ESG Knowledge Update | March 2026

Sustainability and climate reporting

Final UK Sustainability Reporting Standards published

The UK government has published final UK Sustainability Reporting Standards - UK SRS 1 and UK SRS 2 - based on the standards issued by the International Sustainability Standards Board (ISSB) in June 2023.

The standards are available for voluntary use immediately, though any mandatory reporting requirements will be introduced separately through regulation or legislation, at which point an effective date will be set. The transitional relief that had been proposed in the consultation, which would have permitted delayed reporting in the first year, has been removed. As reported previously, the Financial Conduct Authority (FCA) is currently consulting on aligning the sustainability reporting obligations of UK listed companies with UK SRS.

Following consultation, a number of amendments have been made to the standards as originally proposed. These include changes to the reliefs relating to non-climate reporting and Scope 3 greenhouse gas emissions (with the standards no longer specifying how long those reliefs may apply), the removal of the requirement to use the Global Industry Classification Standard, making references to Sustainability Accounting Standards Board standards optional rather than mandatory, and the addition of a mechanism for financial institutions to explain where they have been unable to comply with financed emissions disclosure requirements. The standards also incorporate amendments made to IFRS S2 by the ISSB in December 2025.

Businesses should begin familiarising themselves with UK SRS 1 and UK SRS 2 now, ahead of any future mandatory regime. Those in the financial services sector should pay particular attention to the new mechanism addressing financed emissions disclosure, and all in-scope organisations should assess what changes the amended reliefs mean for their reporting planning.

EU Omnibus simplification package: directive amending CSRD and CSDDD enters into force

Directive (EU) 2026/470, implementing the First Omnibus simplification package, has been published in the Official Journal of the European Union. The directive amends the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), with the aim of streamlining sustainability reporting and due diligence obligations for businesses.

The directive was published in the official journal on 26 February and came into force on 18 March. Member states have until 19 March 2027 to transpose its provisions into national law, with the exception of Article 4 on the level of harmonisation, which must be transposed by 26 July 2028.

Under the revised CSRD, the amended scope thresholds of 1,000 employees and €450 million net annual turnover are confirmed, as are the simplified reporting requirements and the voluntary nature of sector-specific reporting. Under the revised CSDDD, the narrowed scope applying only to businesses with more than 5,000 employees and €1.5 billion net annual turnover is confirmed, along with the removal of the climate transition plan obligation and a cap on penalties at 3% of worldwide turnover.

Businesses should ensure they are aware of which requirements apply to them and when they come into force. The publication of the directive marks a significant step in the EU's efforts to reduce the regulatory burden on companies, and in-scope businesses should now review their reporting and due diligence frameworks in light of the confirmed thresholds and timelines.

Council of the EU formally adopts regulation on greenhouse-gas emissions from transport services

The Council of the EU formally adopted the Count Emissions EU Regulation on 26 February 2026, following the informal trialogue agreement reached in November 2025. The European Parliament is expected to adopt the Regulation at second reading without further amendments at its plenary session of 27–30 April 2026, after which it will enter into force.

The regulation establishes a common methodology for calculating the greenhouse-gas emissions of transport services. It applies where companies choose to publish this information or are required to share it for contractual purposes; for example, where a shipper requests emissions data from a carrier as part of a procurement or reporting process.

Businesses that procure or provide transport services – including logistics operators, freight forwarders, shippers and carriers operating in the EU – should begin assessing how the common methodology will interact with their existing emissions reporting frameworks, including those under the CRSD.

Circular economy

European Commission seeks feedback on simplification of circular economy legislation

The European Commission is inviting feedback on its proposed Environmental Omnibus, a package of proposals to simplify EU legislation focusing on industrial emissions, the circular economy and environmental assessments.

Amongst other matters, the proposals include some administrative simplification of the EU's extended producer responsibility (EPR) rules by removing the need to appoint an authorised representative in some cases. These changes represent a stepping stone to more profound simplification under a Circular Economy Act which will propose reducing the extent of reporting under the EPR regime and simplifying it for non-EU producers.   

The feedback period runs from 12 March to 7 May and the results will be presented to the European Parliament and Council with the aim of informing the legislative debate.

Supply chain transparency

UK launches technical consultation on Carbon Border Adjustment Mechanism secondary legislation

The UK government has opened a technical consultation on the draft secondary legislation for the Carbon Border Adjustment Mechanism (CBAM), which will come into effect on 1 January 2027. The consultation runs until 24 March 2026 and seeks stakeholder feedback on the drafting to ensure the regime operates as intended.

The draft secondary legislation covers administrative requirements including registration for the CBAM, tax returns and required content, reimbursement arrangements, weight of CBAM goods, and record-keeping. The CBAM will place a carbon price on specified goods imported to the UK from sectors at risk of carbon leakage, covering aluminium, cement, fertilisers, hydrogen, and iron and steel sectors.

UK importers of goods from these sectors and downstream producers using these goods in their supply chains should review the draft legislation together with the CBAM policy summary. Responses should be sent to HMRC by 24 March.

UK-EU SPS Agreement: government sets out scope and asks businesses what they need

The UK government has published further details on the proposed UK-EU Sanitary and Phytosanitary (SPS) Agreement, originally agreed in principle on 19 May 2025 and expected to enter into force in mid-2027. The agreement will require UK businesses to align with EU SPS legislation across a wide range of areas, including food and feed safety, food labelling, nutrition, organics, marketing and compositional standards, plant and animal health, pesticides and biocides, and veterinary medicines.

The government has also launched a six-week call for information, running from 9 March to 23 April, to gather stakeholder feedback on the support and guidance businesses need to prepare. Sector-specific guidance is expected from May this year, alongside webinars, workshops and a new stakeholder advisory board.

The agreement will affect businesses across the agri-food supply chain – including farmers, food manufacturers, hauliers, importers and exporters, retailers and veterinarians – all of whom will need to assess what changes are required to their processes, certification, labelling and IT systems. Businesses should respond to the call for information before 23 April, engage with their trade bodies and sign up for Defra email alerts to stay up do date.