ESG horizon scanning: policy and legal measures | Practical Law

ESG horizon scanning: policy and legal measures | Practical Law

This note summarises the key policy and legal measures on environmental, social and governance (ESG) and corporate responsibility (CR) (also known as corporate social responsibility (CSR). It highlights new and emerging initiatives driving change in this area, covering international, EU and UK developments.

ESG horizon scanning: policy and legal measures

Practical Law UK Practice Note 8-501-7176 (Approx. 38 pages)

ESG horizon scanning: policy and legal measures

MaintainedEuropean Union, International, United Kingdom
This note summarises the key policy and legal measures on environmental, social and governance (ESG) and corporate responsibility (CR) (also known as corporate social responsibility (CSR). It highlights new and emerging initiatives driving change in this area, covering international, EU and UK developments.

Scope of this note

This note summarises the key policy and legal developments in environmental, social and governance (ESG) issues and corporate responsibility (CR) (also known as corporate social responsibility (CSR)) at a UK and EU level. It focuses on key recent, new and emerging legal initiatives that are driving change in this area and highlights expected key developments on the horizon.
For Practical Law's materials on ESG in the UK, EU and globally, including general introductory materials and key materials on the individual elements (the "E", "S" and "G"), see Environmental, social and governance (ESG) toolkit: UK, Environmental, social and governance (ESG) toolkit: EU and Global ESG and Sustainability Toolkit.
For information on:

Looking ahead

For a summary of what Practical Law expects on ESG in 2023, see Article, Practical Law: what to expect in ESG in 2023.
For practitioner insights on the ESG issues that are currently top of mind for their clients and the key ESG developments on their radar for the coming few months, see Article, ESG Outlook Spring-Summer 2023.
For information on what to expect in different areas of law and sectors, see Article, Practical Law: what to expect in 2023 across practice areas.
For a series of high-level timelines focused on new and emerging ESG initiatives expected in the short-term and beyond, see Practice note, ESG horizon scanning: timeline of developments.


The terms ESG, CR and CSR are used to refer to the decisions and behaviour of a company or financial organisation in the context of environmental and social responsibility, including areas such as ethics, the environment, diversity, human rights, integrity, labour chain, climate change, philanthropy, accountability, sustainability, values, community, transparency, fair trade and the long term.

Brexit and the EU-UK future relationship

The EU-UK trade and co-operation agreement includes commitments from the EU and UK on ESG and sustainability to:
  • Not regress on levels of environment and climate protection below the levels in place at the end of the transition period, and to strive to increase those levels.
  • Promote implementation of the United Nations 2030 Agenda and the United Nations' Sustainable Development Goals (SDGs) (see UN 2030 Agenda for sustainable development and Sustainable Development Goals (SDGs)).
  • Encourage responsible supply chain management and CSR, including by providing policy frameworks to encourage the uptake of relevant practices by businesses and support the implementation of international instruments such as the UN Global Compact and the UN Guiding Principles on Business and Human Rights.

UK: legal drivers on ESG for corporates

Some definitions of ESG and CSR emphasise its voluntary nature. However, there is a growing body of law and other requirements that regulate this area.

Reform of UK audit industry and corporate governance

In May 2022, the government published its response to the BEIS March 2021 consultation paper, Restoring trust in audit and corporate governance, on major reforms to the UK audit industry and corporate governance regime. The response outlines reforms in relation to the scope of the definition of public interest entities (PIEs), directors' accountability and new corporate reporting requirements (in relation to internal control, resilience, assurance of reported information, anti-fraud measures, and dividends), supervision of corporate reporting, enforcement against company directors and clawback and malus in executive directors' remuneration, audit purpose and scope, audit committee oversight and engagement with shareholders, the audit market and the establishment of the new regulator, the Audit, Reporting and Governance Authority (ARGA). The timescale for many of the reforms, including the establishment of ARGA, is expected to stretch over several years to give market participants time to prepare for the changes. For more information, see Legal update, Audit: government response to consultation on audit and corporate governance reform (full update), Corporate governance reform toolkit and Practice note, Audit reforms: proposals, impact and implementation of the Kingman, CMA and Brydon reviews.

UK Corporate Governance Code

The UK Corporate Governance Code issued by the Financial Reporting Council (FRC) consists of principles of good governance in the areas of leadership, division of responsibilities, composition, succession and evaluation, audit, risk and internal control and remuneration, to ensure that a company operates effectively, complies with legal requirements and reports reliably.
The UK Corporate Governance Code applies to all companies with a premium listing, whether incorporated in the UK or elsewhere. The UK Corporate Governance Code is a "comply or explain" code. The Listing Rules require UK listed companies to include in their annual corporate reports and accounts a disclosure statement setting out how they have applied the principles, whether they have complied with the Code's provisions, and explaining and justifying any non-compliance.
The July 2018 version of the Code applies to accounting periods beginning on or after 1 January 2019.
As well as setting principles of good governance, the July 2018 version of the Code extends somewhat into other aspects of ESG. For example, it refers to companies "contributing to wider society" (Principle A) and has an emphasis on stakeholder engagement (Principle D and Provision 5).
For more information, see Practice notes:

Private companies' corporate governance and the Wates principles

In recent years, there has been an increase in the corporate governance disclosures required of large private companies in their annual reports and on their websites (see Practice notes, Private companies: corporate governance considerations for large private companies (including the Wates principles) and Private companies: corporate governance reporting requirements).
For financial years beginning on or after 1 January 2019, a UK incorporated company must include a statement of corporate governance arrangements in its directors' report if the company has either or both:
  • More than 2,000 employees.
  • A turnover of more than £200 million and a balance sheet total of more than £2 billion.
Unquoted companies must make available the statement of corporate governance arrangements on a website (maintained by or on behalf of the company and which identifies the company). The Wates Corporate Governance Principles for Large Private Companies (Wates principles) are aimed at large private companies which may (but are not required to) adopt them as an appropriate framework when making a disclosure about their corporate governance arrangements. The Wates principles consist of six high level principles with accompanying guidance covering:
  • Purpose and leadership.
  • Board composition.
  • Director responsibilities.
  • Opportunity and risk.
  • Remuneration.

UK Stewardship Code

Institutional investors are subject to the UK Stewardship Code, which is published by the FRC and sets out good practice for institutional investors on engagement with investee companies (see Practice note, UK Stewardship Code 2020).
In October 2019, the FRC published the UK Stewardship Code 2020. The 2020 code applies from 1 January 2020.
The 2020 Code has a greater focus on ESG (including climate change) matters than the previous version. The key changes on the ESG aspects include:
  • Amendments to the definition of stewardship, to clarify that the purpose is to create value for clients and beneficiaries (rather than to create value for beneficiaries, the economy and society). Stewardship is now defined as "the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society".
  • Signatories are expected to take ESG matters, including climate change, into account and to ensure their investment decisions are aligned with their clients' needs.
The principles for asset managers and asset owners include that:
  • Signatories systematically integrate stewardship and investment, including material ESG issues, and climate change, to fulfil their responsibilities.
  • Signatories' purpose, investment beliefs, strategy and culture enable stewardship that creates long-term value for clients and beneficiaries, leading to sustainable benefits for the economy, the environment and society.
The principles for service providers include that signatories support clients' integration of stewardship and investment, taking into account material ESG issues and communicating what activities they have undertaken.
These are "apply or explain" principles, with reporting expectations. In applying the principles, signatories should consider (among other things) environmental and social issues, including climate change.

Directors' duties and enlightened shareholder value (Companies Act 2006)

Under section 172 of the Companies Act 2006 (CA 2006), the directors have a duty to promote the success of the company. This means that a company director must act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole. In doing so, they are to have regard (among other matters) to the:
  • Likely consequences of any decision in the long term.
  • Interests of the company’s employees.
  • Need to foster the company’s business relationships with suppliers, customers and others.
  • Impact of the company’s operations on the community and the environment.
  • Desirability of the company maintaining a reputation for high standards of business conduct.
  • Need to act fairly as between members of the company.
The wording of section 172 of the CA 2006 makes clear that a director is only under a duty to act in a way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members. However, in fulfilling that duty they should also "have regard to" the non-exhaustive list of factors. This reflects the concept that has become known as "enlightened shareholder value"; namely, that it will be to the advantage of companies that directors, in coming to their decisions, also consider other factors, including certain other "stakeholder" groups (for example, employees, suppliers, customers and others) and also the likely consequences and impact of their decisions (for example, in the long term and on the community and the environment). The Chartered Governance Institute UK and Ireland (CGI) (previously the ICSA) and Investment Association (IA) stakeholder voice guidance sets out matters for boards to consider in relation to stakeholders (see Practice note, Shareholder and stakeholder engagement).
Section 172 tries to engender an idea of CR that reflects wider expectations of responsible business behaviour and that, while still only involving one duty to promote the success of the company for the benefit of members, requires directors to have regard to additional CR-type factors.
For financial years beginning on or after 1 January 2019, all public and private companies required to prepare a strategic report, except those companies that qualify as medium-sized under sections 465 to 467 of the CA 2006 in relation to the financial year, must include a separate "section 172(1) statement" in their strategic report describing how the directors have had regard to the matters set out in section 172(1)(a) to (f) of the CA 2006 when performing their duty under section 172; and unquoted companies must publish their section 172(1) statement on a website (maintained by or on behalf of the company).
For more information on:

Non-financial disclosures

The CA 2006 and related regulations, the Listing Rules and the Disclosure Guidance and Transparency Rules (DTR) require certain companies to report annually on environmental, climate-related and other non-financial matters (such as social and employee-related matters) in their directors' reports, strategic reports and elsewhere in their annual reports.
Reporting requirements are complex and vary depending on the type of company. Practice note, Narrative reporting: climate-related and environmental disclosures in annual company reports: overview summarises the requirements for environment and climate-related reporting in UK companies' annual reports prepared in accordance with the CA 2006 and links to more detailed notes. Practice notes, Directors report and Strategic report explain the disclosures required in relation to engagement with employees, suppliers, and customers, corporate governance arrangements, social matters, respect for human rights, and anti-corruption and anti-bribery matters.
Requirements have increased considerably over recent years, particularly in relation to climate-related financial disclosures.

Climate-related disclosures

The UK government has rolled out mandatory climate-related financial disclosures for large companies and financial institutions across the UK economy, as follows:
UK financial institutions and listed companies will be required to disclose net zero transition plans that detail how they will adapt and decarbonise as the UK moves towards to a net zero economy by 2050. For details of net zero targets and net zero transition plans, see Practice notes, Net zero targets for business and Net zero transition plans for UK companies.

Sustainable disclosure requirements (SDR)

The Financial Conduct Authority (FCA) consulted in 2022 on sustainability disclosure requirements (SDRs) that will require companies, some financial institutions and occupational pension schemes to disclose sustainability-related information. The final rules will be published in 2023. The policy statement is expected in Q4 2023 (see Legal update, FCA update on SDR and investment labels consultation) For more information, see Practice notes, Hot topics: UK regulation of sustainable finance and Hot topics: proposed FCA sustainability disclosure requirements (SDR) and labelling regime.
The government had first announced it would require SDRs in its October 2021 Greening Finance: A Roadmap to Sustainable Investing.
It is proposed that certain companies will be required to disclose, in their annual report, information using the ISSB-issued sustainability reporting standards (see International Sustainability Standards Board (ISSB) sets new global sustainability accounting standards below) and appropriate metrics to explain the level of alignment of their activities with the forthcoming UK green taxonomy, including minimum safeguards. (see Legal updates, UK government roadmap on greening finance and sustainable investing and Practice note, Hot topics: proposed FCA sustainability disclosure requirements (SDR) and labelling regime).
The FRC has highlighted how it intends to deal with a number of roadblocks that exist in attaining a fully effective and efficient system of ESG reporting (see Legal update, Non-financial reporting and corporate governance: FRC statement of intent on ESG challenges).
For links to all of Practical Law's materials on climate-related and environmental disclosures, see Climate-related and environmental disclosures toolkit.

Diversity and inclusion disclosures

For accounting periods beginning on or after 1 April 2022, under the Listing Rules, UK and overseas companies with listed equity shares or certificates representing equity shares (other than OEICs and shell companies) must include in their annual report:
  • A comply or explain statement on whether they have achieved certain targets for women and ethnic minority representation on their board.
  • A standardised numerical disclosure on the ethnic background and gender identity or sex of their board, key board positions, and executive management team.
Jointly with the PRA, and Bank of England, the FCA is also considering policy options to improve diversity and inclusion in financial services (see Legal update, Joint FCA, PRA and BoE discussion paper on diversity and inclusion in the financial sector).

Task Force on Nature-related Financial Disclosures (TNFD)

The Task Force on Nature-related Financial Disclosures (TNFD) reporting framework has been tested throughout 2022. The final version is due to be issued in September 2023. There is currently no mandatory requirement to report against TNFD although in March 2023, the government indicated it will be exploring how the TNFD framework should be incorporated into UK policy and legislation (see Legal update, Government publishes updated Green Finance Strategy). For further information on the TNFD, see Practice note, Taskforce on Nature-related Financial Disclosures (TNFD): disclosure framework.).

Shareholder activism

There has been increased recent focus on using shareholder pressure to encourage companies to engage with climate risks. A key example of this trend is the Say on Climate initiative requiring companies to submit a climate transition action plan at their AGM for a shareholder vote. For more information, see Practice notes, Resolutions on climate change at annual general meetings of FTSE 350 companies, Shareholder resolutions on climate change: legal and practical issues and engaging with investors, Shareholder activism and Article, Shareholder activism: here to stay.

Climate transition plans

The government has said that it plans to introduce mandatory requirements for certain companies to publish net zero transition plans setting out how they will decarbonise in the period to 2050. The government has created a Transition Plan Taskforce (TPT), which is tasked with developing a "gold standard" for transition plans and related metrics. The TPT defines a transition plan as an entity's plan to contribute to and prepare for a rapid global transition towards a low greenhouse gas emissions economy. The TPT consulted on a draft framework in November 2022 and is expected to finalise the framework in 2023 (see Legal update, Climate transition plans: TPT consultation on disclosure framework and implementation guidance (full update)). The government indicated in its March 2023 update to the Green Finance Strategy that it expects to consult in autumn or winter 2023 on mandatory disclosure of transition plans (see Legal update, Government publishes updated Green Finance Strategy). For more information, see Practice note, Net zero transition plans for UK companies.

UK climate change legislation

Concern over the effects of climate change is one of the main drivers for increased focus on ESG. In 2019, the UK set itself a statutory net zero carbon target for 2050 under the Climate Change Act 2008 (see Practice note, Climate Change Act 2008).
Key areas of regulation to drive progress towards the net zero target include the UK Emissions Trading Scheme (UK ETS), the climate change levy (CCL), climate-related disclosures, the Energy Savings Opportunity Scheme (ESOS) and energy efficiency in buildings and products.
For more information and links to detailed materials, see Practice note, Climate change issues for companies and Climate change toolkit.

UK supply chain ESG due diligence requirements

Key requirements and developments mandating ESG-related supply chain due diligence include:

Modern slavery statement

Under the Modern Slavery Act 2015, larger organisations carrying on business in the UK with a total turnover of £36 million or more must report annually on actions they have taken to eliminate modern slavery in their supply chains. The report takes the form of a modern slavery statement, which would usually cover information on supply chain due diligence efforts. Legislative changes in the pipeline would mandate the content of any modern slavery statement, and would make it mandatory to include information about due diligence processes on suppliers. For more information on this requirement, including proposed legislative changes, see Practice note, Modern Slavery Act 2015: slavery and human trafficking statement.
A Modern Slavery Bill was proposed in the Queen's Speech 2022. The Bill would cover many issues that have been proposed previously, including extending the reporting requirement in section 54 of the Modern Slavery Act 2015 to include public bodies, mandating the content of the slavery and human trafficking statements, and introducing fines for non-compliance (see Modern Slavery Act 2015 toolkit).

Equality Act 2010: mandatory gender gap reporting

For financial years beginning on or after 6 April 2017, large employers (with at least 250 relevant employees) are subject to mandatory gender pay gap reporting under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (SI 2017/172). For further details, see Practice note, Gender pay gap reporting obligations.

Ethnicity pay gap reporting

Some organisations may already report voluntarily on their ethnicity pay gap but, at present, there is no mandatory requirement to do so. The government's October 2018 consultation, which closed in January 2019, had considered proposals to introduce mandatory ethnicity pay gap reporting. In its Policy paper: Inclusive Britain: government response to the Commission on Race and Ethnic Disparities (published on 17 March 2022), the government confirmed that mandatory ethnicity pay gap reporting will not be introduced at this stage and that the government will support employers with voluntary reporting. For further details, see Practice note, Diversity and inclusion: UK reporting requirements for companies: Ethnicity pay gap.

Anti-corruption and bribery

The Bribery Act 2010 has prompted commercial organisations to assess whether they have adequate procedures to ensure that they are not involved in bribery and corruption. It is widely accepted that corruption causes poverty and suffering, inhibits economic growth, is damaging to business, both financially and in relation to reputation, and may result in criminal and civil liability and penalties for organisations and individuals. Most major companies already have in place an anti-corruption policy that should be reviewed regularly to ensure that it is fit for purpose. For more information, see:

Executive remuneration

Companies are increasingly incorporating the management of material ESG risks and opportunities into their long-term strategy and therefore into their incentive plans (see Legal update, PwC research finds almost 60% of FTSE 100 companies use ESG performance targets). The Investment Association's November 2021 guidance on executive remuneration recommends that companies should use ESG metrics that are quantifiable and are appropriately stretching, and demonstrably linked to company strategy (see Legal update, Executive remuneration: Investment Association principles of remuneration for 2022). Companies that have not yet incorporated ESG metrics into their remuneration policy should explain to shareholders what their intentions are in this regard. For further details, see Practice note, Directors' remuneration: corporate governance issues: ESG: linking executive pay to the company's ESG strategy.

Nature and biodiversity risks

For information on developments relating to understanding and quantifying nature and biodiversity risk, nature markets and finance, and nature and biodiversity disclosures, see Habitats, wildlife and biodiversity toolkit.

Preventing greenwashing and consumer protection

For information on how environmental claims in advertising and other sales and marketing communications are regulated in the UK, see Practice note, Greenwashing in advertising and consumer protection law.

Other environmental developments

For information on developments in environmental legislation in England and Wales and the EU, see Environment draft legislation tracker (England and Wales) and Environment draft legislation tracker (EU) respectively.

Pension funds and ESG

For information on ESG issues as they affect investment decisions made by trustees of occupational pension schemes, including the requirements in respect of the contents of an occupational pension scheme's statement of investment principles (SIP), see Practice note, Environmental, social and governance (ESG) issues for pension schemes.
For information on the Pension Schemes Act 2021, which includes provisions regarding trustees’ governance duties in relation to climate change risk, see Practice notes, Pension Schemes Act 2021: key points: Climate change risk reporting requirements and Pension Schemes Act 2021: implementation tracker.

UK: legal drivers on ESG for financial services industry

Sustainable finance is the process of taking ESG considerations into account in investment decision-making, with the aim of increasing investment in longer-term and sustainable activities. Practice note, A guide to key resources: sustainable finance will help you navigate Practical Law's sustainable finance materials.

Tracking sustainability developments for regulated firms

Practice note, Horizon scanning for financial services practitioners: Sustainable finance tracks forthcoming significant legal and regulatory developments on sustainable finance.
Climate change and sustainability work by international financial services authorities: tracker tracks key developments at an international level that impact UK financial services firms relating to climate change and sustainability.

Green and sustainable investment and lending

For key ESG resources fro finance lawyers, including on green, sustainability-linked and social loans and bonds, see Environmental, social and governance (ESG) for finance lawyers toolkit (UK).

UK as a net zero financial centre

The UK is committed in law to net zero and the government is pushing for the UK to be a net zero financial centre. Key initiatives relating to this ambition include:
  • The UK green taxonomy.
  • Climate transition plans.
  • Mandatory TCFD disclosures.
  • Integrated sustainability disclosures.
For an overview of the key measures and initiatives the UK government and financial services regulators are taking to develop a greener financial system, notably on climate change and sustainability, see Practice note, Hot topics: UK regulation of sustainable finance.

EU: ESG initiatives

EU sustainable finance framework and legislation

Practice note, Hot topics: EU sustainable finance regulation provides an overview of the EU sustainable finance framework that puts ESG considerations at the heart of the financial system to help transform Europe's economy into a greener, more resilient and circular system.
The package of EU sustainable finance Regulations seeks to integrate ESG considerations into the investment and advisory process in a consistent manner across sectors. It consists of the:
  • Disclosure Regulation ((EU) 2019/2088) (also known as the SFDR), which imposes harmonised transparency and disclosure requirements on financial market participants and financial advisers, including requiring firms within scope to consider how sustainability risks are incorporated into the investment decision-making process and how the remuneration of individuals is consistent with sustainability issues. For more information, see Practice note, Sustainable finance: SFDR: overview.
  • Taxonomy Regulation ((EU) 2020/852), which establishes an EU-wide classification system (or taxonomy) intended to provide businesses and investors with a common language to identify what degree economic activities can be considered environmentally sustainable. It also imposes new disclosure requirements for certain financial services firms and large public-interest entities (see Practice note, Sustainable finance: Taxonomy Regulation: overview).
  • Low Carbon Benchmarks Regulation ((EU) 2019/2089), which amends Regulation (EU) 2016/1011 by introducing a regulatory framework that lays down minimum requirements for EU climate transition benchmarks and EU Paris-aligned benchmarks at the EU level, to ensure that these benchmarks do not significantly harm other ESG objectives.
Practice note, EU sustainable finance: indirect impact on UK listed companies gives an overview of the indirect impact of EU sustainable finance regulation on UK listed companies that are not financial services firms and matters to consider in relation to increased investor engagement and demand for sustainability information.

Corporate Sustainability Reporting Directive (CSRD) extends Non-Financial Reporting Directive 2014

The EU Non-Financial Reporting Directive 2014 (2014/95/EU) requires large EU public interest entities to publish an annual statement relating to environmental, social and employee-related matters, respect for human rights, anti-corruption and bribery matters.
The Corporate Sustainability Reporting Directive (EU) 2022/2464 significantly expands the non-financial reporting requirements to apply to a wider range of companies (including some non-EU companies). Affected companies will have to report on a broader list of sustainability matters relevant to their businesses in accordance with mandatory EU sustainability reporting standards.
For more information, see:

Development of EU sustainable reporting standards

The European Commission has mandated the European Financial Reporting Advisory Group (EFRAG) to develop of EU sustainability reporting standards (ESRS).
The Corporate Sustainability Reporting Directive (EU) 2022/2464 (CSRD) includes requirements for companies to report according to mandatory ESRS developed by EFRAG (see Corporate Sustainability Reporting Directive (CSRD) extends Non-Financial Reporting Directive 2014 above).

ESG supply chain due diligence developments

For information on mandatory ESG-related supply chain due diligence requirements in the EU (both existing and emerging), see Practice note, ESG-related supply chain due diligence: UK and EU developments. These include:

Sustainable products, greenwashing and consumer protection

The Commission has proposed the following measures in relation to product sustainability, greenwashing and consumer protection as part of its Green Deal package:
The Council has also adopted the Sustainable Batteries Regulation which modernises and replaces the Batteries Directive 2006 and ensures the sustainability of batteries placed on the EU market throughout their entire life cycle. For further guidance, see Sustainable Batteries Regulation: legislation tracker and Practice note, EU Batteries Directive 2006: Proposed Batteries Regulation to replace Batteries Directive 2006).

Human rights sanctions regime

In December 2020, the EU adopted the Human Rights Violations Regulation ((EU) 2020/1998) and the Human Rights Violations Decision (2020/1999), which together establish a global human rights sanctions regime for the EU. The regime allows the EU to impose sanctions on individuals, entities and bodies that are responsible for, involved in or associated with serious human rights violations and abuses in any part of the world (see European Council: EU adopts a global human rights sanctions regime (7 December 2020)).

International initiatives on ESG

UN 2030 Agenda for sustainable development

In September 2015, the countries at the UN Sustainable Development Summit 2015 formally adopted the 2030 Agenda for Sustainable Development. The Agenda includes 17 Sustainable Development Goals (see Sustainable Development Goals (SDGs) below) and 169 targets designed to stimulate action over the next 15 years (see Legal update, UN adopts the 2030 Agenda for Sustainable Development).
Sustainable development has been defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
The Agenda follows from the 1992 UN Conference on Environment and Development (UNCED, frequently referred to as the Earth Summit), and the 2012 Rio Declaration, both of which set broad environmental goals on a wide range of areas, including biodiversity, energy, forests and sustainable agriculture (see Legal update, Outcome of the Rio+20 conference).

Sustainable Development Goals (SDGs)

The 17 SDGs relate to:
  • Social issues (ending poverty and hunger, ensuring clean water and sanitation, good health and well-being, quality education and gender equality and reducing inequalities).
  • Economics (decent work and economic growth, industry innovation and infrastructure).
  • The environment (affordable and clean energy, sustainable cities and communities, responsible consumption and production, climate action, marine life and life on land).
  • Governance (peace, justice and strong institutions and partnership for the goals).
The SDGs are not legally binding, but governments are expected to take ownership and establish national frameworks to achieve them. The SDGs applied from January 2016 and will guide the decisions that the UN takes in the period to 2030.
In July 2020, the Local Government Association (LGA) and the UK Stakeholders for Sustainable Development (UKSSD) launched guidance to local authorities on the SDGs.

UN proposal for treaty on business and human rights

The treaty would go beyond the voluntary UN Guiding Principles for Business and Human Rights (UNGPs), which provide a global standard for preventing and addressing the risk of adverse human rights impacts linked to business activity.

UN recognition of safe, clean, healthy and sustainable environment as human right

In July 2022, the UN General Assembly passed resolution 76/300, which recognises that a clean, healthy and sustainable environment is a human right (see Legal update, UN recognises clean, healthy and sustainable environment as human right). The landmark resolution was passed with 161 votes in favour and 8 abstentions and follows the UN Human Rights Council (UNHRC) passing a similar resolution in October 2021 (see Legal update, UN Human Rights Council recognises safe, clean, healthy and sustainable environment as human right).
The UN resolution recognises that climate change and environmental damage (including from unsustainable use of natural resources, air, land and water pollution, poor management of chemicals and waste, and biodiversity loss) has a negative impact on enjoyment of all human rights.
The resolution is likely to support the growing trend in climate change litigation of connecting protection of human rights with the responsibilities of governments and greenhouse gas emitters to act on climate change.

International Sustainability Standards Board (ISSB) sets new global sustainability accounting standards

In June 2023, the ISSB (established by the IFRS Foundation) issued the first two IFRS Sustainability Disclosure Standards. They will be effective for annual reporting periods starting 1 January 2024, with early adoption permitted in some circumstances. From 2024, the IFRS Foundation will also take over the monitoring of progress on companies’ climate-related disclosures from the TCFD.

UN resolution seeking clarity on countries' climate change and human rights obligations

In March 2023, the United Nations General Assembly (UNGA) adopted a resolution inviting the UN's International Court of Justice (ICJ) to issue an advisory opinion on countries' climate change and human rights obligations under international law (see Vanuatu press release). The resolution was introduced by 18 countries led by Vanuatu and was co-sponsored by 132 states.
The resolution asks the ICJ to issue an opinion on:
  • The obligations of states under international law to ensure the protection of the climate system and other parts of the environment from anthropogenic (human-caused) emissions of greenhouse gases (GHGs) for states and for present and future generations.
  • The legal consequences of these obligations for states that have caused significant harm to the climate system and other parts of the environment. The resolution asks the ICJ to consider states (in particular small island developing states) and people of present and future generations adversely affected by climate changes.

Task Force on Nature-related Financial Disclosures (TNFD)

The Task Force on Nature-related Financial Disclosures (TNFD) reporting framework is intended to establish a voluntary method for organisations (particularly companies) to identify, assess and report on material nature-related risks and opportunities (sometimes referred to as "biodiversity-related risks and opportunities"). It has been tested throughout 2022 and the final version is due to be issued in September 2023. For more information, see Practice note, Taskforce on Nature-related Financial Disclosures (TNFD): disclosure framework.

Task Force on Inequality-related Financial Disclosures (TIFD)

The Task Force on Inequality-related Financial Disclosures (TIFD) aims to reduce inequality created by the private sector. It will provide guidance, thresholds, targets, and metrics for companies and investors to measure and manage their impacts on inequality, as well as inequality’s impacts on company and investor performance. For more information, see the TIFD website.