Environmental, social and governance | UK Regulatory Outlook April 2023

European Parliament adopts regulation on deforestation-free supply chains

On 19 April, the European Parliament adopted the regulation on deforestation-free supply chains. As outlined in our Insight, the regulation will require companies to issue due diligence statements regarding goods they place on, or export from, the EU market that contain certain source materials. 

The press release notes that MEPs have successfully added rubber, charcoal, printed paper products and a number of palm oil derivatives to the adopted text, along with following products that were in the original proposal: cattle, cocoa, coffee, palm oil, soya and wood - including products derived from these commodities, such as leather, chocolate and furniture.

A wider definition of forest degradation was also agreed by MEPs and now includes the conversion of primary forests or naturally regenerating forests into plantation forests or into other wooded land.

Under the agreed text companies will also have to confirm that these products comply with relevant legislation of the country of production (via the due diligence statement), including on human rights, and the rights of affected indigenous people.

The maximum fine for non-compliance will be at least 4% of the total annual turnover in the EU of the non-compliant operator or trader.

The Council now needs to adopt the text, following which the regulation will be published in the EU Official Journal and enter into force 20 days later. Once in force, operators and traders will have 18 months to implement the new rules.

UK's FCA addresses the robustness and reliability of ratings providers' ESG benchmarks

The FCA has published its second "Dear CEO" letter since the launch of its new "integrated regulatory structure". Published after the FCA's preliminary review into ESG benchmarks, the letter highlights the FCA's continuing work on ESG claims and its concerns for the potential for "widespread failings" in this area. Read our Insight for more. See also Fintech, digital assets, payments and consumer credit section.

HMT consults on future regulatory regime for ESG ratings providers

Please see Fintech, digital assets, payments and consumer credit. 

Study finds only 29% of businesses submitted modern slavery statements in 2022

Please see Modern slavery.