On 22 May 2025, the EU banking supervisor The European Banking Authority (EBA) announced the release of several proposed amendments to its Pillar 3 disclosure requirements, previously contemplated under the CRR3 banking package. These amendments clarify ESG risk-related reporting for small and medium-sized banks, as well as expand on the guidelines for larger institutions. Feedback from the public consultation on these proposals is due by August 22, 2025. Below is a table summarising the simplified approach to be taken by the various institution types. The full consultation paper can be accessed here. 

As illustrated above, the EBA is introducing a more streamlined approach to ESG risk disclosures, adjusting the level of detail required based on the size and complexity of each institution. Smaller, non-complex institutions (SNCIs) need only report their most essential ESG risk information, such as their exposure to physical and transition risks and involvement with fossil fuel sectors. Larger institutions and subsidiaries will also benefit from a proportionate approach, with requirements scaled to their specific circumstances. The EBA is not introducing new disclosure obligations for large, listed institutions, but is instead clarifying and improving the existing requirements based on feedback and questions received about the current Pillar 3 ESG framework. The goal is to ensure that the rules are easier to understand and apply, without significantly changing the core information that must be disclosed. To make compliance easier and ensure consistency, the EBA will directly link Pillar 3 disclosure templates to the EU Taxonomy Regulation, meaning that any updates to the Taxonomy Regulation will automatically be reflected in the Pillar 3 templates, which will ensure that the information disclosed under both frameworks remains identical and eliminating the need for separate regulatory updates.

The EBA is also providing transitional measures to give institutions enough time and certainty to adapt to the new ESG disclosure requirements. This will be a phased implementation where large, listed institutions should comply with the current rules until the end of 2026, except for certain templates related to the Green Asset Ratio and Taxonomy Regulation, in which disclosure requirements are suspended until then. Institutions newly covered by the updated regulations (CRR3) will start applying the new rules from the same date. During the transition period, the EBA encourages regulators to allow institutions the flexibility outlined in the transitional provisions. If institutions choose to follow the new approach early, regulators should support this and avoid asking for additional disclosures. This is intended to reduce operational burdens, provide clarity, and ensure a consistent and proportionate rollout of the new requirements across all affected institutions. Please read our previous blog posts on the EBA’s ESG reporting requirements here and here.

The UK government is currently consulting on draft primary legislation establishing a UK Carbon Border Adjustment Mechanism (“CBAM”), which is set to come into force from 1 January 2027. The current consultation is limited to ensuring that the draft primary legislation implements the Government’s stated policy intent, rather than seeking further stakeholder comment on the policy design itself and is open until 3 July 2025.

1. Introduction and Purpose of CBAM


The CBAM is a tax charged on the emissions embodied in certain specified goods imported into the United Kingdom. Those emissions include not only the emissions from the production process itself but the indirect emissions from the use of electricity used in that process. Its primary aim is to ensure that imported goods are subject to a carbon price equivalent to that faced by domestic producers, thereby preventing carbon leakage and supporting the UK’s climate objectives, specifically its commitment to achieve net zero by 2050.

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On April 16, 2025, the “Stop-the-Clock” Directive was published in the EU Official Journal. It constitutes a significant amendment to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) as it key sustainability reporting and due diligence obligations.

Key Changes Introduced

  • CSRD Reporting Delay: The directive postpones CSRD reporting requirements by two years for companies in “wave 2” (due to report in 2026 for financial years starting on or after January 1, 2025) and “wave 3” (due to report in 2027 for financial years starting on or after January 1, 2026). These companies now have until 2028 and 2029, respectively, to comply. Reporting for “wave 1” companies and non-EU companies (due in 2029) remains unchanged.
  • CSDDD Implementation Delay: The transposition deadline for Member States to integrate the CSDDD into national law is extended by one year to July 26, 2027, with the first application phase for the largest companies (those with over 5,000 employees and €1.6 billion in net turnover) deferred to July 26, 2028.

Simplification Efforts and Impacts on Business

The adoption of the “Stop-the-Clock” Directive provides breathing room for legislators to finalize substantive amendments to both directives, including raising the CSRD employee threshold to 1,000 (potentially reducing the scope by 80%) and simplifying due diligence requirements under the CSDDD. The delay also offers relief for companies grappling with the complexity of CSRD and CSDDD compliance. It provides additional time to align internal processes, enhance data collection systems, and prepare for revised European Sustainability Reporting Standards (ESRS), which the European Financial Reporting Advisory Group (EFRAG) is tasked with simplifying by October 31, 2025.

Next Steps for CSRD and CSDDD Negotiations

With the “Stop-the-Clock” Directive in place, attention now shifts to the substantive amendments proposed for the CSRD and CSDDD under the Omnibus I package, detailed in the European Commission’s proposal COM(2025)81. These amendments aim to streamline reporting and due diligence requirements, particularly for SMEs, while maintaining the EU’s sustainability objectives.

In the European Parliament the Legal Affairs Committee (JURI) will lead the negotiations, and the process begins with an exchange of views in April 2025, followed by a draft report from MEP Jörgen Warborn reportedly scheduled for June 4, 2025. Amendments must be submitted by June 27, 2025, with committee and plenary votes scheduled for October 2025. The European Commission aims to have the directive adopted by the end of 2025, after which Member States will transpose the changes into national law.

Looking Ahead

While the “Stop-the-Clock” Directive eases immediate pressures, it has sparked debate. Some sustainability advocates warn that delays could undermine the EU’s green agenda, while others view it as a pragmatic step to balance competitiveness with environmental goals.

Other authors: Kirsty Morris

The House of Commons’ Joint Committee on Human Rights (the “Committee“) has launched a new inquiry to examine the UK’s current framework in relation to forced labour in international supply chains1. The Committee is seeking to establish if the current framework is effective in managing the risk of exposure to forced labour and whether it keeps up with international global developments. Submissions for evidence closed on 14 February 2025.

Legislative background

Modern slavery in international supply chains is predominantly governed in the UK by the Modern Slavery Act 2015 (the “MSA”). In October 2024, the House of Lords’ Modern Slavery Act Committee concluded in a report (the “Report“) that, despite the MSA being considered a world-leading piece of legislation when it was implemented, the UK has not kept up with global best practices. The Report recommended that the Government introduce mandatory modern slavery due diligence requirements.

 In its response to the Report2, the Government stated that it is planning to improve the modern slavery statement registry and that it supports voluntary due diligence approaches taken by UK businesses in line with the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. The Government also stated that it is considering how it can strengthen penalties for non-compliance with the MSA.

Call for evidence

The Committee’s new inquiry presented an opportunity for stakeholders, including businesses, to share opinions on the effectiveness of the current UK framework in dealing with forced labour and to highlight the challenges they face in mitigating the risk of forced labour in their international supply chains. The Committee sought evidence on the following:

  1. Legislative Framework: The effectiveness of the MSA and other UK laws in preventing goods linked to forced labour from entering the UK market and whether this meets international compliance standards.
  2. Enforcement and Corporate Activity: The roles and powers of key public bodies in preventing forced labour-linked goods from entering the UK market.
  3. Consumer behaviour: The impact of forced labour exposure on consumer attitudes and corporate profits.
  4. Procurement: The relationship between procurement and the risk of exposure to forced labour.
  5. International approaches: Consider the approach of other jurisdictions, such as the EU and US.

International approaches to forced labour

International legislative approaches to forced labour are now more far reaching than under the MSA including notably the EU Forced Labour Regulation and the US (for example, under the Uyghur Forced Labor Prevention Act).

  • EU Forced Labour Regulation prohibits companies from “placing and making available” on the EU market, or exporting from the EU, products made using forced labour (see here for more information).
  • Uyghur Forced Labor Prevention Act prohibits the importation of goods produced wholly or in part in the Xinjiang Uyghur Autonomous Region of China, unless clear and convincing evidence proves they are not made with forced labour. It establishes a rebuttable presumption that all goods from this region are tainted by forced labour. This Act has also been implemented in Canada and Mexico pursuant to the United States-Mexico-Canada Agreement.

With regards to human rights due diligence obligations, a number of international laws impose more stringent requirements on businesses than those set out in the MSA. The Report cites the German Corporate Due Diligence in Supply Chains Act (see here and here for previous articles), the French Duty of Vigilance Law, the Norwegian Transparency Act and the EU’s Corporate Sustainability Due Diligence Directive (see here for changes presented by the “Omnibus” package) as going beyond the transparency requirements of section 54 of the MSA by introducing mandatory due diligence obligations.

Next steps

The Committee’s findings will provide an indication of the challenges faced by businesses in tackling forced labour in international supply chains. These are likely to inform the Government’s next steps in trying to implement its previous stated ambition of improving the UK’s framework in relation to forced labour.

  1. UK Parliament-Joint Committee on Human Rights, “New Inquiry: Forced Labour in UK Supply Chains Inquiry“, 21 January 2025, available at https://committees.parliament.uk/work/8812/forced-labour-in-uk-supply-chains/ ↩︎
  2. UK Home Office, “Government response to House of Lords Modern Slavery Act 2015 Committee report, ‘The Modern Slavery Act 2015: becoming world-leading again‘”, 16 December 2024, available at https://www.gov.uk/government/publications/modern-slavery-government-response-to-house-of-lords-committee-report/government-response-to-house-of-lords-modern-slavery-act-2015-committee-report-the-modern-slavery-act-2015-becoming-world-leading-again#response-to-recommendations-enforcement-of-the-modern-slavery-act ↩︎

Other authors: Dušan Stojković

On 26 February 2025, the European Commission (“Commission”) published its “Omnibus I” or “Sustainability Omnibus” package as part of its mission to improve the competitiveness of the European Union. The Omnibus Package foresees changes to several EU instruments pertaining to sustainability reporting under the Corporate Sustainability Reporting Directive (“CSRD”) and Taxonomy Regulation, sustainability due diligence under the Corporate Sustainability Due Diligence Directive (“CSDDD”), and imports of carbon-intensive products under the Carbon Border Adjustment Mechanism (“CBAM”). The Commission aims to “cut red tape” and “simplify EU rules for citizens and business” by means of this Omnibus Package.

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The Brazilian National Council of Justice (CNJ) has recently issued Recommendation No. 156/2024, advising all branches of the Brazilian Judiciary and judges to adopt the second scope of the CNJ’s Protocol for Judging Environmental Lawsuits (Protocol). This second scope provides guidelines for quantifying the impact of environmental damages on climate change. In 2023, the CNJ published the first scope of the Protocol, which focused on using satellite imaging as evidence in environmental lawsuits.

The second scope aims to assist Brazilian judges in adhering to Article 14 of CNJ Resolution No. 433/2021, which requires that verdicts on environmental damages consider their impact on climate change. Specifically, the Protocol introduces methodologies for calculating greenhouse gas emissions resulting from deforestation and fires in Brazilian biomes, assigning a financial value to these emissions.

The financial valuation of damages is calculated using the following steps:

  1. Determine the extent of the damaged area (in hectares).
  2. Estimate the average carbon stock in the area or biome (per hectare).
  3. Calculate the carbon stock lost by multiplying (1) and (2).
  4. Convert the lost carbon stock into tons of carbon dioxide equivalent (CO2e).
  5. Assign a price to CO2e, based on Protocol parameters.
  6. Calculate the final value by multiplying (4) and (5).

Regarding CO2e pricing, the Recommendation specifies that judges should not use a value lower than the rate established for contracts under the Amazon Fund, which is currently set at USD 5.00 per tCO2e. When this rate is revised, judges are encouraged to adopt the updated value, converted into Brazilian reais (BRL).

This new framework is expected to guide the Brazilian Judiciary in addressing environmental damage lawsuits more comprehensively. By incorporating the climate impacts of deforestation and fires, the assessment of these damages by the Judiciary will no longer be limited to their direct effect on the forest but is also expected to reflect their contribution to climate change.

On 19 November 2024, the Council of the European Union (“Council”) adopted a new regulation on environmental, social and governance (ESG) rating activities.1 The new regulation, which was presented by the European Commission on 13 June 2023, aims to make ESG rating activities in the EU more consistent, transparent and comparable.2  This will in turn build investors’ confidence in sustainable financial products.  We previously commented on the Council’s agreement to regulate ESG ratings providers in December 2023, and the provisional agreement reached between the Council and the European Parliament in February 2024.

Among other things, the new regulation aims to strengthen the reliability and comparability of ESG rating by improving the transparency and integrity of the operations that ESG ratings providers conduct.  In particular:

  • ESG ratings providers established in the EU:
    • will be authorised and supervised by the European Securities and Markets Authority; and
    • will have to comply with certain transparency requirements.
  • ESG ratings provides established outside the EU that wish to operate within the EU will need to:
    • obtain an endorsement of their ESG ratings by an EU authorised ESG rating provider;
    • obtain a recognition based on a quantitative criterion; or
    • be included in the EU registry of ESG rating providers on the basis of an equivalence decision.

The new regulation also requires ESG rating providers to take “all necessary steps” to ensure that that they are not affected by any existing or potential conflict of interest (Article 25).

Next steps

The regulation will be published in the EU’s Official Journal and enter into force 20 days later. The regulation will apply 18 months after the date of its entry into force.

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The Mayer Brown team is closely monitoring these developments and their potential implications, particularly for market participants in the finance sector and across the asset management and investments community.

  1. Environmental, social and governance (ESG) ratings: Council greenlights new regulation, Council of the EU, Press Release, 19 November 2024, available at: https://www.consilium.europa.eu/en/press/press-releases/2024/11/19/environmental-social-and-governance-esg-ratings-council-greenlights-new-regulation/
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  2. Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities, and amending Regulations (EU) 2019/2088 and (EU) 2023/2859, available at: https://data.consilium.europa.eu/doc/document/PE-43-2024-INIT/en/pdf ↩︎

Other contributor: Jan Buschfeld

On 12 November 2024, a Dutch appeals court ruled that Shell does not have to reduce its CO2 emissions by 45% by 2030 compared to 2019 levels, as previously ordered by the Hague District Court on 26 May 2021. Shell now has the right to adjust its own emissions reductions targets as it sees fit. However, the appeals court maintained the District Court’s stance that there exists a private law duty of care which requires, through corporate policy, that companies contribute to the mitigation of dangerous climate change by reducing their emissions. This “unwritten” Dutch duty of care requires that “companies like Shell, which contribute significantly to the climate problem and have it within their power to contribute to combating it, have an obligation to limit CO2 emissions in order to counter dangerous climate change”. Therefore, whilst the appeals court judgment overturned the requirement that Shell reduce its CO2 emissions by 45%, it did not overturn this new duty. Read our full analysis on the Mayer Brown website for more information.

In a significant development for EU corporate sustainability legislation, European Commission President Ursula von der Leyen has announced plans to merge three cornerstone sustainability frameworks – the Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD), and the Taxonomy Regulation – through so-called omnibus legislation.

While the Commission maintains this consolidation aims to streamline reporting burdens and reduce bureaucratic overlap without altering substantive requirements, the proposal may have unintended consequences as it could inadvertently reopen these established frameworks to substantial revision during the legislative process.

Under the EU’s legislative process, once the Commission tables its proposal, both the European Parliament (EP) and Council will have opportunities to propose amendments. Recent precedent from the EU Deforestation Regulation (EUDR) vote suggests that center-right coalitions may push for more extensive changes than initially intended.

The technical complexity of merging these frameworks presents additional challenges, given their different legal forms (regulations versus directives) and varying scope of application. While the European Sustainability Reporting Standards should remain unchanged under Commission mandate, the broader implications of this consolidation remain uncertain.

Mayer Brown closely monitors these developments as they may significantly impact corporate sustainability compliance requirements in the EU.

On November 11, 2024, one of the first substantive outcomes of the 29th Session of the UN Conference of the Parties to the UN Framework Convention on Climate Change (COP29) was approved. The President of COP19 introduced a draft decision of the Conference of the Parties Serving as the Meeting of the Parties to the Paris Agreement (CMA) Bodies. The decision took note of the Article 6.4 Supervisory Body’s adoption of two standards (one on “methodologies” and one on “removals”), while also reiterating the authority of the Supervisory Body to prepare the rules for the implementation of Article 6.4.

Article 6.4 of the Paris Agreement aims to replace the Clean Development Mechanism (CDM) of the Kyoto Protocol, and to establish a global carbon credit market to promote the reduction of greenhouse gas (GHG) emissions. The standards prepared by the Supervisory Body establish criteria for the implementation of this global market, and aim for a uniform approach for two elements of the mechanism: (i) the development and evaluation of the methodologies applicable to Article 6.4; and (ii) the requirements for activities involving GHG removals under the Article 6.4 mechanism. These standards will assist project developers in creating and submitting their methodologies, and allow projects to be registered under the Article 6.4 mechanism.

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