ESG Knowledge Update | May 2026

Sustainability and climate reporting

European Commission consults on simplified CSRD reporting standards and voluntary framework for smaller companies

The European Commission published two draft delegated regulations on 6 May for consultation relating to sustainability reporting standards under the Corporate Sustainability Reporting Directive (CSRD).

The first revises and simplifies the European Sustainability Reporting Standards (ESRS). It introduces a simplified materiality assessment and additional targeted flexibilities. The revised ESRS will apply for financial years starting on 1 January 2027, with an early adoption option for companies whose CSRD obligations begin in 2026.

The second establishes voluntary standards for companies with fewer than 1,000 employees on average. These sit outside the mandatory CSRD regime but are drawn into sustainability reporting through the value-chain cap, under which large in-scope companies may request sustainability data from supply chain partners. The voluntary standards provide a structured, proportionate basis for responding to those requests. They will apply to in-scope entities undertaking value chain reporting from financial years starting in 2027 and to out-of-scope companies wishing to report voluntarily from the date of entry into force.

Both consultations close on 3 June, with Commission adoption planned for this second quarter.

Circular economy

European Commission consults on digital product passport registry

The European Commission published a consultation on 27 April on its draft implementing regulation concerning the operation of the digital product passport registry under the Ecodesign Regulation 2024. Digital product passports are designed to provide easy access to digital information relating to a product's sustainability, circularity and legal compliance. The consultation closes on 27 May.

The draft implementing regulation would require verified economic operators and other verified value-chain actors to register product passports through a secure interface or application programming interface (API), with automatic checks on mandatory data, granularity and qualified electronic signatures or seals. The registry would apply across all products subject to the regulation, including batteries, toys, detergents and construction materials.

European Commission consults on exemptions from battery removability requirements

The European Commission has published a draft delegated regulation setting out additional product categories to be exempted from the requirement under the Batteries Regulation (EU 2023/1542) that portable batteries incorporated into products be removable and replaceable by the end user. For exempted products, it is sufficient that batteries are removable and replaceable by independent professionals rather than end users.

Proposed new categories include appliances designed to operate primarily in environments regularly subject to splashing water, professional medical imaging and radiotherapy devices, wireless thermometer probes specifically designed for food contact, and, until 31 July 2030, certain electric toys incorporating rechargeable batteries.

The feedback period closes on 26 May. 

European Commission publishes guidance on Packaging and Packaging Waste Regulation implementation

The European Commission has published guidance and accompanying frequently asked questions (FAQs) to support the uniform implementation of the Packaging and Packaging Waste Regulation (PPWR) across the EU. 

The PPWR entered into force in February 2025 and begins to apply from this August. It replaces the previous Packaging and Packaging Waste Directive and covers all packaging placed on the EU market, regardless of material or origin. 

The guidance clarifies key definitions including those of manufacturer, producer and importer, and addresses a range of compliance requirements including restrictions on single-use packaging formats, PFAS (per- and polyfluorinated alkyl substances) restrictions in food contact packaging from August 2026, re-use targets, recyclability requirements, extended producer responsibility obligations, and deposit and return system requirements. It also addresses packaging minimisation requirements and the empty space ratio, labelling obligations, and the extent to which Member States may introduce additional national requirements. The accompanying FAQs address practical issues raised by stakeholders since the PPWR's adoption and will be updated on an ongoing basis.

The guidance and FAQs provide important practical clarity on a regulation that will continue to be fleshed out through further implementing and delegated acts over the coming years.

EU publishes rules on permitted exceptions to ban on destruction of unsold consumer goods

New rules setting out the limited circumstances in which businesses may destroy unsold consumer products have been published in the Official Journal. Commission Delegated Regulation (EU) 2026/296, published on 22 April, sets out the permitted exceptions to the prohibition under article 25 of the Ecodesign Regulation 2024. The ban currently applies to apparel, clothing accessories and footwear, taking effect from 19 July this year for large enterprises and 19 July 2030 for medium-sized enterprises.

Destruction is permitted where a product is dangerous, unfit for purpose due to non-compliance with EU law or an unrepairable defect, in breach of intellectual property rights, or unsuitable for reuse or remanufacturing. It is also permitted where no waste treatment operator can be found, or where the product is not accepted as a donation by a social economy entity or cannot be redistributed by one.

Documentation evidencing the basis for relying on any of these derogations must be maintained and made available to competent authorities on request.

Supply chain transparency

HMRC consults on draft UK CBAM emissions calculation and verification regulations

HMRC has launched a technical consultation on the draft Carbon Border Adjustment Mechanism (Emissions and Verification) Regulations 2026 ahead of the UK CBAM's commencement on 1 January 2027. 

The draft regulations set out the process for calculating direct embodied emissions in CBAM goods, requirements for monitoring and verification of emissions data including conditions for verifiers and accreditation bodies, and record-keeping requirements. This follows an earlier consultation on the CBAM that closed in March on three other sets of draft regulations covering administrative requirements, the CBAM rate and carbon price relief, and transitional period modifications to 30 June 2028. Final secondary legislation is expected to be laid later this year. 

The consultation closes on 21 May  and those importing CBAM goods may wish to engage with the process as the regulatory framework takes shape ahead of the January 2027 commencement date.

EU Deforestation Regulation - Commission publishes simplification report

The European Commission has published a report on the simplification of the EU Deforestation Regulation (EUDR), together with a package of further measures to support its implementation ahead of its entry into application on 30 December 2026 for large and medium companies and from 30 June 2027 for other micro and small enterprises.

The package includes an updated guidance document and FAQs, and a draft delegated act on the product scope of the EUDR that proposes additions of certain downstream products (such as soluble coffee and certain palm oil derivatives) as well as exclusions (including leather and retreaded tyres) and exemptions for product samples, certain packing materials, used and second-hand products, and waste. The draft delegated act is open for public feedback until 1 June. Together, the measures are expected to reduce annual compliance costs for companies subject to EUDR obligations by approximately 75% compared to the original regulation.

Independent Anti-Slavery Commissioner publishes futures analysis on modern slavery threats

The Independent Anti-Slavery Commissioner has published a futures analysis report examining modern slavery and human trafficking threats in the UK through to 2036, drawing on contributions from more than 50 organisations and lived experience advisory panels.

The report identifies 21 threats across five thematic areas: global context; technology and finance; labour and livelihoods; exploitation and control; and governance and safeguards. The report concludes that artificial intelligence (AI), cryptocurrencies and digital platforms are enabling traffickers to recruit, control and exploit victims with greater scale, speed and anonymity, while fragmented safeguarding systems and low prosecution rates are weakening the UK's response capability.

Among its recommendations are stronger labour protections, reform of tied visa arrangements, increased corporate accountability, greater regulation of digital platforms and supply chains, and improved international cooperation. The focus on corporate accountability and supply chain regulation reflects a continuing policy direction that companies with extended or internationally sourced supply chains will need to monitor closely.

Natural capital

Regulations extend biodiversity net gain register to nationally significant infrastructure projects

New regulations extending the biodiversity net gain (BNG) register to cover nationally significant infrastructure projects (NSIPs) in England under the Planning Act 2008 were made on 5 May and come into force on 29 May. The Biodiversity Gain Site Register (Amendment) Regulations 2026 (SI 2026/494) amend the principal registry regulations to enable registration of off-site biodiversity units used for mandatory BNG for NSIPs, which was previously limited to development under the Town and Country Planning Act 1990.

The regulations follow the government's response this April to its May 2025 consultation on implementing BNG for NSIPs, confirming that BNG will apply to NSIP applications made on or after 2 November 2026. The government has also indicated it will publish an updated metric user guide for NSIPs and further guidance on NSIP BNG.

Council of the EU formally adopts Regulation on forest reproductive material

The Council of the EU on 21 April formally adopted a regulation on the production and marketing of forest reproductive material, such as seeds and plants, used for the establishment of new forests, for reforestation, and for other types of tree planting, following the European Parliament's first-reading position adopted in April 2024.

The regulation aims to increase the diversity and quality of forest reproductive material, ensuring that the right tree is planted in the right place so that forests are better adapted to climate change. Tree breeding under the new framework will allow climate change adaptation of forests to be accelerated, helping to ensure their continued productivity. The regulation forms part of a wider legislative package adopted by the Commission in July 2023 on the sustainable use of natural resources.

The European Parliament is expected to formally adopt the Regulation at second reading at its plenary session on 18 May, after which it will be published in the Official Journal and enter into force. The regulation will apply after five years to provide time for implementation.

Sustainable finance

European Commission adopts delegated rules on fees and penalties for ESG rating providers

Following its consultation in February on ESG ratings activity, the European Commission has adopted two delegated regulations supplementing the ESG Ratings Regulation (EU 2024/3005), which established the supervisory role of the European Securities and Markets Authority (ESMA) over ESG rating providers.

The first sets out the procedures ESMA must follow when imposing fines and periodic penalty payments on ESG rating providers. This includes rights of defence, collection procedures and limitation periods for imposing and enforcing penalties. The second sets out the fees ESMA may charge, covering annual supervisory fees, authorisation fees, registration fees and recognition fees.

Both are now subject to scrutiny by the European Parliament and the Council of the EU before publication in the Official Journal. The fees regulation will enter into force the day after publication, while the fines regulation will enter into force on the twentieth day following publication. 

EU institutions sign, one Europe, one market roadmap

The European Commission, the Council of the EU and the European Parliament agreed and signed the "one Europe, one market" roadmap on 24 April, a political and operational commitment to deliver a series of legislative and policy measures to strengthen the single market and improve the EU's competitiveness by the end of 2027.

The roadmap is structured around five strategic objectives: simplifying rules, deepening the single market, championing trade, reducing energy prices and decarbonising, and driving digital and AI transformation. Measures include a digital and AI omnibus package by end of 2026, a new EU securitisation framework, a review of merger control guidelines, grid modernisation, an emissions trading system review, and new legislation on cloud and AI, a Chips Act 2 and AI gigafactories.

The roadmap does not create binding obligations but acts as a framework to accelerate delivery in the priority areas. The institutions have committed to quarterly reviews and regular stocktaking to monitor progress and update the annex where necessary.

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