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17 October 2025

Sustainability: Insights For In-House Counsel - Autumn 2025

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Travers Smith LLP

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It remains important for all businesses to follow the progress of the various sustainability reporting proposals across the globe, including the EU's Omnibus...
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1. Sustainability reporting: keeping track

It remains important for all businesses to follow the progress of the various sustainability reporting proposals across the globe, including the EU's Omnibus (or "Stop the Clock") Directive and its impact on CSRD and CS3D, and the UK's own proposed new framework, US SRS. For more on these and other key proposals, see below.

  • CSRD and CS3D: The substantive amendments to the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CS3D) introduced by the first Omnibus package continue their journey through the EU legislative process.

The Council of the EU announced in June 2025 that it had agreed its negotiating position, with the European Parliament due to vote on its own position in October. Once both co-legislators have finalised their respective positions, inter-institutional negotiations will commence with a view to finding a common agreement.

Many countries have brought into force legislation to implement the Omnibus Directive, providing certainty to reporters in waves 2 and 3 of CSRD (large companies/groups and listed SMEs) that they will not have to report in the next two years, as originally expected.

  • ESRS: Separately, simplified drafts of the European Sustainability Reporting Standards (ESRS), published in July, would reduce the number of datapoints to be reported under CSRD. The public consultation on these drafts is now closed.

  • US/EU Framework Agreement: In August 2025, the United States and the European Union announced a Framework Agreement on Reciprocal, Fair, and Balanced Trade. As part of this Framework Agreement, the EU has committed to ensuring that CS3D and CSRD will not unduly restrict transatlantic trade, and it will work to address US concerns regarding the imposition of CS3D requirements on companies of non-EU countries. For our analysis of the "Washington effect" currently influencing EU policymaking, see our briefing.

  • More on Omnibus: The European Commission's simplification agenda is in full swing, with further Omnibus proposals published for the batteries, chemicals, environment and circular economy sectors; in September 2025, the European Commission unofficially announced its intentions to pursue a further one year delay to the application of the Deforestation Regulation, allegedly on account of IT issues.

  • UK SRS: The UK Government recently consulted on the adoption of new UK Sustainability Reporting Standards ("UK SRS"), based closely on the ISSB framework, and the assurance of sustainability-related financial disclosures.

The adoption of the UK SRS will be the first step, with any reporting in line with the adopted standard begin initially voluntary, expected to be followed by mandatory requirements, with the FCA expected to consult on mandatory reporting for listed firms, and the Department for Business and Trade also expected to consult on mandatory reporting by "economically significant entities", potentially before year-end.

The UK Government has proposed very few changes to the underlying ISSB standards, e.g. for the first two reporting periods, entities may choose to disclose under only S2 and not S1 (i.e. "climate first reporting"). With the consultation now closed, voluntary standards are expected to be released in due course.

  • Assurance regime: The consultation package also covered the development of a regime for assurance of sustainability-related disclosures, with the FRC consulting on a draft UK version of the International Auditing and Assurance Standards Board's ISSA 5000 standard on general requirements for sustainability assurance engagements. The UK Government has not yet decided whether mandatory reporting under UK SRS would be subject to assurance, highlighting on the one hand the increased confidence that this may provide for investors, and on the other hand the significant costs associated with obtaining assurance.

  • Climate transition plans: Finally, the UK Government is also consulting on how they should fulfil their election manifesto of mandating UK-regulated financial institutions – including banks, asset managers, pension funds, and insurers – and FTSE 100 companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement. The broad consultation discusses several options ranging from the manageable "comply or explain" option, to a very challenging "adopt and implement" option. It is not yet clear when the Government will provide more detail.

For more information about these consultations, see our briefing.

2. Further amendments to the EU Carbon Border Adjustment Mechanism ("CBAM")

The proposals to amend the CBAM were discussed in our previous edition of Insights and our related briefing. In June 2025, the European Parliament and Council of the EU reached a political agreement on the proposal, which must now be formally endorsed by both co-legislators before it can enter into force.

The European Commission has also launched a public consultation and call for evidence on extending the scope of the CBAM to cover downstream products. The future proposal also seeks to introduce anti-circumvention measures and clarify rules around the calculation of actual emissions for electricity used in the production process. The consultation closed on in August 2025 with a firm proposal expected in Q4 of 2025.

3. New 'failure to prevent fraud' offence

See our related briefing in section 4 (Company law and M&A).

4. Updated Stewardship Code

Please see section 10 (Equity Capital Markets) for our briefing on the updated Stewardship Code for 2026.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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