Environmental, social and governance | UK Regulatory Outlook June 2026

UK 

Government confirms plans to introduce mandatory deforestation due diligence for GB supply chains 

The government has confirmed that it will introduce mandatory deforestation due diligence requirements for businesses in Great Britain, using powers under Schedule 17 of the Environment Act 2021 alongside legislation to strengthen the existing UK Timber Regulation. A consultation will be published later this year, covering businesses that trade in commodities sourced from rainforests, including soy, palm oil, cocoa and rubber. 

The government has proposed that the GB regime will cover the same core commodities and underlying information requirements as the EU Regulation on Deforestation-Free Products (EUDR), which will apply in Northern Ireland from 30 December 2026. This aligned approach is intended to reduce administrative duplication across the UK and help businesses exporting to the EU meet consistent traceability standards. The government has also indicated a longer-term ambition to transition to a fully deforestation-free standard, beyond the initial focus on illegally deforested land. 

This announcement represents a significant step forward after a prolonged period of inaction on GB deforestation rules. The extent of alignment between the GB regime and the EUDR remains to be determined through the forthcoming consultation.  

Private Members' Bill proposes mandatory human rights and environmental due diligence 

A Private Members' Bill introduced in the House of Lords on 17 June 2026 would impose a statutory duty on commercial organisations and public authorities to prevent human rights and environmental harms across their own operations, subsidiaries and value chains. Companies with a worldwide annual turnover of £36 million or more would be required to conduct due diligence and publicly report on it annually. 

The bill includes civil liability for failure to prevent harms anywhere in the value chain, financial penalties of up to 10% of global turnover, exclusion from public procurement for up to five years, and a criminal offence for directors of repeat offenders. Modelled on the structure of the Bribery Act 2010, it also creates a "failure to prevent" corporate criminal offence where a person associated with a commercial organisation commits an act to obtain or retain business, and that act constitutes a specified offence including slavery, servitude, forced or compulsory labour or human trafficking under the Modern Slavery Act 2015. 

The bill is at first reading stage and its prospects of becoming law in this session are uncertain. However, it signals growing political pressure for a UK mandatory due diligence regime and businesses should monitor its progress alongside the EU Corporate Sustainability Due Diligence Directive (below). 

Science-Based Targets initiative launches final version of its updated Corporate Net Zero Standard 

Concluding a nearly two-year process, on 11 June 2026, the Science-Based Targets initiative (SBTi) published the final version of its Corporate Net-Zero Standard V2.0 (V2), which it is calling its most comprehensive framework for corporate climate action to date. 

Companies with existing validated targets do not need to set new ones. Those targets remain fully valid throughout their target cycle, subject to the five-year review provisions. However, the companies can benefit from some of the innovations of V2 including a "best efforts" approach to implementation and a hierarchy of mechanisms, from direct emissions reductions to offsets. V2 also includes accommodations for small and medium-sized enterprises, and allows companies to set targets for different contexts including supply chains, sectors and geographies. 

The V2 can be used for target validation from 1 February 2027, though the standard, transition guidance for companies which already have validated targets, and key resources needed to set targets are available now. Additional guidance to support implementation and progress assessment will be released through 2026 and beyond. 

Business leaders urged to put nature on the boardroom agenda 

The Department for Environment Food and Rural Affairs (Defra) has launched a suite of new board-level resources designed to help business leaders treat nature as a strategic priority, framing investment in natural capital as a means of cutting costs, reducing risk and unlocking new growth opportunities. The resources were developed in partnership with the Council for Sustainable Business, the Green Finance Institute, the Aldersgate Group and the Institute for Sustainability and Environmental Professionals. 

The materials include a boardroom briefing tailored for chairs and non-executive directors and a collection of cross-economy business case studies. These highlight that the UK's natural capital asset value is estimated at approximately £1.6 trillion, with annual ecosystem service flows valued at £41 billion. Real-world examples include Severn Trent Water's restoration of peatlands in the Peak District, which has avoided £18 million in sediment removal costs and postponed a major infrastructure upgrade by over a decade, and Canary Wharf's conversion of an unused dock into a nature-rich public space, which achieved a 55% biodiversity net gain alongside the group's strongest leasing performance in over a decade. 

For boards yet to integrate nature-related risks and opportunities into their decision-making, the resources provide practical and financial grounding for doing so. 

HMRC consults on mandatory certification for recycled plastic packaging 

See sustainable products section. 

EU 

European Commission consults on CSDDD implementation guidelines 

The European Commission has launched a public consultation, open until 24 July 2026, on the development of guidelines to support implementation of the Corporate Sustainability Due Diligence Directive (CSDDD). The amended CSDDD, following the Omnibus I simplification package, will apply from 26 July 2029 to large EU companies with more than 5,000 employees and net annual turnover exceeding €1.5 billion, with the same turnover threshold for non-EU companies. 

The guidelines will provide practical guidance to companies on fulfilling their due diligence obligations, to Member State authorities on implementation and enforcement, and to stakeholders on pursuing their rights. They will also be relevant to companies and other stakeholders in non-EU countries linked to the supply chains of in-scope companies. The first tranche of guidelines is due by 26 July 2027 and the second by 26 July 2028.  

In-scope companies, and smaller businesses in their value chains, should consider responding to the consultation before 24 July 2026 to ensure their views are considered in the guidance. 

EU legislators agree provisional framework for small mid-cap companies 

European Parliament and Council negotiators have reached a provisional agreement introducing a new category of small mid-cap (SMC) enterprise as part of the Commission's fourth Omnibus simplification package. The new category is intended to avoid cliff-edge situations where a company's regulatory obligations increase sharply upon growing beyond the SME threshold. 

Small mid-cap companies are defined as companies with fewer than 1,000 employees and either up to €200 million in turnover or up to €172 million in total assets. SMC exemptions would be extended across a range of legislative frameworks, including GDPR record-keeping obligations where processing is not likely to be high-risk, the Prospectus Regulation, the Batteries Regulation, the F-gases Regulation, MiFID and the Resilience of Critical Entities Directive. Within five years of entry into force, the Commission will produce a report on the SMC threshold and its impact on administrative burden, with the possibility to review it. The provisional agreement must be formally adopted by Parliament and Council before entering into force. 

Companies that currently sit just above the SME threshold should assess whether they would qualify as an SMC and consider what exemptions may become available to them. 

European Group on Ethics calls for recognition of a legal right to a healthy environment 

The European Group on Ethics in Science and New Technologies has adopted an opinion on how nature is valued across human, institutional and legal systems in the EU and how those values can be better reflected in governance. The opinion, published by the Ethics Advice Mechanism which provides independent ethical advice to the European Commission and other EU institutions, argues that ecological sustainability is not a secondary policy objective but is necessary for Europe's resilience, prosperity, security and democratic legitimacy. 

Key recommendations include: 

• recognition of a legal right to a clean, healthy and sustainable environment within the EU; 
• consistent integration of ecological, social, ethical, cultural and economic values into EU policymaking; 
• treating scientifically identified ecological boundaries as constraints in impact assessment and policy decision-making; 
• strengthening institutional mechanisms to ensure ecological concerns are adequately reflected in governance and legal decision-making; 
• using economic valuation of nature responsibly and within clear ethical and ecological conditions; and 
• ensuring coherence between the EU's internal commitments on nature and its external action. 

While the opinion is advisory rather than binding, businesses operating in highly regulated sectors should monitor whether its recommendations feed into future Commission legislative proposals.