply chain law – highlighting what you need to know to stay compliant and commercially resilient. 

The UK government has launched three linked consultations on key sustainability and transparency reporting proposals. For information and links to the proposals, please see the item at our Corporate/corporate reporting section, below. 

On 23 June 2025, the European Parliament announced the cancellation of the trilogue on the Green Claims Directive. The Green Claims Directive was expected to become law this year. It would’ve provided specific protection for consumers from misleading environmental marketing, required companies to have environmental claims externally verified before using them, and regulated environmental labelling schemes in Europe. 

The government is scrapping plans to introduce a green taxonomy. It has confirmed, however, in its new Financial Services Growth and Competitiveness Strategy, that it will support the growth and integrity of the transition finance market, voluntary carbon and nature markets, transition planning and UK sustainability reporting standards. The government has also reiterated plans to table legislation, later this year, for ESG ratings providers regulation. 

Water infrastructure reform

The government has said that the UK faces water shortage in the next decade. It’s taking steps to secure water supplies. As an immediate step, it’s convened a National Drought Group, following the driest spring since 1893. It’s also announced that it has secured over £104 billion of private sector investment to fund essential infrastructure, including 9 new reservoirs, and to cut leakage by 17% over the next 5 years. In related news, the Cunliffe Review Independent Water Commission has published its Interim Report which proposes “major and ambitious change” across: strategic direction and planning; legislation; regulatory reform; company structures, ownership, governance and management; and infrastructure and asset health. Water stress is beginning to affect businesses across all sectors, in the UK and internationally. See our briefing on water stress and environmental and commercial concerns, for information and practical advice. 

The Environment Agency has published the National Framework for Water Resources 2025: water for growth, nature and a resilient future; and the House of Commons has published a report highlighting a failing water sector in need of “root and branch reform”. The European Commission has also published the European Water Resilience Strategy. 

On 28 May 2025, Ofwat handed out its largest-ever fine, £123 million, to Thames Water, for breach of rules governing wastewater management and unjustified payment of dividends. A parallel investigation by the Environment Agency (EA) is still ongoing. The EA has also launched a new unit to bolster enforcement efforts. Legal commentators are suggesting that the Thames Water fine, and the direction of travel in relation to environmental enforcement generally, is a warning – not only for the water/waste industry, but for companies across all sectors – that ESG compliance is a priority for the UK’s enforcement agencies. In line with that trend, Ofwat has now issued South West Water with a £24 million enforcement package, and the EA has been given the largest ever budget to deal with water pollution. 

International climate finance

On 15 May 2025, the Emerging Markets and Developing Economies Investor Taskforce was launched to explore recommendations from ‘The UK as a Climate Finance Hub‘ report, unlock capital to address climate change risks, and facilitate the flow of finance into emerging markets. 

 On 16 May 2025, the UK government published International Climate Finance guidance on integrating gender equality, disability and social inclusion into programme design and delivery. 

We’ve reported previously on the Milieudefensie et al v Shell Plc (or, the Royal Dutch Shell case). In November 2024, Shell ‘won’ its appeal against a court order requiring it to reduce its emissions by 45%. But the Dutch Court of Appeal’s decision is more nuanced than headlines may suggest. In fact, the decision means that businesses have a duty which likely goes beyond just complying with existing laws and regulations. Rather, compliance should be seen as the starting point, rather than the goal, of corporate climate responsibility. In the latest iteration of its green litigation ‘campaign’, Milieudefensie is now bringing an action against Dutch Bank ING. It alleges that, as a large corporation, ING owes the Court of Appeal-confirmed duty of care to mitigate its climate change impact, and its inadequate climate policy amounts to a breach of that duty. The policy is allegedly inadequate in terms of: ING’s level of emissions; the level of emissions in the sectors it finances; its financing of companies involved in oil and gas projects; and its failure to require clients to advance robust climate plans. The claim is extremely far-reaching – it’s definitely one to watch. It’s an example of the trend towards green claims being used to advance climate goals, and an example of climate-related claims prompting jurisdictions to consider whether funders should be liable to account for climate (and other) issues through their choice of investments. The practical advice set out in our earlier briefing is perhaps even more important today. Businesses may also want to check out our more recent advice in relation to the Corporate Sustainability Due Diligence Directive and climate transition planning. 

Corporate/corporate reporting

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) 

• A new proposal to establish a voluntary sustainability assurance registration regime. 

The consultations are open until 17 September 2025. 

The European Securities and Markets Authority has published its Final Report on the integration of sustainability risks and disclosures in the investment fund sector. 

On 17 June 2025, Companies House published its Business Plan: 2025-26, setting out how it intends to progress its strategic goals for 2025-30. Companies House expects to publish its full 2025-30 strategy later in 2025. 

The government has published draft regulations which will extend the types of personal information an individual can request that Companies House makes unavailable (including signature, date of birth, residential address) on the public register. 

Economic Crime and Corporate Transparency Act 2023

The Department for Business and Trade has published its second progress report on the implementation of aspects of the Economic Crime and Corporate Transparency Act 2023 (ECCTA). Key updates include the Companies House roll out of voluntary identity verification (IDV) procedures to enable individuals to verify their identity in advance of mandatory IDV coming into effect in autumn and its new facility for firms to register as an authorised corporate service provider (enabling them to conduct IDV for individuals). Upcoming ECCTA IDV developments at a glance: 

• Mandatory IDV for all new directors and persons with significant control (PSCs) – Autumn 2025 

• 12-month transition to mandatory IDV for existing directors and PSCs – Autumn 2025 – Autumn 2026 

• Compulsory IDV for anyone filing documents at Companies House on a company’s behalf – Spring 2026. 

Also in line with the ECCTA: 

• Companies House has announced it will mandate software-only filing for company accounts (including dormant accounts) software from 1 April 2027 

• Draft regulations have been published which will remove requirements to keep a register of directors, a register of directors’ residential addresses, a register of secretaries, or a register of PSCs once the relevant provisions in the ECCTA and these regulations are brought into force 

• Draft regulations have been published applying the company law provisions on IDV to all new and existing members and PSCs of LLPs; and 

• Regulations have been made applying the provisions on IDV to the directors and PSCs of unregistered companies, and to directors of overseas companies with establishments/branches in the UK. 

The government has published regulations to establish PISCES – an innovative new type of stock market for private companies. The FCA has set up a website to support those applying to run a PICES platform. 

The FCA is overhauling the UK prospectus regime to make it easier for listed companies to raise capital. The FCA is expected to publish the final rules this summer.

On 3 June 2025, the Financial Reporting Council (FRC) published the UK Stewardship Code 2026. Key features of the new code, effective from 1 January 2026 include: an enhanced definition of stewardship, focusing on creating long-term sustainable value for clients and beneficiaries; reduced and more flexible reporting; targeted principles for asset owners, asset managers, proxy advisors, investment consultants, and engagement service providers; and new guidance for effective implementation. The FRC has also published draft guidance to help organisations when reporting on the Code.  

The FRC has published a paper highlighting strong stakeholder support for digital reporting. In related news, the FRC also recently launched a digital reporting viewer, which is open to the public and free to use. 

On 5 June 2025, the GC100 and Investor Group published a revised version of its Directors’ Remuneration Reporting Guidance. 

See our recent update on the fast approaching failure to prevent fraud offence.  

In force from 30 June 2025, The Register of Overseas Entities (Annotation) Regulations 2025 are intended to improve the quality of information published on the register where: 

• An overseas entity has been dissolved, wound up or ceases to exist in its home jurisdiction; 

• An overseas entity fails to comply with a notice issued under section 1092A of the Companies Act 2006; or 

• A verifying agent is found not to be supervised under the 2017 Money Laundering regulations. 

The government has published the conclusions from a cross-government review of UK sanctions implementation and enforcement and provided an update on whistleblowing legislation to strengthen implementation and enforcement.   

We’ve reported previously on publication of the EU’s Omnibus Simplification Package – a proposal to simplify sustainability due diligence and reporting. Continuing the theme of simplification, the European Commission is considering revising the Sustainable Finance Disclosure Regulation to streamline and reduce disclosure requirements. The European Financial Reporting Advisory Group Sustainability Reporting Board has also published its work plan, which focuses on simplification. The clear direction of travel is towards striking the right balance for corporates between fostering transparency and sustainability, and reducing the reporting burden. 

Data protection/cybersecurity/tech and digital

 The Data (Use and Access) Act has passed into law. The Information Commissioner’s Office has published guidance to support organisations and the public as the changes are introduced. They will be phased in between now and June 2026. The government published a summary of the data protection and privacy changes. 

The National Cyber Security Centre has launched its cybersecurity culture principles – guidance to support organisations in creating the right cultural conditions to enable their people to carry out the right security behaviours. 

How to use AI in your organisation

The ICO has launched a new AI and biometrics strategy to ensure organisations are developing and deploying new technologies lawfully and to support with innovation.      

Ofcom has published its strategic approach to AI, setting out how it’s supporting safe innovation and use of AI across the sectors it regulates.  

The Financial Times reported, on 4 July 2025, that Hitachi Energy’s Head is calling for rules to alert utilities to fluctuations in data centre demand which could destabilise global electricity supply. Huge surges in power demand, occurring while data centres train AI models, are challenging electricity supply. The International Energy Agency has predicted that data centre electricity consumption will double to 945 terawatt-hours by 2030 – more than the power currently used by an entire country such as Japan! The FT reports that Ireland and the Netherlands have already restricted the development of new data centres due to concerns about their impact on the electricity network. Hitachi Energy is at the centre of a global shortage of power transformers that are essential for adjusting voltage. It plans to invest $6bn to increase production capacity and hire an additional 15,000 workers by 2027 to meet orders. 

As well as our AI literacy briefing, we’ve released a webinar and AI impact checklist, to help businesses understand and comply with EU AI regulatory requirements. 

Commercial/general

The government has recently published two key documents impacting infrastructure and development across the UK: the Modern Industry Strategy (with supporting Sector Plans currently covering Advanced Manufacturing, Clean Energy Industries and Digital and Technologies); and CP1344 UK Infrastructure: A 10 Year Strategy. The Modern Industrial Strategy is part of the government’s wider ‘Plan for Change’ and sets the economic and strategic vision. CP1344 lays physical and digital groundwork to support/help realise that vision, with specific focus on transport and logistics, energy networks, housing and planning, digital infrastructure, and environmental resilience. 

The government has published its Financial Services Growth and Competitiveness Strategy. As well as the sustainability reporting measures referred to above, the Strategy sets out five key areas of focus: delivering a competitive regulatory environment; harnessing the UK’s global leadership in financial services; embracing innovation and leveraging Fintech; retail investment and capital markets; and financial services skills and talent. 

See our recent article on the EU Accessibility Act, mentioned in one of our previous updates. 

The EU is in the late stages of negotiating its proposed Anti-Corruption Directive. We don’t yet have a timescale for finalisation, but it’s one to watch because UK companies will need to understand any divergence between the UK Bribery Act 2010 and future legislation implementing the Anti-Corruption Directive across EU Member States. 

From 29 May 2025, drivers and businesses will no longer need to submit a planning application to install public or private .. 

The Competition and Markets Authority (CMA) has launched a market study into the civil engineering sector. The CMA has said it will focus on how to improve the design, planning, and delivery of key road and railway infrastructure in the UK in support of the government’s growth mission and 10 year infrastructure strategy. It intends to conclude the review within 10 months. Our market-leading Competition team has extensive experience of advising businesses on CMA market studies and investigations. One to watch. 

Enforcing the Green Claims Code

Consumer body Which? has published research finding widespread non-compliance with the CMA’s Green Claims Code. Of 1,000 online product listings from popular UK retailers containing green claims, Which? found that 84% failed at least one of the Code’s principles and 62% failed multiple principles. CMA enforcement action to date has been limited to specific sectors, but with the new power under the Digital Markets, Competition and Consumers Act 2024, to directly enforce consumer law, the CMA may now place greater emphasis on enforcement. See our resources on greenwashing and the wider washing phenomenon for information and advice.  

On 10 July 2025, without prior warning, the government proposed legislation banning upward only rent reviews, via the English Devolution and Community Empowerment Bill. The proposed ban would apply to new and renewal leases, but not to the continuing enforceability of rent review provisions in existing leases, nor to leases granted under agreements for lease entered into before the ban becomes effective. The Bill doesn’t provide for contracting out of the ban on upward only reviews. It has provoked concern within the commercial real estate investment community. The Bill also supports the government’s devolution ambitions, and extends powers for communities to purchase assets of community value. We’ll monitor and report on key developments. 

People

The government has released a roadmap for the implementation of the raft of new employment rights to be introduced through the Employment Rights Bill. We’ve summarised the key changes here. 

The Employment Rights Bill will also impact due diligence when preparing for the sale or purchase of a business. See our recent article for practical insights.  

Major restrictions to the sponsorship of migrant workers

The government has announced major restrictions to the sponsorship of migrant workers (notably on the Skilled Worker route), taking effect on 22 July 2025. Key changes (non-exhaustively) include: 

• Other than in limited circumstances, only roles which are classified as being skilled to degree level or above (RQF Level 6) will be capable of being sponsored from this date; and 

• General minimum salary thresholds will increase, as well as ‘going rate’ salaries applicable to individual occupation codes, for all applications (meaning individuals already sponsored will need to meet the increased salary thresholds for extension applications). 

See our briefing for further information and recommended urgent advice. 

Reviewing leave and pay for parents

The Department for Business and Trade and the Department for Work and Pensions have launched a review, including a call for evidence open until 25 August 2025, of all types of leave and pay for parents, including maternity, paternity, adoption, shared parental, neonatal care and parental bereavement leave and pay, unpaid parental leave, and maternity allowance. 

We’ve recently published an article with insights on recent ICO guidance on employee data retention. 

According to a new survey commissioned by Acas, 35% of employers believe increased productivity is the most important benefit of AI at work. Acas sets out some top tips for employers on the use of AI at work. In related news, a survey commissioned by Henley Business School found that workers are feeling optimistic but overwhelmed when it comes to AI. The survey identifies lack of training as a critical barrier to wider AI adoption. The results also suggest that concerns around job security appear to be easing, with many respondents now focusing on the practical benefits of AI.