<p>Filter Knowledge</p>

After months of delay,  the UK Government has finally published the long-awaited consultation on the adoption of ISSB sustainability standards as the first UK Sustainability Reporting Standards ("UK SRS"), and on assurance of sustainability-related financial disclosures. At the same time, the Government is consulting on how to implement its manifesto commitment to mandate UK-regulated financial institutions – including banks, asset managers, pension funds, and insurers – and FTSE 100 companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement.

The last 6 months have seen unprecedented turbulence in the field of sustainability regulation. The EU, historically a world leader in environmental standards and responsible business conduct, appears to be backtracking on its leading position and fitting in with the political mood in the US.

Modern slavery and human rights abuses impact countless supply chains across the world every year. Businesses and investors may be exposed to risks arising from such abuses regardless of how far down the supply chain they occur and, in some circumstances, may be under a duty to identify, remediate and prevent further violations.

The "Stop-the-Clock" proposal to delay sustainability reporting under the Corporate Sustainability Reporting Directive ("CSRD") and due diligence obligations under the Corporate Sustainability Due Diligence Directive ("CS3D") was approved by the European Parliament on 3 April, with immediate consequences for many large companies preparing CSRD reports.

Earlier this week, the UK Home Office published updated guidance (the "Guidance") for businesses on how to comply with the letter and spirit of the UK's Modern Slavery Act 2015 ("MSA"). 

As we noted in our previous CSRD briefing, 2024 saw a dizzying number of changes for companies in scope of this landmark sustainability reporting regulation. Keeping track of these changes is a big enough challenge.

In case you missed it: Travers Smith recaps a dramatic year in the world of sustainability reporting.

When the UK's Modern Slavery Act (the "MSA") was introduced in 2015, it was considered world-leading, with the UK being one of the first countries in the world to mandate corporate reporting on modern slavery. Now, nearly 10 years on, the initial optimism appears to be waning.

Earlier this year, the World Uyghur Congress was successful in its appeal in a case which centered on concerns about the importation of cotton products to the UK from the Xinjiang Uyghur Autonomous Region ("XUAR") in the People’s Republic of China¹. In this article we will explore the important legal and practical ramifications of this decision, in light of more recent allegations against large multinational entities for failing to prevent slavery and human trafficking abuses in their supply chains. We will also examine the impacts this decision may have in other areas from a Proceeds of Crime ("POCA") perspective, along with practical steps organisations can take to manage supply chain risk. 

The EU’s Corporate Sustainability Due Diligence Directive (CS3D) will be highly consequential for those large EU and non-EU companies that fall within its scope. Despite some misleading commentary to the contrary, the financial sector is in scope of the CS3D as finally agreed by the European legislators in May 2024.

Earlier this month, the EU's European Artificial Intelligence Act ("AI Act")^[1], the world's first comprehensive regulation on artificial intelligence, came into force. The AI Act aims to ensure that AI systems are safe, transparent, traceable and environmentally friendly.

The EU's Corporate Sustainability Reporting Directive ("CSRD") was due to be implemented into national law by the Member States by 6 July 2024. The majority missed that deadline to finalise their laws.

The Corporate Sustainability Due Diligence Directive ("CS3D") was finally published on 5 July 2024, concluding a long and unprecedentedly turbulent legislative process. Businesses now have the certainty they need to start assessing whether they are in scope, and if so, what they need to do to comply with the demanding due diligence obligations under the law, and by when.

This update provides a brief summary of some notable recent developments from an international sanctions perspective. This includes the publication of a 'Tri-Seal Compliance Note' by certain government bodies in the US, emphasising the potential applicability of US sanctions to non-US persons and the corresponding risks of non-compliance, the impact of the EU's new "no Russia" law, which requires certain contractual obligations to be satisfied when exporting specific goods from the EU, and  the EU's new directive imposing criminal liability on those looking to circumvent its sanctions regime.

This update provides a brief summary of some notable recent developments from a UK sanctions perspective, including the introduction of the Office of Trade Sanctions Implementation ("OTSI"), which will be tasked with trade sanctions implementation and enforcement in the UK, along with further guidance on a potentially wide interpretation of the "ownership and control" test, and the Office of Financial Sanctions Implementation's ("OFSI") 2022-2023 Annual Review.

After months of negotiations, on 14 December, the EU Parliament and Council reached a provisional agreement on the principles that will underpin the Corporate Sustainability Due Diligence Directive ("CS3D").

This update provides a brief summary of some notable recent developments in the UK sanctions world, including interesting commentary from the Court of Appeal on a potentially wide interpretation of the "ownership and control" test, which was rapidly followed by a statement from the Government suggesting such an interpretation should be limited, and the Office of Financial Sanctions Implementation's ("OFSI") first use of its public disclosure enforcement power.

As many companies take the first steps towards understanding the impact of the Corporate Sustainability Reporting Directive ("CSRD") on their organisations, a series of seemingly impactful changes to the regime, and corresponding alarming headlines, have emerged. However, while these changes and headlines might make businesses worry that they will need to pivot their plans and processes as a reaction, in practice, many of those currently preparing for CSRD reporting may find that recent developments do not move the dial significantly and they may well still be on the right path towards CSRD compliance.

Major fashion brands are increasingly making efforts to capitalise on growing ESG consciousness by consumers. At the same time however, brands are also aware of activity by regulators and campaigners that seeks to hold businesses accountable for "greenwashing" and human rights risks present in their value chain.