ESG Knowledge Update | October 2026
Published on 14 October 2026
Welcome to Osborne Clarke's ESG Knowledge Update from our multi-disciplinary ESG team
At a glance:
FCA finalises rules requiring listed issuers to report against new UK Sustainability Reporting Standards from 2027.
HMRC consults on mass balance approach for chemically recycled plastic in Plastic Packaging Tax.
MEPs back limiting EPR representative suspension to small businesses only.
Sustainability and climate reporting
Government consults on modernising corporate reporting, including sustainability disclosures in the strategic report
The UK government is undertaking a programme to modernise and simplify the UK's corporate reporting framework, building on previous reforms to non-financial reporting. Last month, it launched a consultation on Modernising Corporate Reporting, seeking feedback in relation to, among other things, sustainability-related reporting: reducing disclosures in the strategic report and introducing a single threshold for companies required to produce a strategic report; offering flexibility as to the location of sustainability-related disclosures within the strategic report; and requiring transparency in relation to assurance of strategic reporting information in the annual report.
On disclosures in the strategic report, the government proposes to remove from the legislative framework environmental matters, employees, social matters, community matters, respect for human rights, and anti-corruption and anti-bribery matters. This would not mean that companies should stop reporting on these specific topics where financially material, and companies would not be prevented from using recognised reporting standards and frameworks, such as UK Sustainability Reporting Standards (UK SRS), should they wish to do so.
On location, the government is proposing flexibility to report climate and other sustainability information anywhere in the strategic report, including either integrated in the strategic report or in a separate section of the strategic report which refers to this information.
On assurance, the government does not have any plans to introduce new requirements for reporting companies to obtain assurance over future UK SRS reporting at this stage, or for other strategic reporting topics. Instead, its preferred approach is to allow decisions around whether to obtain external assurance to remain with the reporting entity, while exploring how to support investors and creditors in understanding whether assurance has been obtained and the nature of that assurance.
The consultation closes on 30 November 2026.
FCA finalises rules aligning listed issuers' sustainability disclosures with UK Sustainability Reporting Standards
From 1 January 2027, listed issuers falling within scope of UKLR 6, 14, 15, 16 and 22 will need to report their sustainability and climate disclosures against the UK SRS, following the Financial Conduct Authority (FCA)'s publication of PS26/19 on 30 September 2026, which replaces the existing climate disclosure regime. The new requirements take effect through the UK Listing Rules (Sustainability Reporting Standards Disclosure) Instrument 2026, which enters into force on 1 January 2027 and applies to accounting periods beginning on or after that date, with first reporting due in 2028.
Two aspects of the final rules depart from the FCA's original January 2026 consultation. First, climate disclosures under UK SRS S2 will now be subject to a comply-or-explain approach, aligning them with the approach already proposed for non-climate disclosures under UK SRS S1 and for Scope 3 emissions reporting. Second, international commercial companies with a secondary listing and depositary receipt issuers will be required to report against UK SRS on a comply-or-explain basis, rather than simply signposting their home jurisdiction's requirements as the FCA had originally proposed.
To ease the transition, the FCA is providing one year of transitional relief for Scope 3 emissions disclosures and two years for UK SRS S1 disclosures. The FCA is separately consulting on guidance to help issuers apply the comply-or-explain approach, with feedback due by 28 October 2026 and final guidance expected before the rules take effect.
Circular economy
Mandatory digital waste tracking came into force on 1 October 2026 in England and Wales
The Digital Waste Tracking (England) Regulations 2026 (SI 2026/729) and the Digital Waste Tracking (Wales) Regulations 2026 (SI 2026/105) both came into force on 1 October 2026, introducing the first phase of a UK-wide digital waste tracking regime under the Environment Act 2021.
Operators of permitted facilities receiving controlled waste must record specified information in a digital waste record and confirm it has been entered into the digital tracking system by the end of the second working day after the load is received, replacing reliance on paper waste transfer notes and hazardous waste consignment notes for this purpose. Failure to comply is a criminal offence, and the Environment Agency can also impose civil sanctions such as a fixed monetary penalty.
Businesses operating permitted waste receiving sites in England or Wales should confirm their sites are in scope and registered for the digital tracking system, if they have not already done so.
Commission publishes draft list of countries authorised to import EU waste and an assessment of plastic waste exports to Türkiye
The European Commission published a draft list of non-OECD countries on 18 September 2026 that could be authorised to import non-hazardous waste from the EU after May 2027 under the Waste Shipment Regulation. As a general principle, the EU will no longer export waste to non-OECD countries from 21 May 2027, except where a country has requested to continue receiving EU waste and demonstrated it can manage it sustainably. A total of 32 countries submitted such requests, which the Commission has assessed in a report published alongside the draft list, on which it is now seeking feedback through an online consultation open until 16 October 2026.
The first list of countries authorised to receive EU waste will be established by the end of 2026 and updated at least every two years, with countries not on the list able to (re)apply.
The Commission separately published an assessment of plastic waste exports to Türkiye, the main OECD destination for such exports, ahead of a ban on plastic waste exports to non-OECD countries from 21 November 2026. The assessment acknowledges that Türkiye has strengthened its legislation and enforcement, but identifies areas needing further progress, including transparency on plastic waste data, implementation of legislation, and governance arrangements.
European Parliament Committee backs limiting EPR representative suspension to small businesses
The European Parliament's Environment, Climate and Food Safety (ENVI) Committee has adopted its position on proposals to temporarily suspend extended producer responsibility (EPR) authorised representative requirements for batteries, packaging, textiles, footwear, electronic appliances and single-use plastics.
While the European Commission proposed suspending the requirement for producers to appoint an EPR authorised representative in each member state until 2035, the committee wants to limit the suspension to EU-based micro and small enterprises with fewer than 50 employees and either annual turnover or an annual balance sheet total under €10 million; non-EU companies would remain subject to the requirement.
The committee also backs a sunset clause ending the suspension automatically once comprehensive circularity rules enter into force, and has called for greater information-sharing between member states, interoperable digital systems and common reporting requirements.
The positions must be confirmed by Parliament in plenary, expected during the 19-22 October 2026 session, before negotiations with the Council can begin.
HMRC publishes guidance on mass balance approach for chemically recycled plastic in Plastic Packaging Tax
HMRC has published guidance, and a technical consultation on draft regulations on using a mass balance approach to account for chemically recycled plastic in Plastic Packaging Tax (PPT) returns, alongside separate guidance on the minimum certification requirements for using that approach.
From 1 April 2027, businesses that manufacture packaging components in the UK using chemically recycled plastic, or import finished components made this way, must use a mass balance approach for that content to count for PPT purposes. Otherwise, it will be treated as virgin plastic. The approach is only available where the recycling process changes the chemical structure of the plastic waste. Every business in the supply chain must hold certification from a scheme meeting HMRC's minimum requirements, supported by attribution declarations and records kept for six years. HMRC has said it will publish more detailed guidance, including on penalties, in early 2027.
The draft Plastic Packaging Tax (Chemical Recycling Certification Schemes) Regulations 2027, now out for technical consultation, set out the conditions businesses must meet to use a mass balance approach, covering attribution methodology, certification, auditing, monitoring and record keeping, alongside a draft reference document setting out the methodology for applying dual-use factors to output products.
PPT came into force on 1 April 2022. It applies to plastic packaging components manufactured in or imported into the UK that contain less than 30% recycled plastic by weight, at a rate of £200 per tonne. Manufacturers and importers that meet the relevant threshold must register with HMRC and pay the tax. Other businesses in the supply chain must carry out due diligence to avoid being held jointly and severally liable for unpaid PPT.
Natural capital
Nature restoration levy regulations come into force under the Planning and Infrastructure Act 2025
The Nature Restoration Levy Regulations 2026 (SI 2026/1020) came into force on 11 September 2026, providing the legislative framework for the operation of the nature restoration fund (NRF) levy.
Under the Planning and Infrastructure Act 2025, developers can meet certain environmental obligations relating to protected sites and species through environmental delivery plans (EDPs) developed by Natural England, rather than undertaking their own assessments or delivering project-specific interventions. To use an EDP, the developer must pay a levy into the NRF, which Natural England uses to pay for the conservation measures set out in the EDP.
Planning authorities must impose a pre-commencement condition for payment of the levy when granting planning permission for in-scope development, and Natural England can impose and apportion liability on landowners where no one has assumed liability or the levy cannot be recovered.
The regulations also cover how the levy amount is calculated, how Natural England must use levy funds on conservation measures, and enforcement, including warning and stop notices where a levy is unpaid and surcharges for non-compliance. The levy amount is a local land charge on the land until liability is discharged or ceases to exist.
Supply chain transparency
Delegated regulation under EUDR updating covered products published in the Official Journal
The delegated regulation updating the list of covered products under the EU Deforestation Regulation (EUDR) was published in the Official Journal on 17 September 2026. This removes cattle hides, skins and leather, re-treaded tyres, soybeans for sowing, articles of vulcanised rubber, conveyor and transmission belts and aircraft and motor vehicle seats, while adding soluble coffee, certain palm oil derivatives, and frozen cattle tongues from 30 December 2027.
Separately, the European Commission has proposed removing French Guiana from the EUDR's territorial scope, using the special legislative procedure under Article 349 TFEU. The EUDR, which covers cocoa, coffee, palm oil, soybeans, livestock, rubber and timber, is due to start applying on 30 December 2026 following two earlier delays. The Commission points to French Guiana's geography, with around 95% of its territory covered by Amazon rainforest, and its porous land border with Brazil and Suriname, as justifying tailored treatment for the outermost region.
Under the proposal, trade in EUDR-covered products between French Guiana and Brazil, and products produced and consumed within French Guiana, would fall outside the regulation's scope, while goods shipped from French Guiana to the rest of the EU would still need to comply. Because the proposal relies solely on Article 349, the European Parliament has only a consultative role, and any amendments sought by member states during Council negotiations would generally require unanimity unless incorporated into the Commission's own proposal.
European Commission publishes notice setting out guidelines on the Forced Labour Regulation
The European Commission has published a notice setting out guidelines on the application of the Forced Labour Regulation (EU) 2024/3015, in the Official Journal of the European Union on 3 September 2026. This follows an earlier publication of the guidelines via the Commission's "have your say" portal.
The regulation prohibits the placing, making available or export of products made with forced labour on the EU market, applying to all products regardless of origin, sector or stage of production, and to all economic operators, including non-EU businesses. The notice confirms that due diligence remains a "useful tool" rather than a specific obligation, since the regulation instead imposes an obligation of result.
The Commission has also published a list of competent authorities for the regulation, though only ten member states have so far made a designation, and the promised forced labour risk database is not yet available.
Businesses should use the guidelines, now formally published, to map forced labour risk across their supply chains and test due diligence arrangements against the OECD-aligned framework they set out, ahead of the December 2027 application date.
European Parliament adopts amendments to strengthen EU CBAM and establish Temporary Decarbonisation Fund
The European Parliament's plenary session adopted amendments to two European Commission proposals: a regulation extending the EU Carbon Border Adjustment Mechanism (CBAM) to downstream goods and introducing anti-circumvention measures, and a regulation establishing a Temporary Decarbonisation Fund (TDF), paving the way for trialogue negotiations.
On the CBAM extension, MEPs agreed with the Commission's proposal to extend the scope beyond basic materials to an extensive list of downstream products. To close loopholes, MEPs lowered the threshold by which small changes to a good would qualify as circumvention and tightened the rule so it targets only arrangements set up purely to avoid the CBAM. They rejected the Commission's proposed safeguard that would have allowed goods to be removed from CBAM's scope during price shocks, proposing instead a mechanism to temporarily redirect CBAM revenues from the goods concerned to the affected sectors. The Council adopted its general approach on 12 June 2026, so informal trialogue can now begin.
On the TDF, MEPs want financial support to run from 2027 to 2029, rather than only from 2028 as proposed by the Commission, and want the fund opened to fertiliser producers and downstream users facing higher carbon-related input costs. The Council has not yet adopted its negotiating position on this proposal.
Defra consults on draft legislation for new UK REACH Alternative Transitional Registration Model
The Department for Environment, Food and Rural Affairs (Defra) has launched a technical consultation on draft legal provisions to implement the Alternative Transitional Registration Model (ATRm) for UK REACH, giving effect to policy conclusions published in the government's response to a 2024 consultation on 30 March 2026.
The ATRm is intended to provide a more proportionate registration framework for transitional substances, reducing the hazard information that must be submitted upfront to the Health and Safety Executive while preserving the regulator's ability to request further information to assess hazards and risks.
It will be delivered via a statutory instrument amending UK REACH, with the consultation presenting the proposed changes as a Keeling Schedule showing how the amended regulation would read.
The consultation seeks views on whether the drafting accurately gives effect to the stated policy intentions and invites evidence of any drafting issues, omissions or unintended consequences; it closes on 10 November 2026.
Green claims
EU Directive on Empowering Consumers for the Green Transition becomes applicable
The Empowering Consumers for the Green Transition Directive ((EU) 2024/825) became applicable across EU member states on 27 September 2026, amending the Consumer Rights Directive and the Unfair Commercial Practices Directive (UCPD). It requires traders to give consumers new sustainability information pre-contract, such as on a product's reparability and durability, and bans or otherwise tackles unfair commercial practices that prevent sustainable consumption choices, including greenwashing. Member states had until 27 March 2026 to transpose the directive into national law.
Among other things, the directive introduces new definitions into the UCPD, including "environmental claim", "generic environmental claim" and "recognised excellent environmental performance", and adds certain practices relating to green claims to the list of banned commercial practices in Annex 1 of the UCPD.
UK or other non-EU traders that pursue or direct their activities to EU-resident consumers may face consumer claims and regulatory action in those EU countries for breach of local implementing laws, regardless of any choice of law or jurisdiction clause.
