ESG "Back to school" bulletin

It has been a busy summer for ESG related developments – including consultations on the UK’s sustainability reporting framework, updates on the extended producer responsibility regime for packaging waste, changes to the European Sustainability Reporting Standards (ESRS) and publication of the International Court of Justice’s Advisory Opinion in respect of States’ climate change obligations, among others.

In our latest bulletin, the Dentons Environment and Litigation & Arbitration teams provide an overview of key updates for you to catch up on before the Autumn term starts in earnest. Should you have any queries on any of the updates set out in this bulletin, please do not hesitate to contact us.

Regulatory Developments

UK

UK Sustainability Reporting Standards – Government consults on exposure drafts

On 25 June 2025, the UK government launched a consultation on the draft UK Sustainability Reporting Standards (SRS S1 and S2). These standards are based on the International Sustainability Standards Board (ISSB) standards published in June 2023. The consultation seeks views on their suitability for the UK, proposed amendments, and the potential benefits and costs for stakeholders.

The UK Government has not yet taken a final decision on whether to introduce mandatory reporting, and if so, which companies would be required to report. However, it is clear that if mandatory reporting is required, then the UK SRS will almost certainly be the reporting framework used.

Why introduce UK SRS?

The UK government is committed to establishing the UK as a global centre for sustainable finance.

By aligning with the ISSB’s international standards, the UK aims to provide investors and markets with consistent, comparable and decision-useful information on sustainability and climate-related risks.

What are SRS S1 & S2?

• SRS S1 sets out the general requirements for disclosure of sustainability-related financial information.
• SRS S2 focuses specifically on climate-related disclosures.

Both standards are designed to enhance transparency and accountability, building on existing UK requirements and reflecting the global baseline established by the ISSB.

Proposed amendments to ISSB standards

The exposure drafts incorporate six proposed amendments to the ISSB standards, following recommendations from two expert committees: the UK Sustainability Disclosure Technical Advisory Committee (TAC) and the UK Sustainability Disclosure Policy and Implementation Committee.

1. Removal of the transition relief that permits delayed reporting

The draft SRS S1 removes the ISSB’s transition relief (paragraph E4) that allowed delayed reporting in the first year.

This relief allowed entities to publish sustainability disclosures at a later time than their financial statements during the first year of reporting. The TAC concluded that delaying sustainability disclosures undermines the principle of “connectivity” with financial statements and other narrative reporting.

Given that many UK entities have already been required to produce climate-related disclosures aligned with the TCFD since 2022, the government considers that UK entities are well placed to report on the same timetable as their financial statements, so the relief has been removed.

2. Extension of the transition relief that allowed a ‘climate-first’ approach

IFRS S1 includes a transition relief (paragraph E5) which permits reporting entities to defer the disclosure of sustainability-related risks and opportunities beyond those on climate by an additional year. This transition relief is planned to be extended from one to two years.

3. Removal of mandatory use of GICS

IFRS S2 includes requirements on financed emissions, which are defined as the “portion of gross greenhouse gas emissions of an investee or counterparty attributed to the loans and investments made by an entity to the investee or counterparty”. One element of this is the requirement to use the Global Industry Classification Standard (GICS) 6-digit industry-level code.

Now, it is recommended that entities can use any appropriate industry classification standard, not just the GICS. This change reflects the TAC’s view that requiring use of GICS could impose unnecessary additional cost and may not align with firms’ existing reporting practices. Allowing flexibility to use other classification systems is expected to reduce costs and improve connectivity with existing reporting.

4. Removal of ‘effective date’ clauses

Both ISSB Standards currently include a statement on the effective date: “An entity shall apply this Standard for annual reporting periods beginning on or after 1 January 2024. Earlier application is permitted.” Now, the standards will not specify an effective date. Instead, this will be set by future rules or regulations, allowing voluntary adoption of the SRS by entities in the interim.

5. References to the SASB materials

The requirement to “refer to and consider” the applicability of the Sustainability Accounting Standards Board (SASB) materials is softened to “may refer to and consider”, reflecting stakeholder feedback on the SASB materials.

6. Treatment of transition reliefs

Both IFRS S1 and IFRS S2 include transition reliefs, with different lengths and objectives. The government proposes to amend the wording on reliefs so that they are explicitly linked to the introduction of any mandatory reporting requirements. This proposed amendment would not preclude entities from using the reliefs if they choose to report on a voluntary basis.

Next steps

• The consultation will close on 17 September 2025.
• The consultation will inform the UK government’s decision on whether to endorse the draft standards and make them available for voluntary use, with a view to publishing final versions of SRS S1 and S2 in Autumn 2025.
• The decision on whether to introduce mandatory reporting against the UK SRS (via the Companies Act 2006) for economically significant entities will be assessed separately.
• The FCA is also expected to consult separately on requiring UK SRS for listed companies.

Government consultation on transition plan requirements

The UK government has launched a consultation on a framework for requiring UK-regulated financial institutions and FTSE100 companies to implement credible transition plans aligned with the 1.5°C goal of the Paris Agreement. There is currently no indication on timing as to when this requirement would be in force.

This consultation forms part of the government’s broader sustainability reporting agenda, running in parallel with consultations on the draft UK Sustainability Reporting Standards (UK SRS) and development of an oversight regime for assurance of sustainability-related financial disclosures.

What are the benefits and use cases for transition plans?

The UK’s Transition Plan Taskforce (TPT) has recommended the following key elements of a transition plan:

• Decarbonising an entity – ambitions and actions to reduce GHG emissions in the entity’s own operations and the value chain
• Ambitions and actions to enhance resilience to climate change and respond to the risks and opportunities arising from the transition to a low-GHG emissions economy
• Contributing to an economy-wide transition, using the levers and capabilities that the entity has available

The Consultation Document identifies the key use case for transition plans as supporting the deployment of transition finance, improving corporate transparency and assisting the credibility of transition finance by limiting the risk of actual or perceived greenwashing.

Implementation options

The Government is seeking feedback on the following issues regarding the implementation of transition plans:

• Adoption of the TPT’s recommended “Five Disclosure Elements”, which comprise (1) Foundations and Strategic Ambition of the plan; (2) implementation strategy; (3) engagement strategy; (4) metrics and targets and (5) governance
• Whether the requirements of the current draft UK SRS 2 provide useful information about the contents of transition plans
• Whether entities should explain if they have not disclosed a transition plan in accordance with UK SRS 2, or whether transition planning should be integrated into annual reporting
• The application of materiality thresholds (financial or impact) to any mandatory requirement to disclose transition planning information
• Whether entities should be required not only to disclose but also to implement their transition plans
• Net zero alignment, including setting interim targets and alignment with 2050 trajectories
• The role of climate adaptation in transition plans
• The integration of nature and biodiversity considerations in transition plans
• The potential impact on businesses in the supply chains of “in-scope” entities
• Legal risks and implications of the above approaches

Next steps

Consultation on transition planning is open until 17 September 2025.

This consultation, along with the parallel consultation processes on the draft UK SDRs and assurance requirements, are the first step in developing a UK sustainability reporting framework.

The Government intends to carry out further phases of consultation, covering proposals for sustainability reporting and assurance in more detail.

Subject to future decisions, the Government intends to provide a “roadmap” of any further requirements in subsequent phases of consultation.

Extended Producer Responsibility regime for packaging waste

The new Extended Producer Responsibility for packaging regime came into force on 1 January 2025, significantly expanding reporting and financial obligations for businesses producing packaging waste. The first invoices will be issued in October 2025.

Who is in scope?

The regime places reporting obligations on all businesses that produce more than 25 tonnes of packaging with a turnover of at least £1 million. Businesses with a turnover above £2 million and producing more than 50 tonnes of packaging (“large producers”) must also pay a waste management fee to cover local authority recycling and disposal costs.

Fees

The first waste management fee invoices will be issued by the scheme administrator (PackUK) on 1 October 2025, based on packaging data collected between 1 July and 31 December 2024.

Base fees for 2025 have now been published by DEFRA and are as follows (in £ per tonne):

• £266 for aluminium
• £461 for fibre-based composite
• £192 for glass
• £196 for paper/card
• £423 for plastic
• £259 for steel
• £280 for wood
• £259 for other materials

Producers have an ongoing obligation to continue reporting their packaging data through the RPD online portal. Large producers should report data for the period 1 January to 31 June 2025 by 1 October 2025.

In-scope businesses should ensure all packaging data for 2024 has been accurately submitted via the Report Packaging Data (RPD) portal. Compliance schemes can support businesses in managing reporting and recycling obligations, and fee reductions are available for businesses using more sustainable packaging.

Looking ahead, from 2026, modulated fees will be introduced to incentivise the use of recyclable packaging through a “red, amber, green” rating system, with red being the least recyclable and green being the most recyclable.

Next steps

Businesses should prepare for invoicing in October 2025 and review the DEFRA guidance on 2025 base fees and methodology. For more information, see the DEFRA guidance here and our previous article on the regime here.

Failure to Prevent Fraud offence now in force

As of 1 September 2025, the UK’s new corporate offence of Failure to Prevent Fraud (FTP) is in force. Dentons has developed a practical FTP Toolkit to help organisations assess FTP readiness, identify compliance gaps and take proportionate action – find out more here.

EU

EU Omnibus: ESRS changes and timetable for further developments

On 3 April 2025, the European Parliament approved significant changes to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) under the European Commission’s Omnibus Package (introduced in February 2025). The reforms aim to reduce regulatory burdens and provide companies with additional time to prepare for compliance.

The Omnibus Package includes:

• A directive amending the CSRD and CSDDD
• A draft delegated act amending the Taxonomy Disclosures and Climate/Environmental Delegated Acts (subject to public consultation)
• A regulation amending the Carbon Border Adjustment Mechanism Regulation
• A regulation amending the InvestEU Regulation

For more details on the proposed changes to the CSRD and CSDDD, see our previous article here.

ESRS revisions and consultation

In line with the Omnibus reforms, the European Financial Reporting Advisory Group (EFRAG) published revised Exposure Drafts of the ESRS on 31 July 2025. The revisions introduce major simplifications:

• 57% fewer mandatory datapoints
• 68% fewer total disclosures (mandatory and voluntary)
• 55% shorter standards overall

Changes include a streamlined double materiality assessment, reduced overlaps, clarified language and removal of voluntary disclosures. Reliefs have been added where reporting would cause undue cost or effort.

The consultation runs from 31 July to 29 September 2025, with EFRAG to deliver final technical advice to the Commission by 30 November 2025. Outreach events will take place in September and October, alongside field tests and a cost-benefit analysis.

Next steps

• Member States must transpose Omnibus reforms into national law (note that local timelines and requirements may vary).
• EFRAG’s final advice on the revised ESRS is due on 30 November 2025, after which the Commission will adopt simplified standards.

EUDR – reminder on upcoming 2025/2026 start dates

The EU Deforestation Regulation (Regulation (EU) 2023/1115) (EUDR) entered into force on 29 June 2023. The EUDR is a landmark measure to ensure that products placed on or exported from the EU are “deforestation-free” and produced legally. The first compliance dates fall in December 2025, so it is important that in-scope companies understand their obligations.

The EUDR applies to seven key commodities: cattle, cocoa, coffee, oil palm, rubber, soya and wood, as well as a wide range of derived products listed in Annex I.

Who is in scope?

The EUDR applies to:

• Operators: those who first place relevant products on the EU market or export them.
• Traders: those who make relevant products available on the market.

Non-SME traders are subject to most of the same obligations as operators, while SME traders face lighter requirements (traceability and information-keeping).

Prohibition

Article 3 of the EUDR prohibits the placing or making available on the market, or exporting, of in-scope products unless they:

• Are deforestation-free (the products contain, have been fed with, or have been made using, relevant commodities that were produced on land that has not been subject to deforestation after 31 December 2020);
• Have been produced in accordance with the relevant legislation of the country of production; and
• Are covered by a due diligence statement confirming that the operator/trader has carried out due diligence in accordance with the EUDR and that they found “no or negligible risk” of non-compliance with the Article 3 requirements.

Key obligations for businesses

The main obligations require that before placing relevant products on the market (or making them available in the case of non-SME traders) or exporting them, operators and traders must:

• Carry out due diligence to prove compliance with the Article 3 Requirements.
• Submit a due diligence statement to the competent authorities, confirming that the products comply with the Article 3 Requirements.
• Establish and maintain a due diligence system to ensure relevant products are not made available on the market when prohibited by the EUDR, and publicly report on the actions taken under the due diligence system.

Due diligence obligations

Operators and non-SME traders must:

• Collect information and documentation on relevant products, the commodity, the supplier and country of production (including geographic co-ordinates for strict traceability).
• Conduct a risk assessment, considering various criteria including the level of risk that the Commission has assigned to the country of production.
• Adopt risk mitigation measures if any non-negligible risk is identified.

Simplified due diligence

In May 2025, the Commission published its country risk classification, assigning 140 countries as low risk, four as high risk and 50 as standard risk. Where products are sourced exclusively from low-risk countries, operators may conduct simplified due diligence, which exempts them from risk assessment and mitigation obligations but still requires:

• Collection of geolocations and conclusive information showing products are deforestation-free and legally produced.
• Traceability to the plot of land, ensuring no mixing with non-compliant or high-risk commodities.
• Submission of a due diligence statement.

SME operators and traders are exempt from full due diligence where relying on products already covered upstream. They must, however, provide reference numbers of due diligence statements they rely on.

Updated guidance and clarifications

The Commission published updated Guidance and FAQs in April 2025 which provide key clarifications on the application of the EUDR, including:

• In-scope products and scope of due diligence for composite products.
• A packaging exemption which has been clarified for single-use and reusable packaging used solely to protect/carry other products.
• Downstream non-SME operators and traders – FAQs simplify what non-SMEs must do to “ascertain” upstream due diligence.

Penalties for non-compliance

Penalties for non-compliance with the EUDR will be laid down under the national law of each Member State. The EUDR provides for significant penalties for non-compliance, including:

• Fines of at least 4% of annual EU turnover
• Confiscation of products
• Exclusion from procurement and funding
• Temporary bans on placing/making available/exporting relevant products

Next steps

The EUDR’s obligations are now approaching, with staggered application depending on company size:

• 30 December 2025: large and medium-sized operators and traders must comply.
• 30 June 2026: micro and small undertakings must comply.

In preparation, in-scope businesses should:

• Map supply chains and identify high-risk commodities.
• Engage suppliers to secure geolocation data and traceability.
• Implement due diligence systems, including internal policies, IT tools and risk controls.
• Familiarise themselves with the Commission’s April 2025 Guidance, FAQs and country classification list.

Litigation Developments

ICJ issues important advisory opinion clarifying States’ climate change obligations

In July 2025, the International Court of Justice (ICJ) issued its long-awaited advisory opinion in Obligations of States in respect of Climate Change (the Opinion), as requested by the United Nations General Assembly. The Opinion considered States’ international law obligations to protect the climate and environment from anthropogenic greenhouse gas emissions, particularly in the context of developed vs developing States and vulnerable States, and the legal consequences of those obligations in the case of proven damage.

In summary, the key points from the detailed Opinion are:

1. While the UN Charter and well-known climate change treaties such as the 1997 Kyoto Protocol and the 2015 Paris Agreement form part of the most directly applicable law governing States’ climate-related obligations, customary international law and environmental and human rights treaties are also binding on all States whether they have ratified them. Notably, States’ customary obligations may require conduct beyond that required by treaties.
2. States have obligations to mitigate, adapt and cooperate on climate change having regard to both internal and transboundary effects. States are accordingly required to exercise due diligence regarding the activities of private actors.
3. Failure to take the necessary measures to protect the climate from emissions (including through fossil fuel production and the provision of fossil fuel subsidies) could amount to an intentionally wrongful act which is attributable to a State under international law. The wording here is key, insofar as the relevant act is not the emission of greenhouse gases itself but breaching applicable international law. The legal consequences of such an act could include an obligation to terminate the wrongful conduct or to pay compensation as a form of reparation (in the case of proven damage) and could pave the way to litigation between States.
4. Causation is not required to establish State responsibility but is necessary to trigger reparations. The ICJ broadly described causation having regard to two elements: (i) whether a climate event or trend can be attributed to anthropogenic climate change (which the Opinion suggests is possible based on the current state of scientific evidence); and (ii) whether a particular climate harm can be attributed to a particular State (i.e. a “sufficiently direct and certain causal nexus” between the State and the harm, which remains the key unanswered question).

While the Opinion is iterative and not legally binding on States, it nonetheless serves as authoritative guide from the principal judicial organ of the UN and will likely influence how States – and their domestic courts — approach issues such as climate policy and decarbonisation commitments, causation and attribution. The Opinion also makes clear that States’ obligations extend to the conduct of corporates and other private actors, though it remains to be seen whether this will translate into any concrete regulatory or legislative measures at a domestic level. For further details, see our longer article here.

Australian court rejects novel duty to protect indigenous community from climate change harm

The Federal Court of Australia has recently found in Pabai v. Commonwealth of Australia (No 2) that the Commonwealth did not owe a duty to protect an indigenous group and its way of life from the effects of climate change.

Two elders from the Torres Strait Islands claimed on behalf of their communities that the Commonwealth owed concurrent duties of care to set emissions reduction targets in line with the best available science and to fund adaptation measures adequately.

Although the court made several factual findings in the claimants’ favour, including that the Commonwealth’s 2015, 2020 and 2021 emissions reduction targets were not consistent with Australia’s international law obligations under the Paris Agreement, the claim failed on a number of legal grounds.

As an initial matter, the court decided that it would be inappropriate to impose a duty of care where this would require courts to evaluate the Commonwealth’s decision-making in matters of core government policy. The nature of the relationship between the Commonwealth and the Torres Strait Islanders also did not justify such a duty: notably, the Commonwealth had minimal control over the risk of harm to the claimants from the impacts of climate change. As to compensable damage, the court rejected the claimants’ argument that they should be compensated for loss of the ability to practise their customs and traditions, noting that cultural loss was not an actionable harm under the Australian common law of negligence.

In its concluding remarks, the judge commented that the claim failed not because there was no merit to the factual allegations, but rather because the current state of Australian common law “provides no real or effective avenue” for obtaining redress in this type of climate change litigation. The decision is likely to be a barrier to future climate change claims in tort against both states and corporates under Australian law under this cause of action.

Court refuses permission to appeal finding of English jurisdiction over Brazilian environmental claim

In the latest example of the English courts accepting jurisdiction over ESG claims relating to the conduct of overseas group companies, the English Court of Appeal recently refused two UK companies permission to appeal the High Court’s finding that the English courts had jurisdiction to hear environmental claims brought against them in connection with the conduct of a foreign subsidiary.

In Da Silva and others v. Brazil Iron Ltd and another, 103 Brazilian individuals (including from certain protected indigenous communities) claimed against two UK companies in England in respect of alleged environmental damage, property damage and air and noise pollution caused by the iron ore mining activities of a Brazilian subsidiary. The defendants challenged the jurisdiction of the English courts on the basis that the proper forum was Brazil.

Applying the legal test established in Spiliada, the High Court found that an assessment of territorial factors pointed to Brazil as being the forum with which the dispute was most closely connected: the key issues in the case related to events which took place in Brazil, Brazilian law applied to the dispute and the claimants (and at least some witnesses and experts) were located in Brazil. However, notwithstanding these connecting features, the possibility that the claimants would not be able to obtain third-party litigation funding to bring their claims in Brazil – particularly given the complexity and therefore greater expense of the claims – gave rise in the court’s view to a real risk that substantial justice would not be achieved in Brazil, and therefore it was appropriate in these circumstances to allow the claims to proceed in England. On 1 August 2025, the Court of Appeal refused the defendants’ application for permission to appeal, meaning the claim will now proceed in the English High Court.

This is not the first time the English courts have accepted jurisdiction over a claim having regard to the availability of litigation funding in the UK where the claim is otherwise more closely connected to an overseas forum. UK companies with overseas operations should bear in mind the English courts’ expansive approach to jurisdiction, which is itself an incentive for the pre-eminence of litigation funding in the UK. As with the Court of Appeal’s recent decision in Limbu v. Dyson (which we discuss in detail here), the court rejected undertakings offered by the defendants to mitigate concerns regarding the availability of funding in the country where the alleged conduct occurred, similarly citing the potential for a conflict of interest to arise and highlighting the degree of control the defendants would otherwise have over the claimants’ case.