ESG Knowledge Update | June 2026

Sustainability and climate reporting

Science-Based Targets initiative launches final version of its updated Corporate Net Zero Standard

Concluding a nearly two-year process, on 11 June 2026, the Science-Based Targets initiative (SBTi) published the final version of its Corporate Net-Zero Standard V2.0 (V2) which it is calling its most comprehensive framework for corporate climate action to date.

Companies with existing validated targets do not need to set new ones. Those targets remain fully valid throughout their target cycle, subject to the five-year review provisions. However, the companies can benefit from some of the innovations of V2 including a "best efforts" approach to implementation and a hierarchy of mechanisms, from direct emissions reductions to offsets. V2 also includes accommodations for small and medium-sized enterprises, and allows companies to set targets for different contexts including supply chains, sectors and geographies.

The V2 can be used for target validation from 1 February 2027, though the standard, transition guidance for companies which already have validated targets, and key resources needed to set targets are available now. Additional guidance to support implementation and progress assessment will be released through 2026 and beyond.

International Sustainability Standards Board to publish a nature-related disclosure practice statement

The International Sustainability Standards Board (ISSB), the body responsible for the IFRS Sustainability Disclosure Standards, has announced it will publish a new practice statement on requirements for nature-related disclosures. 

The new practice statement will complement (but not replace) the IFRS S1 (on sustainability-related risk and opportunity reporting) and IFRS S2 (on climate-related disclosures and metrics). It is intended to explain how businesses should disclose information about nature-related risks and opportunities under IFRS S1.

The ISSB aims to publish an exposure draft for public comment in October 2026, giving stakeholders the opportunity to provide feedback on the proposed requirements, including on whether an IFRS Practice Statement is the right form of standard-setting for nature-related disclosures. 

Circular economy

HMRC consults on mandatory certification for recycled plastic packaging

HMRC has launched a consultation exploring the potential introduction of a mandatory certification requirement for UK manufacturers and importers of plastic packaging containing mechanically recycled plastic, and possible changes to the evidential requirements for claiming an exemption from Plastic Packaging Tax where packaging contains at least 30% recycled plastic.

The objectives of the proposal are to mitigate the risk of fraudulent or erroneous recycled content claims, standardise evidential requirements and strengthen compliance activity. Industry concerns have been raised about the validity of some recycled plastic claims, particularly for imported packaging, with UK recyclers and trade bodies calling for third-party certification to improve transparency and fairness. 

If introduced, mandatory certification would operate via independent third-party schemes meeting minimum requirements to be set out in future legislation, with the government not proposing to prescribe a single scheme.

The consultation seeks views on the prevalence of fraud, the impacts on businesses across the plastics supply chain, how the requirement should operate in practice and potential implementation timings. It runs until 10 August 2026.

Draft Waste Tracking Regulations laid before Parliament

The draft Digital Waste Tracking (England) Regulations 2026 have been laid before Parliament for consideration. The regulations are expected to come into force from 1 October 2026, to align with the application of equivalent regulations in Wales. 

The regulations will be implemented in phases. 

Phase 1 will require operators of sites which receive "controlled waste" under environmental permits to record information about the waste and ensure it is entered into the digital tracking system. This will replace the current system of waste transfer notes and hazardous waste consignment notes. 

Phase 2 will then include additional obligations to include commercial waste received at household waste recycling centres, and track waste digitally from where it is produced to where it is received as waste. 

Supply chain transparency

European Commission consults on rules for recognising carbon prices paid in third countries

The EU carbon border adjustment mechanism (CBAM) requires EU importers of certain carbon-intensive goods to purchase certificates corresponding to the carbon price that would have been paid had those goods been produced in the EU. Where a carbon price has already been paid in the country of origin, the number of certificates to be surrendered can be reduced accordingly. 

From 13 May to 10 June, the European Commission consulted on a draft implementing regulation setting out the rules that will govern how that reduction is calculated. 

The draft regulation covers five areas: how to determine the carbon price effectively paid in a third country for the embedded emissions in each good; the conversion of carbon prices expressed in foreign currencies into euros; the methodology for calculating the resulting reduction in certificates to be surrendered; how to account for rebates or other forms of compensation that reduce the carbon price effectively paid; and the qualifications required for an independent person to certify the evidence provided by a CBAM declarant.

EU importers of in-scope goods produced in countries with a carbon pricing regime, such as the UK, should review the draft rules. Further guidance is available on the European Commission's website.

Parliamentary committee calls for faster action on 'forever chemicals' regulation

The House of Commons Environmental Audit Committee has published a report criticising the government's February 2026 Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS) Action Plan as lacking decisive action and warning that UK REACH has fallen behind the EU in restricting PFAS, commonly known as "forever chemicals" due to their persistence in the environment. 

The committee has recommended that the government introduce phased restrictions on non-essential PFAS uses from 2027 under UK REACH, taking a group-based approach to ensure that banned substances are not simply replaced with harmful alternatives, and that it require businesses to obtain approval before introducing any new PFAS substance. 

On remediation, the committee recommends applying the polluter pays principle, consulting by March 2027 on establishing a national fund for PFAS remediation, and investing in technology for safe destruction of PFAS. The report also calls for limits on PFAS in food, mandatory supply chain disclosures and use of existing EU-UK dialogue mechanisms to avoid unnecessary regulatory divergence from EU REACH. 

Manufacturers and suppliers of products containing PFAS should monitor the government's response and assess their exposure across supply chains in anticipation of potential tightening restrictions.

Council of Europe's group urges stronger enforcement in the UK on labour exploitation and supply chain transparency

The Council of Europe's Group of Experts on Action against Trafficking in Human Beings (GRETA) has published its fourth evaluation report on the United Kingdom, with significant findings for employers and businesses on labour exploitation and supply chain accountability.

High-risk sectors identified by GRETA include agriculture, care work, domestic work, hospitality, construction, fishing, car washes, nail bars, waste management, logistics, food processing and warehousing.

For more, see Regulatory Outlook May 2026.

European Commission confirms it will not be reforming REACH, the EU chemicals regime

The European Commission has confirmed that it will not review or reform REACH, the EU chemicals regime, at this point, with Commissioner Roswall citing the need for certainty and predictability in a speech to the European Parliament's Committee for Environment, Climate and Food Safety on 27 April 2026. 

The Commission has indicated it will nonetheless continue to explore ways of simplifying and modernising REACH and will bring forward initiatives to improve enforcement against non-EU compliant products and substances at borders and through more effective market surveillance. 

Those operating under EU REACH should note that while a broader reform has been taken off the table for now, enforcement activity is expected to intensify, and ongoing work on PFAS restrictions through ECHA's scientific committees continues.

Natural capital

Business leaders urged to put nature on the boardroom agenda

The Department for Environment Food and Rural Affairs (Defra) has launched a suite of new board-level resources designed to help business leaders treat nature as a strategic priority, framing investment in natural capital as a means of cutting costs, reducing risk and unlocking new growth opportunities. The resources were developed in partnership with the Council for Sustainable Business, the Green Finance Institute, the Aldersgate Group and the Institute for Sustainability and Environmental Professionals.

The materials include a boardroom briefing tailored for chairs and non-executive directors and a collection of cross-economy business case studies. These highlight that the UK's natural capital asset value is estimated at approximately £1.6 trillion, with annual ecosystem service flows valued at £41 billion. Real-world examples include Severn Trent Water's restoration of peatlands in the Peak District, which has avoided £18 million in sediment removal costs and postponed a major infrastructure upgrade by over a decade, and Canary Wharf's conversion of an unused dock into a nature-rich public space, which achieved a 55% biodiversity net gain alongside the group's strongest leasing performance in over a decade.

For boards yet to integrate nature-related risks and opportunities into their decision-making, the resources provide practical and financial grounding for doing so.