ESG Knowledge Update | November 2025

Legal and regulatory news

European Union

European Parliament adopts its negotiating mandate for simplification of sustainability regulations

Under the adopted mandate, the employee threshold under the Corporate Sustainability Reporting Directive (CSRD) would be raised to 1,750 employees (higher than the 1,000 level proposed by the European Commission and adopted by the Council of the EU) alongside a net annual turnover threshold of EUR450 million (matching the Council's mandate). The thresholds for companies in scope of the Corporate Sustainability Due Diligence Directive would be over 5,000 employees and a net annual turnover of more than €1.5 billion, which matches the Council's negotiating position. Negotiations with the Council started on 18 November, with the aim of finalising the legislation by the end of the year. 

Meanwhile, the delegated regulations, which defer the requirement for "first wave" companies to report under the CSRD, were published in the Official Journal and entered into force on 13 November. 

European Commission proposes delay to EU Deforestation Regulation

The European Commission has adopted a proposal for a targeted amendment to the EU Deforestation Regulation. The proposal introduces a six-month postponement for micro- and small enterprises to 30 December 2026 (from 30 June 2026), as well as for the newly defined category of micro- and small-primary operators, while for large and medium operators and traders, the regulation will apply as originally planned from 30 December  onwards. However, to ensure a gradual phase-in of the rules, these large and medium-sized actors will benefit from a grace period of six months for checks and enforcement. The proposal needs to be agreed by the European Parliament and Council before it can take effect.

Council agrees position on new category of small to medium-sized enterprises (SMEs)

The Council has adopted its position on the European Commission proposals to create a new category of small mid-cap companies (SMCs) as part of the "Omnibus IV" legislative package. The new SMC category will cover companies with fewer than 1000 employees and either an annual turnover of up to €200 million or up to €172 million in annual balance sheet total. The aim of the new definition is to help to avoid a cliff edge and enable a smooth transition of SMEs to SMCs; allow SMCs to keep the same beneficial environment as when they were SMEs; and give better incentives to SMEs to scale up. The first set of mitigating measures to be extended or modified to include SMCs include those relating to batteries and fluorinated greenhouse gases.

Simplification to the EU CBAM enters into force

Following the European Parliament's formal adoption of the changes to the carbon border adjustment mechanism (CBAM), Regulation 2025/2083 (which "aims to simplify and strengthen the EU's CBAM") has been entered into the Official Journal and came into force on 20 October.

The key changes include:

• Adopting a new de minimis mass threshold whereby imports of up to 50 tonnes per importer per year will not be subject to CBAM rules.
• Outlining conditions for a transition state for importers, whereby imports of CBAM goods will still be allowed while importers are awaiting CBAM registration.
• A general simplification of CBAM measures, including the authorisation procedure, the data collection processes, calculation of emissions and financial liability calculations.
• Adjustments to penalty provisions and on the rules regarding indirect customs representatives.

Amending directive introduces EPR scheme for textiles

An amendment to the Waste Framework Directive  was published in the Official Journal of the European Union and came into force on 16 October. The amending directive introduces an extended producer responsibility (EPR) scheme for textiles. Producers that make textiles available in the EU will have to cover the costs of their collection, sorting and recycling through new EPR schemes to be set up by each Member State by 16 April 2028 (within 30 months of the amending directive's entry into force on 16 October 2025). The provisions will apply to all producers, including those using e-commerce tools, whether they are established in an EU Member State or outside the EU. Micro-enterprises will have an extra year to comply with the EPR requirements.

The EPR requirements cover textile products such as clothing and accessories, hats, footwear, blankets, bed and kitchen linen, and curtains. Member States are required to establish a register of producers of such products to monitor compliance.

European Commission adopts package to accelerate sustainable transport fuels

The European Commission's transport package includes a Sustainable Transport Investment Plan (STIP) focusing on renewable and low-carbon fuels for aviation and waterborne transport, mapping investment needs and improving use of EU financing programmes.

European Commission proposes simplification of the Sustainable Finance Disclosure Regulation

Proposals to amend the Sustainable Finance Disclosure Regulation (SFDR) include simplified disclosure and categorisation requirements. However, these SFDR simplification proposals will now be submitted to the European Parliament and Council for their consideration.

United Kingdom

Consultation on expanding Climate Change Agreement Scheme eligibility

HMRC has launched a consultation which runs until 2 December on draft regulations to expand and refine the Climate Change Agreement Scheme. The consultation proposes adding three new eligible processes from January 2027: mechanical recycling of plastic, packaging of spirits, production of batteries for electric vehicles

Amendments to Packaging Extended Producer Responsibility Scheme

Amendments to the extended producer responsibility scheme for packaging waste (pEPR) in the UK were laid before Parliament on 3 November and will come into force on 1 January 2026. The changes will:

• Enable the appointment of a producer responsibility organisation (PRO) to support the scheme administrator PackUK in running the pEPR scheme and ensure closer producer involvement.

• Enable producers to deduct tonnage of recycled food grade plastics packaging waste from their pEPR obligations where they have collected it directly from consumers and sent it for reprocessing in a closed loop recycling system.

• Improve the operational efficiency of the pEPR scheme and clarify producers' obligations, including resolving potential loopholes, removing ambiguity, improving the approach to local authority costs modelling, and removing barriers to compliance and enforcement.

On the same date, the Department for Environment, Food and Rural Affairs and PackUK published guidance for organisations on how to apply to be the PRO, with PackUK intending to appoint the PRO in March 2026.

Government publications on forced labour in global supply chains

The government has published an optional combined international template designed to reduce the administrative burden for organisations subject to supply chain reporting requirements in the UK, Australia and Canada and support the development of one report for all three jurisdictions. The government's response to the Joint Committee on Human Rights report in July on forced labour in global supply chains implies that further legislative or regulatory action is unlikely in the near term on this topic.

FCA review of climate reporting by asset managers, life insurers and FCA-regulated pension providers

The FCA has published the results of its review of climate reporting by asset managers, life insurers and FCA-regulated pension providers. These firms are required to disclose climate-related information in line with the Taskforce on Climate-related Financial Disclosures recommendations (now incorporated into the International Sustainability Standards Board Standards). The FCA is now considering how to streamline and enhance its sustainability reporting framework.

Financial Reporting Council annual review of corporate governance reporting

The Financial Reporting Council (FRC) has published its annual review that analyses reporting trends and practices among 100 UK-listed companies and highlights areas of good practice. This is the last time that the review will be against backdrop of the 2018 UK Corporate Governance Code; next year annual reports will be reviewed against the updated 2024 code which came into effect in January. The FRC has published a series of podcasts to support companies in strengthening their reporting across areas covered by the Code

ESG ratings providers to come within remit of the FCA

Draft regulations have been laid before Parliament that will require ESG ratings providers to be authorised by the Financial Conduct Authority (FCA). The commencement date for the new regime is 29 June 2028, with a year-long transitional period that will run until 29 June 2029. The FCA intends to consult on its proposed rules before the end of the year.

International

Transition finance guides

The Loan Market Association, the Asia Pacific Loan Market Association and the Loan Syndications and Trading Association have jointly published a guide to transition loans. Concurrently, the Transition Finance Council is developing Transition Finance Guidelines to create a consistent framework for identifying and evaluating credible transition finance at entity-level.

COP30: Brazil

At the time of writing, the pressure is on negotiators in the last few days of the global climate conference. COP30 was launched with an ambitious 30 key objectives and it remains to be seen what progress has been made towards agreement and action on them. Of most interest to business are the objectives relating to finance and technology including artificial intelligence, innovation, climate entrepreneurship, biotechnology, harmonisation of carbon markets and carbon accounting standards and information integrity in climate change matters.

California climate disclosure law paused

A US appeals court has paused California's climate disclosure law which was due to be implemented on 1 January 2026, pending the hearing of the US Chamber of Commerce's suit. The paused law would have required in scope US companies to report on climate-related financial risks. However, another law requiring companies to report on their greenhouse gas emissions, which is set to come into effect later in 2026, was not halted. 

Market news

Free energy assessment tool launched designed to help manufacturing facility and plant managers identify potential energy-saving opportunities…Major retailer launches a new decarbonisation programme designed to accelerate the adoption of renewable electricity across its global fashion supply chain…Global Reporting Initiative launches new checklist to help businesses and investors align their climate reporting using the GRI Standards with the UN's official approach

Recent ESG Insights from Osborne Clarke

• Regulatory Outlook | Osborne Clarke
• What international business can expect from COP30 on carbon markets
• International regulatory headwinds: how general counsel can navigate uncertainty in Europe
• Why are fewer businesses setting goals to combat modern slavery?
• International Court of Justice issues landmark opinion on state obligations in respect of climate change
• Unlocking Carbon Markets and Supporting Natural Capital 

Brogan Cheshire, a Knowledge Lawyer with Osborne Clarke, contributed to this Insight.