As sustainability moves to the forefront of business strategy, UK companies must stay ahead of evolving regulations to remain compliant, competitive, and resilient. With ESG regulations globally increasing by 155% over the last decade, understanding what regulations impact your business, and how to comply with them is imperative. From stricter ESG compliance requirements to enhanced corporate sustainability laws, businesses of all sizes face new obligations aimed at reducing environmental impact and promoting transparency.
With upcoming legislation set to reshape reporting standards, supply chain expectations, and carbon reduction targets, understanding these changes is crucial. In this article, we break down key UK sustainability regulations, what they mean for your business, and how you can prepare to stay compliant while driving positive impact.
Procurement Act 2023
The Procurement Act 2023 positions sustainability as a fundamental component of public procurement, encouraging contracting authorities to integrate environmental and social considerations at every stage. This goes far beyond the current regulations which only talk about considering these outcomes, and where other legislation or guidance is relied on to really integrate them, for example, the Public Services (Social Value) Act 2012.
The new UK sustainability regulations will replace the Procurement Regulations 2015, originally based on EU Directives. Initially set to take effect in October 2024, the Act was delayed until 24th February 2025, and key updates in the policies include:
- Incorporates sustainability and social value as a key consideration under “maximising public benefit”.
- MEAT to MAT: Change to “Most Advantageous Tender” enables authorities to take a broader view of value to include social and environmental outcomes.
- Businesses will be encouraged as part of the evaluation process to consider the full cost of a product/service including environmental costs.
- New provisions for authorities to publish contract performance reports and they will have the power to exclude suppliers for poor performance and environmental misconduct.
UK Sustainability Reporting Standards (UK SRS)
The UK SRS is another corporate sustainability law set to take effect in 2025. The proposed framework will introduce a unified approach to how businesses report on environmental, social, and governance (ESG) factors to improve corporate transparency, accountability, and ESG compliance in the UK. Plans are in place in Q1 2025 for the expected endorsed standards to be made available by the UK Government. While Q2 is expected to see decisions made by the UK Government on future requirements.
Corporate Sustainability Reporting Directive (CSRD)
CSRD will significantly impact businesses operating in the EU and beyond this year, too. As of the 1st January 2025, large companies with substantial operations in the EU (250+ employees, €20M assets, or €40M revenue) now fall into the scope of the regulations and must comply, following the initial rollout for large EU companies in 2024. The directive introduces stricter sustainability reporting requirements aligned with the European Sustainability Reporting Standards (ESRS), enhancing corporate transparency on environmental and social impacts. Businesses should prepare for reporting requirements by assessing data readiness and aligning with the new standards early to ensure compliance.
Energy Savings Opportunity Scheme (ESOS)
Large undertakings in the UK with 250+ employees and/or an annual turnover exceeding £44 million and an annual balance sheet total exceeding £38 million are currently under the phase 3 scope for ESOS. The UK sustainability regulations currently impact around 12,000 businesses. Businesses currently impacted by this phase have until 5 December 2025 to submit their annual progress update to comply with requirements.
Phase 4 requirements are expected to be introduced in December 2027 to encourage more businesses to comply by increasing eligibility, enhancing energy efficiency, and accelerating carbon reduction across industries. Mandatory ESOS Net Zero requirements will now be delayed to phase 5, but a voluntary Net Zero reporting option will still be available during phase 4.
Streamlined Energy and Carbon Reporting (SECR)
The SECR framework will also continue to impact businesses in the UK, requiring large companies and Limited Liability Partnerships (LLPs) to disclose their energy use, carbon emissions, and efficiency measures. As sustainability reporting expectations evolve, businesses should prepare for potential updates to SECR in 2025 and ensure compliance with any new requirements. Companies can get ahead by reviewing their data collection processes, improving energy efficiency tracking, and aligning with best practices for carbon reporting.
Carbon Border Adjustment Mechanism (CBAM)
The UK’s CBAM is set to impact businesses that import high-carbon. Expected to take effect in 2027, these measures aim to level the playing field for UK companies by placing a carbon price on imported products based on their embedded emissions. This mechanism could introduce stricter restrictions on emissions across industries, including incurred costs for high carbon-intensive goods being imported from the EU, such as steel. Companies should prepare by assessing their supply chain emissions, understanding potential cost implications, and staying informed on possible policy changes that may affect operations and costs.
NHS Supplier Roadmap
The National Health Service (NHS) is working to address the urgent issues of climate change and environmental degradation and has made a bold commitment to attain Net Zero by 2040. Suppliers are essential to the NHS achieving Net Zero, and the roadmap provides a strategic framework to streamline the procurement process, ensuring stakeholders within the NHS supply chain are aligned with NHS Net Zero.
Current requirements in place since 2024 extended the requirement for a Carbon Reduction Plan that aligns with the Procurement Policy Note (PPN) 06/21 to cover all procurements by NHS suppliers. From 2027, all suppliers will be required to publicly report targets and emissions. As well as publishing a Carbon Reduction Plan for global emissions aligned to the NHS Net Zero targets for all of their Scope 1, 2 and 3 emissions.
Corporate Sustainability Due Diligence Directive (CSDDD)
CSDDD is a relatively new corporate sustainability regulation, set to introduce stricter obligations for businesses with operations in the EU. Introduced as part of the European Green Deal, the directive aims to ensure that businesses operating in the EU integrate human rights and environmental considerations into their decision-making processes.
From 2027, CSDDD will apply to EU companies with 500+ employees and €150M+ revenue, with further plans to increase the regulation’s scope the following year. Non-EU businesses generating significant revenue in the EU will also fall under its scope. Companies should start preparing by assessing supply chain risks, strengthening due diligence processes, and aligning with regulatory expectations. Stay informed on CSDDD compliance requirements here.
Conclusion
As UK sustainability regulations continue to evolve, UK businesses must take proactive steps to ensure compliance and stay ahead of emerging requirements. From stricter reporting standards to enhanced procurement and supply chain expectations, these changes will reshape how companies operate and measure their environmental impact in the coming years to ensure ESG compliance.
By understanding the key regulations set to take effect in 2025 and beyond, such as the Procurement Act and UK SRS, as well as updates to existing regulations, businesses can develop robust sustainability strategies that not only meet legal obligations but also drive long-term value. Now is the time to assess your readiness, strengthen data collection processes, and align with best practices to remain competitive in a rapidly changing regulatory landscape. Turn compliance into an opportunity for meaningful impact.
