ESG Watch: Rules become reality

On 9 September 2026, the ASA published three rulings against Thomas Cook, We Love Holidays, and Lotus Leisure. All the advertisements in question were identified for investigation following intelligence gathering by the ASA's Active Ad Monitoring system, which uses AI to search for online ads that might break the rules.

All three rulings revolved around the use of similar terms in relation to advertised accommodation — "eco resort", "eco hotel" and "eco-conscious resort." Companies argued that these did not constitute environmental claims of their own making. Rather, those "eco" terms were either part of the name of the accommodation being advertised, or automatically generated by pay-per-click advertising platforms, based on commonly used search terms.

In all three cases, the ASA held that consumers would interpret these terms as meaning the accommodation had certain environmental characteristics or benefits. As such, they constituted claims, the basis of which had to be made sufficiently clear.

In each case, the advertised accommodation did, in fact, have various initiatives in place to reduce environmental impact, including use of solar power, grey water recycling, and the elimination of single-use plastics from operations. However, none of this information was communicated in the ads themselves, nor made available by other means (e.g., prominent placement on linked-to landing pages).

Our view

We would highlight two key takeaways from these rulings:

Firstly, they underscore regulators' increasing scrutiny of green claims, and the need for businesses to ensure that any claims they make are clearly explained and substantiated. Enforcement is not contingent on receipt of a complaint; regulators are proactively seeking to identify and rule on claims that may fall short of the standards required.

Secondly, they show that advertisers cannot hide behind arguments that "eco" terms are part of a brand name, or were created or supplied by a third party. Irrespective of the original source of the wording, companies must now be live to the fact that they may be held responsible for the impression those terms create.

If they can reasonably be interpreted as a description of the product or service being advertised, then they will likely be treated as environmental claims that the advertiser must be able to justify — if not in the ad itself, then by linking to a page where the basis for the claim is sufficiently and prominently explained.

Developed with support from Mishcon de Reya, the UK NZCBS provides a common reference point for anyone seeking to fund, procure, design, construct, occupy, manage or invest in net zero carbon buildings.

As well as providing an industry-agreed definition of what constitutes a net zero carbon aligned building, it also lays out the methodology for demonstrating that these conditions have been met. This includes limits, targets and requirements in relation to operational energy use, fossil fuel elimination, embodied carbon, on-site renewable electricity generation, electricity demand management, space heating and cooling, and refrigerant and water use.

As of 28 July 2026, buildings may be independently verified against the standard, helping to cut through greenwashing and ensuring that only buildings with demonstrable low carbon outcomes can claim "Net Zero Carbon Aligned" status.

Our view

People may question the need for another standard but, rather than viewing different frameworks as competing certifications, it is more useful to think of them as answering different questions.

BREEAM and LEED's essential purpose, for example, is to provide holistic assessment of a building's sustainability credentials. NABERS UK seeks to measure and verify actual operational energy performance. The UK NZCBS offers something different, ultimately producing not a sustainability score or star rating, but a verified claim that a building is aligned with a science-based net zero pathway.

Because the UK NZCBS complements existing frameworks, we foresee that the market norm for leading assets may become a combination of all of them.

We advise real estate stakeholders to actively consider how, and how quickly, adoption of UK NZCBS is likely to influence investment decisions, occupier requirements, procurement strategies and financing arrangements.

For more detail, see our full article: From ambition to verification: why the UK Net Zero Carbon Buildings Standard (UK NZCBS) matters.

On 30 September 2026, the FCA published a policy statement setting out final rules to align listed issuers' sustainability and climate disclosures with the new UK SRS.

The headline outcome from its recent consultation is a softening of the proposed regime. Rather than mandating climate-related disclosures under UK SRS S2, the FCA has instead opted for a comply-or-explain approach across all categories of disclosure, citing concerns over proportionality for smaller companies and international competitiveness of companies operating in the UK.

A further notable change is that international companies with secondary UK listings will also be required to report against UK SRS on a comply-or-explain basis, rather than merely signposting reporting requirements and disclosures under their home jurisdiction.

Otherwise, final rules are largely as originally proposed back in January:

• UK SRS-aligned disclosures will replace existing TCFD-aligned requirements for accounting periods beginning on or after 1 January 2027, with first reports due in 2028.
• Final rules retain transitional reliefs, including a one-year exemption from Scope 3 emissions disclosures and a two-year "climate-first" period, during which issuers may defer wider UK SRS S1 disclosures.
• Companies are not required to have transition plans, however they must transparently disclose if they have published one (and where it can be found) or why they have not.
• Similarly, companies are not required to seek third-party assurance, but if they do, they should state the name of the assurance provider, the disclosures that have been assured and to what level (e.g., reasonable or limited assurance).

Our view

Even if listed companies are now only required to make climate-related disclosures on a comply-or-explain basis, they should not mistake this relaxation of the rules for reduced expectations.

The FCA repeatedly emphasises that issuers remain subject to broader disclosure obligations concerning principal risks and uncertainties, and that investors continue to require financially material sustainability information. In practice, it is likely that market expectations, investor stewardship and peer benchmarking will exert pressure on many larger listed companies towards full compliance.

For boards, the key message remains unchanged from our Q1 update: use the runway before first reporting begins in 2028 to undertake gap analysis, strengthen governance arrangements, review data systems, and assess how UK SRS reporting interacts with disclosure requirements in other relevant jurisdictions (most notably ESRS).

Key planks of the EU Green Deal and Circular Economy Action Plan have either taken practical effect this quarter or soon will.

The EU Right to Repair Directive (RRD) seeks to extend the lifetime of consumer goods and reduce premature disposal by making repair more accessible and attractive. Obligations for manufacturers of products listed in Annex II of the directive (e.g., large white goods, vacuum cleaners, smartphones and tablets) have applied since 31 July 2026. These include that manufacturers:

• Must repair goods that are technically repairable within a reasonable timeframe and at a reasonable cost;
• Cannot use contractual clauses, hardware locks, or software restrictions to prevent independent repair, unless justified by legitimate and objective reasons (e.g., safety or IP protection);
• Must provide access to spare parts at a reasonable price and may not block the use of compatible, second-hand or 3D-printed parts that are safe and compliant; and
• Must provide easily accessible information on repair services, including indicative prices for typical repairs, either on websites, instruction manuals, or a free-access platform.

Alongside the RRD, the EU Packaging and Packaging Waste Regulation (PPWR) became directly applicable on 12 August 2026. Applying to all packaging placed on the EU market (including packaging produced outside the EU) it covers manufacturers, importers, distributors, and e-commerce operators. Headline requirements include that:

• Packaging must minimise the presence and concentration of substances of concern, including in emissions and any outcomes of waste management;
• Packaging must be designed for material recycling by 2030, such that resulting secondary materials are of sufficient quality to substitute for primary raw materials;
• Plastic packaging must contain minimum levels of recycled content, recovered from post-consumer plastic waste;
• Packaging must include clear labelling, indicating material composition, recyclability, and instructions for disposal; and
• By 2030, packaging must be designed so that its weight and volume is the minimum necessary to ensure its functionality.

From 27 September 2026, the Empowering Consumers for the Green Transition Directive (ECGT) takes practical effect. Intended to promote sustainable consumption and better purchasing decisions, its headline provisions include:

• Requiring traders to provide consumers with pre-contract information about the durability and reparability of goods, including details on commercial guarantees of durability, reparability scores, availability of spare parts, repair and maintenance instructions, and the period for which software updates will be supplied (where applicable); and
• Adding 12 banned and automatically unfair practices to Annex 1 of the Unfair Commercial Practices Directive, effectively banning greenwashing. Blacklisted practices include use of unverified sustainability labels, unsubstantiated generic environmental claims (e.g., "green" or "eco-friendly"), and claims based on offsetting.

Our view

Viewed individually, these measures each address different sustainability challenges. However, together with the Ecodesign for Sustainable Products Regulation (ESPR), we consider it more helpful and valuable to view them as an interconnected regulatory framework governing the entire product lifecycle.

This is effectively moving sustainability regulation upstream. Increasingly, the EU is regulating the fundamental characteristics of products themselves — how they are designed, what materials they contain, how long they last, whether they can be repaired, and how they are packaged — as well as how those characteristics are communicated to consumers.

As a result, the key question becomes not whether a company can market a product as sustainable, but whether the product itself has been designed in a way that complies with emerging circular economy requirements. In other words, sustainability is becoming more of a market access issue than a branding issue.

This has significant governance implications. Increasingly, product design, procurement, engineering, packaging, legal, compliance and commercial teams will need to work together from the earliest stages of product development to ensure products remain marketable in the EU.

On 13 July 2026, the European Commission adopted two measures to support implementation of the EUDR, which begins to apply from 30 December 2026.

A Delegated Act confirms changes to scope following public consultation. While not altering regulated commodities (cattle, wood, cocoa, soy, palm oil, coffee, and rubber), these changes do affect the list of in-scope products derived from those commodities.

Products removed from scope include leather and re-treaded tyres, while those added include soluble coffee and certain palm oil derivatives. To allow time for businesses to prepare for these changes, new products added to scope will only become subject to the regulation from 30 December 2027.

The Commission has also adopted the Implementing Act, which finalises technical rules for the EUDR information system. This includes introduction of simplified due diligence declarations for micro and small primary operators — i.e., undertakings that place regulated commodities/derived products on the EU market for the first time, and which satisfy two or more of fewer than 50 employees, less than €10 million turnover, or less than €5 million net assets.

Our view

Taken together, these measures do not alter the core due diligence obligations established under the EUDR. Rather, they provide practical clarity on product scope, due diligence declarations, and operation of the information system.

For companies trading in relevant commodities and derived products, the key risk is no longer regulatory ambiguity but execution. Companies should use this period to assess whether any product scope changes affect them, and to ensure that they are ready to comply with their obligations, i.e.:

• Large- and medium-sized primary operators must carry out due diligence in accordance with the detailed requirements of Article 8, and submit a due diligence statement confirming that the products they place on the market are deforestation-free and produced in accordance with relevant legislation in the country of production.
• Micro and small primary operators must similarly carry out due diligence in line with Article 8, but need only submit a single simplified declaration, rather than a full due diligence statement.
• Downstream operators and traders must collect and retain for five years information that identifies primary operators, downstream operators or traders that have supplied them with relevant products, and any downstream operators or traders whom they have supplied. Where they are the first downstream operator or trader in the supply chain (i.e., they were supplied by a primary operator), they must also collect and retain the due diligence statement number or declaration identifier associated with those products.

On 3 July 2026, the European Commission formally adopted revised ESRS for use by companies inside the mandatory scope of the Corporate Sustainability Reporting Directive (CSRD), and a voluntary standard for smaller companies outside it.

As covered in our previous update, simplified core standards are expected to reduce reporting costs per company by around a third, having cut mandatory data points by more than 60 per cent and total data points by more than 70 per cent.

The voluntary standard provides a proportionate framework for sustainability reporting by smaller companies. It also establishes a value chain cap, meaning that companies subject to the CSRD cannot require smaller companies in their value chains to provide them with information beyond what is covered by the voluntary standard.

Delegated acts revising the core ESRS and establishing the voluntary standard now pass to the European Parliament and Council for scrutiny. Once in force, the revised ESRS will apply to reporting for financial years starting on or after 1 January 2027.

Our view

For EU undertakings and non-EU issuers required to report from 2028 (for financial years starting on or after 1 January 2027), the key task is to reassess reporting processes against the revised ESRS standards. Those that are already subject to mandatory reporting under the existing regime for FY26 have the option to apply the revised ESRS early and should assess the potential benefits of doing so.

Non-EU ultimate parent companies of groups that exceed €450 million EU turnover, and that have an EU subsidiary/branch with net turnover of more than €200 million, also have a strategic decision to make. As outlined in more detail below, while such companies will be able to apply a dedicated standard for non-EU undertakings (ESRS-40a), following revised ESRS could well prove the better option.

As trailed in our previous update, on 23 July 2026, the European Financial Reporting Advisory Group published an exposure draft of dedicated ESRS for non-EU undertakings.

Previously referred to as Non-EU ESRS (N-ESRS) or ESRS for Third Countries (ESRS-TC), these standards now go by the name ESRS-40a, reflecting their application to certain non-EU undertakings in accordance with article 40a of the Accounting Directive. This means non-EU headquartered companies and groups that:

• Had EU turnover of more than €450 million (at a group or individual level) in each of the last two consecutive years; and
• Have an EU branch or subsidiary that generated more than €200 million turnover in the previous financial year.

Under the CSRD, such businesses will be required to make ESRS-aligned disclosures from 2029 (for financial years beginning on or after 1 January 2028) and will have three options for doing so:

• Apply ESRS-40a on a global basis;
• Apply ESRS-40a using a "mixed approach" (see below); or
• Apply the revised full ESRS required of large EU businesses.

Using the revised ESRS as their starting point, the ESRS-40a consultation draft proposes two significant changes:

• Reporting would be based on an undertaking's impact materiality assessment only, resulting in the exclusion of disclosure requirements or terminology relating to (financial) risks and opportunities, resilience and dependencies.
• Per the aforementioned "mixed approach", for topics other than climate change (which must be reported at a global level), undertakings could limit disclosures to impacts arising in the EU only.

Our view

For reasons expanded upon in our full article — Simplified EU sustainability reporting standards for non-EU companies (ESRS-40a): are they really the better choice? — we believe that many businesses may be better served by adopting the full ESRS framework, rather than ostensibly simpler ESRS-40a standards.

These include that:

• It is questionable whether ESRS-40a represents a further simplification of revised ESRS standards, which already cut total data points by more than 70 per cent. Indeed, the proposed mixed approach, which would result in using different scopes for different topics within the same report, seems to add complexity rather than reducing it.
• Disclosure requirements that ESRS-40a proposes to drop (e.g., in relation to identification of climate-related risks and resilience to climate change) are still required by IFRS-aligned regimes such as UK Sustainability Reporting Standards. Thus, their removal is unlikely to reduce the reporting burden for non-EU entities already committed to IFRS or equivalent reporting standards.
• Applying the double materiality approach required by full ESRS standards is essential to developing a more timely and complete picture of where a business is exposed to risk, lacks resilience and needs to transform. Adopting a single materiality lens — whether focusing on financial materiality or impact materiality only — is of limited strategic value by comparison.
• Where a third-country ultimate parent applies full ESRS, this can relieve EU subsidiaries of their own standalone CSRD reporting obligations, thereby potentially representing a net reduction in burden across the whole group.

We therefore recommend that non-EU parent companies of groups model the full ESRS option carefully before defaulting to ESRS-40a. This modelling should account for the analytical work that will be required regardless of the EU reporting route chosen, the potential relief available to EU subsidiaries, and the practical and reputational risks of adopting ESRS-40a's mixed approach (should it survive the consultation process).

These are strategic decisions with long-term consequences for reporting architecture, governance processes and group-level resource allocation. They should be made with legal and sustainability reporting advice, not deferred until after the standard is finalised.

On 29 July 2026, the GHGP announced a series of updates to its corporate standards. Most notably, this included the announcement of plans to combine the GHGP's Scope 1, Scope 2, Scope 3 and emerging Actions and Market Instruments (AMI) standards with ISO’s 14064-1 standard to create a single global standard for carbon accounting.

The stated objective is to reduce fragmentation, improve interoperability, and provide a more consistent foundation for corporate emissions accounting across jurisdictions and reporting frameworks. Stakeholders will be consulted on an integrated exposure draft in Q2 2027, with publication of the final consolidated standard targeted for Q4 2028.

Our view

In previous ESG Watch updates, we have highlighted numerous developments in disclosure regulation and target-setting standards. This announcement from the GHGP is important because its standards sit beneath all those frameworks.

The announcement is also notable in the context of ongoing debates about the future direction of carbon accounting. Controversial proposals advanced by the Carbon Measures coalition, for example, have highlighted disagreement over how corporate climate action, market instruments and emissions impacts should be measured and reported, particularly in relation to Scope 3 emissions.

Against that backdrop, the move to consolidate of the two most widely used carbon accounting standards can be viewed as an attempt to reinforce a common measurement baseline, rather than allowing multiple competing methodologies to become a distraction from the urgent need to accelerate global decarbonisation.

Companies should monitor further developments carefully, as the eventual settlement of these debates could have significant implications for disclosure standards, target setting, transition planning, and assurance expectations.

In our previous edition, we covered the case of KGM v Meta et al, where a Los Angeles jury found Meta and YouTube liable for designing platforms in a manner that contributed to addictive use patterns and subsequent mental health-related harms.

In August, Meta was in the dock again, facing claims originally filed in 2023 by a coalition of 29 US state attorneys general. The case alleged that Instagram and Facebook were deliberately designed to keep children hooked, that Meta misled the public about harms, and that it had illegally harvested data from children under 13.

Little more than a week after opening statements were given, the trial was cut short on 26 August, when Meta elected to settle the claims. While continuing to deny any wrongdoing, Meta will pay up to $18 billion over 10 years to 48 states, plus the District of Columbia and three US territories.

It will also implement a host of changes aimed at better protecting teen users of Facebook and Instagram in participating jurisdictions. These include:

• Introducing a combined two-hour daily usage cap across both apps;
• Blocking app access overnight by default;
• Restricting notifications during night-time and school hours;
• Hiding "like" counts by default;
• Switching off certain appearance-altering filters;
• Implementing stronger age-verification and age-assurance systems; and
• Adding enhanced parental supervision and control tools.

Our view

This case marks a continuation of the new legal playbook being used against the social media giants. Historically, attempts to sue them have fallen foul of section 230 of the US Communications Decency Act, which provides immunity for content posted by users. However, the strategy of focusing on the effects of design choices — such as recommendation systems, video autoplay and infinite scroll — means that the platforms can be held liable when those features are judged to cause harm.

With thousands of similar cases working their way through the courts, the sense that a "Big Tobacco" moment has arrived for Big Tech is only getting stronger. AI companies should be paying close attention too. With OpenAI already facing legal action in relation to ChatGPT's alleged contribution to suicides, self-harm and delusional episodes, they may be next in line.

On 18 August 2026, the New Zealand Government passed its controversial Climate Change Response (Tort Liability) Amendment Bill. Amending the Climate Change Response Act 2002, the new law bars any court from finding any person, including the Crown, liable in tort for emissions-related climate change effects.

Unusually, the statute is expressed to apply not just to future claims, but also to cases already before the courts. This is widely viewed as an attempt to prevent the ongoing case of Smith v Fonterra from succeeding.

This novel claim, brought by a Māori climate advocate against seven major corporate emitters, used the torts of negligence and public nuisance to try and gain judicial recognition that major emitters owe a duty of care in relation to climate change and can be required to reduce their emissions. An attempt by the defendants to seek strike out of that claim failed.

Justification for the new law, as articulated by Justice Minister Paul Goldsmith, is that climate policy should be made by parliament, not through tort law, and that tort litigation risks creating a parallel regulatory system.

Our view

The significance of this legislation lies not so much in what it says about the viability of climate litigation, but in the fact that the New Zealand Government chose to intervene after the Supreme Court had allowed Smith v Fonterra to proceed. Enacted explicitly in response to the pending trial, it represents an unusually direct legislative response to a live climate case.

Indeed, the fact that the Government considered it necessary to legislate retrospectively underlines the significance the case had acquired, and the perceived power of climate litigation to establish new duties and liabilities. While New Zealand has closed off one particular route to climate liability, businesses and governments elsewhere should expect claimants to continue testing new legal pathways for holding them to account for climate-related harms.

Centring on allegations that major car manufacturers used prohibited "defeat devices" in diesel vehicles to manipulate European emissions tests, and involving more than 1.6 million claimants, the Pan-NOx Group Litigation is the largest group action in English legal history.

Hinging on the legal meaning of "defeat device", claimants argued that this extended to a range of strategies that result in higher emissions outside laboratory testing conditions. In contrast, defendants argued that cars legitimately adjust performance in different driving conditions. Accordingly, only a much narrower category of systems should count as a defeat device — i.e., those that sense the vehicle is being tested and cause the emissions control system to operate differently under those specific conditions.

In her judgment handed down on 10 July 2026, Lady Justice Cockerill sided with the narrower interpretation, holding that it was not enough for claimants to establish that the challenged strategies reduced the effectiveness of emissions control systems outside relevant testing conditions. Rather, for a defeat device to be found, there needed to be "an intentional and/or impermissible purpose of causing the [emission control system] to operate differently when it senses it is being tested."

Using that interpretation, the High Court rejected most of the claimants' allegations. It also concluded that the outcome would have been much the same, even under a broader interpretation of what constitutes a defeat device.

A further trial to "resolve quantum issues in relation to claims for breach of contract and statutory duty only" is listed to commence on 26 October 2026.

Our view

The decision is significant in that Lady Justice Cockerill declined to follow recent EU case law on what constitutes a defeat device. For multinational businesses, this raises the broader issue of increasing divergence in environmental compliance and litigation risk, post-Brexit, with conduct that may attract challenge in one market not necessarily giving rise to the same exposure in another.