Sustainability/ESG

Legal 500’s In House Lawyer magazine has published Walker Morris’ Addressing ESG in your supply chain: A practical approach. The article provides an overview of key ESG-related developments and requirements. It also explains practical steps businesses can take to safeguard human rights and sustainability, both internally and within their supply chain. Following on from the IHL article, even more recent and upcoming sustainability developments are set out below.

The Circular Economy Taskforce has published its Terms of Reference. The Terms state that a circular economy strategy, underpinned by a series of roadmaps for reform in different sectors and their supply chains, will be forthcoming by autumn 2025.

The Partnership for Carbon Accounting Financials is calling for industry input on proposals for measuring and reporting avoided and expected GHG emissions linked to financial activities – a form of ‘Scope 4’ emissions. (Scope 4 emissions are: the avoided emissions that are prevented or reduced as a result of a company’s products or services; home working emissions; or emission reductions that happen outside of a life cycle of the product or value chain, but as a result of the use of that product.) The consultation is open until 28 February 2025.

On 14 November 2024, the UK government published its consultation response and draft legislation proposals to regulate ESG ratings providers. The legislation is expected to be laid before Parliament in early 2025.

We reported, back in 2021, on Milieudefensie et al v Shell Plc (or, the Royal Dutch Shell case). In November 2024, Shell ‘won’ its appeal against a court order requiring it to reduce its emissions by 45%. But the Dutch Court of Appeal’s decision is more nuanced than headlines may suggest. In fact, the appeal decision clarifies that businesses have a duty which likely goes beyond just complying with existing laws and regulations. Rather, compliance should be seen as the starting point, rather than the goal, of corporate climate responsibility. The practical advice set out in our earlier briefing is perhaps even more important today. Businesses may also want to check out our more recent advice in relation to the Corporate Sustainability Due Diligence Directive and climate transition planning.

We reported, in the first edition of our Legal Horizon scanner, that Vanuatu, Fiji and Samoa had formally proposed recognition of ecocide (unlawful or wanton acts committed with knowledge that there is a substantial likelihood of severe and either widespread or long-term damage to the environment being caused by those acts) as an international crime. An ‘ecocide bill’ and the Ecocide (Prevention) (Scotland) Bill have now been introduced in the House of Lords and Scottish Parliament respectively. Similar ecocide legislation is currently being proposed by other countries such Italy, Spain, Mexico, Brazil, the Netherlands and Belgium, and by the EU.

On 14 November 2024 the EU Parliament agreed to the EU Commission’s proposal to postpone the date on which the EU Deforestation Regulation (EUDR) will apply, to 30 December 2025. Micro and small enterprises will not need to comply until 30 June 2026.  It will require importers of cattle, cocoa, coffee, oil palm, rubber, soya and wood to ensure products entering the EU have not caused deforestation or forest degradation. Compliance will require extensive data collection.

The Green Claims Directive is expected to become law in 2025. When it does, EU Member States will have two years to transpose it into national law. The Directive will address greenwashing and will regulate environmental labelling schemes. Suppliers to the EU will be affected.

Corporate/corporate reporting

Companies House has issued a transition plan for implementation of the Economic Crime and Corporate Transparency Act 2023. The plan summarises changes which have already been brought into effect and lays out Companies House’s timing expectations for implementation of the remaining updates, including those relating to identity verification.

The Financial Reporting Council (FRC) has published a consultation paper on significant changes to the Stewardship Code. Proposed changes relate to: the purpose of the Code and the definition of stewardship; the process for reporting; the introduction of two sets of Principles – for asset owners and managers and for service providers; and whether signatories should be permitted to cross-refer to disclosures contained outside of their Code report. The consultation closes on 19 February 2025. The FRC intends to publish the updated Code in the first half of 2025, to take effect from 1 January 2026.

On 24 October 2024, Companies House published its first strategic intelligence assessment report. The report analyses the key threats – internal and external – faced by Companies House. It also considers how professional enablers, such as formation agents, accountants and solicitors, can be used to facilitate the abuse of Companies House processes to commit frauds. The report recognises the pressing need to adapt and improve its processes and will inform Companies House’s approach to dealing with identified threats.

Rachel Reeves’ Mansion House speech (14 November) announced key policy measures/proposals, including:

• Publication of a call for evidence to inform development of the Financial Services Growth & Competitiveness Strategy.
• Plans to consult on replacing the Certification Regime under the SMCR with a more proportionate approach.
• Plans to establish PISCES (the proposed Intermittent Trading Venue that would allow trading in shares of private companies) by May 2025.
• Modernisation of the Financial Ombudsman Service (FOS) framework so that clearer expectations are set out for firms and consumers. The FCA and the FOS have published a joint Call for Input, which seeks to significantly improve the rules governing how the FOS operates.
• A proposed PRA consultation on reducing the length of deferrals under the remuneration regime.
• A proposed FCA consultation on “transformational changes” to financial advice and guidance.
• Next stepson the repeal and restatement of MiFID II.
• An FCA Discussion Paperon transaction reporting, and plans to consult on organisational requirements before the end of 2024.
• Publication of the interim report of the Pensions Investment Review, which proposes a major consolidation of the UK pension system.
• Plans to establish the UK as a global leader in sustainable finance. This includes: taking forward proposals to regulate ESG ratings providers (HM Treasury has published a consultation response and draft legislation); gathering views on the value case for introducing a UK Green Taxonomy (see this consultation, which runs until 6 February 2025); consulting on economically significant companies disclosing information using future UK Sustainability Reporting Standards; launching a set of integrity principles for voluntary carbon and nature markets; launching the Transition Finance Council with the City of London Corporation; and consulting in the first half of 2025 on how best to implement requirements in relation to transition plans.

Data protection/cyber security/tech and digital

The Information Commissioner’s Office (ICO) is calling on organisations to share personal information responsibly to protect their customers from scams and fraud, saying that data protection is not an excuse. It has published new practical advice to support organisations.

The ICO and government published a Privacy Enhancing Technologies (PETs) cost-benefit awareness tool to help organisations understand and assess the costs and benefits associated with adopting a variety of PETs.

The government is consulting until 29 January 2025 on the design, content and use of a new AI Management Essentials tool, a self-assessment tool that aims to help organisations assess and implement responsible AI management systems and processes.

From 2 February 2025, the EU AI Act will require many businesses with commercial activities in the European Union to ensure their staff demonstrate a mandatory level of literacy in AI.

Commercial/general

As we reported in December, changes to the UK merger control regime came into force on 1 January 2025. Businesses doing deals involving a target with UK sales or activities should now consider whether the Competition and Markets Authority will have jurisdiction to review the transaction, and what impact that may have.

Sustainability, technological advances and innovation in ‘last-mile’ strategies are fuelling a rise in drone delivery. But, increasingly, drones offer other, wide-ranging, opportunities in today’s commercial world. Our recent article highlights some of those opportunities, and explains the drone laws and legal issues of which UK drone operators should be aware.

The House of Commons Library has published a briefing detailing the Labour government’s approach to assimilated law reform. A notable development is the proposed Product Regulation and Metrology Bill. It would grant powers to align UK product laws with EU regulations and potentially reduce regulatory friction across the UK, particularly in relation to Northern Ireland.

The government’s Industrial Strategy is due to be published in spring 2025, following the October 2024 consultation on the Industrial Strategy green paper. The Strategy is expected to focus on “growth driving sectors” including Advanced Manufacturing, Clean Energy, Creative Industries, Defence, Digital and Technologies, Financial Services, Life Sciences, and Professional and Business Services.

The government has announced a new National Infrastructure and Service Transformation Authority (NISTA), which will combine the functions of the National Infrastructure Commission and Infrastructure and Projects Authority, bringing infrastructure strategy and delivery together, to boost infrastructure development. In related news, the government has also launched the British Infrastructure Taskforce, a public and private sector collaboration, to explore different options to support the UK’s infrastructure goals.

The government has published The English Devolution White Paper which proposes significant plans to make devolution/local decision-making the default setting across a range of policy areas. Measures include plans for new local ‘strategic councils’ with the ability to guide infrastructure and development projects across areas such as housing, transport and skills.

The Law Commission has launched a consultation into the security of tenure regime entitled “Ensuring Part 2 of the Landlord and Tenant Act 1954 works for today’s commercial property market”. The consultation will take place in two parts. The first asks the questions whether the current system still works and whether it could or should be replaced or reformulated. This will run until 19 February 2025. If that consultation identifies a preferred way forward that is generally supported by the industry, then a second consultation in mid/late 2025 will ask for views on how to implement that choice in practice. The Law Commission highlights that it will consider the current “security of tenure applies unless contracted out” model, and will also consider 3 alternatives: “compulsory security of tenure”; “no security of tenure unless contracted in”; and “no security of tenure”.

The Civil Justice Council has published the second and final part of a report recommending substantial changes to the regime parties are expected to follow before civil litigation is commenced in the English courts. A key proposal is that parties must attempt another dispute resolution process before issuing proceedings, so that litigation effectively becomes a last resort.

The Procurement Act 2023 is due to come into force on 24 February 2025.

Nationals of all countries who do not currently require a visitor visa to travel to the UK for short-term business visits  will need to make an application for an Electronic Travel Authorisation (ETA) in advance of their visit. The ETA scheme will be fully rolled out to all applicable countries by April 2025, with the requirement applying to: all non-EU/EEA/Swiss nationals travelling to the UK on or after 8 January 2025; and all EU/EEA/Swiss nationals travelling to the UK on or after 2 April 2025. See our briefing for further information.

Some payroll changes on the horizon:

• National Insurance (NI) – Employers’ NI will go up by 1.2 % to 15% from April 2025, while the level at which employers start paying NI for workers will drop from £9,100 to £5,000. Smaller employers will be shielded by an increase in the Employment Allowance.
• National Living Wage and National Minimum Wage – the National Living Wage will increase by 6.7% to £12.21 per hour from April 2025. From April 2025, the National Minimum Wage for 18-20 year olds will be £10.00 per hour, an increase of 16.3%. Government is also increasing the minimum wages for under 18s and apprentices to £7.55 per hour.
• Income tax thresholds – Government will not extend the freeze to income tax and National Insurance contributions thresholds. From April 2028, these personal tax thresholds will be uprated in line with inflation.

The government has published the benefit and pension rates for 2025/26.

The government has announced a number of employment support reforms in its Get Britain Working White Paper.

Recent changes to employment law mean businesses must take proactive steps to prevent sexual harassment in the workplace. Our Employment team has produced a training package to help businesses with the new duty to prevent sexual harassment.

New research from Zurich UK found that half of neurodivergent adults have been discriminated against by a hiring manager or recruiter because of their neurodiversity. Around one in seven UK adults are neurodivergent.

2025 may see reform of the Modern Slavery Act 2015. The government indicated, in December 2024, that it would review both legislative and non-legislative measures to tackle forced labour and increase supply chain transparency. No timetable has yet been announced.