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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.