ESG

Recent developments

Hooray for delay? EU Deforestation Regulation delayed by 12 months

What is happening?
The EU's Deforestation Regulation aimed at reducing global deforestation (EUDR) has been delayed by 12 months after intense industry and third-country opposition. The EUDR, which was due to come into force on 30 December 2024, will now come into force on 30 December 2025, allowing businesses more time to prepare for compliance with the onerous supply-chain monitoring obligations imposed by the regulation. Further, SMEs will not be required to comply until 30 June 2026, giving them even more time to prepare.

What impact will the regulations have?

Once it is in force, the EUDR will require all in-scope commodities being imported into, or exported from, the EU to be accompanied by a due diligence statement confirming they are not linked to deforestation.

To evidence that the supply chain is "deforestation-free", businesses will be required to produce geolocation data showing that the entirety of the land used to produce the product has not been converted from forest to agricultural use since 31 December 2020. They will also be required to state that the products have been produced in compliance with applicable local laws.

These requirements set a very high bar for compliance, with many businesses struggling to work back through the supply chain to get the relevant data needed to comply. There have been particular challenges for companies trading in certain product lines, such as leather goods, where there is often very limited full supply chain visibility, and it is often not possible to trace a product back to the individual farm where the cattle were raised. Without the delay, there were concerns that such products could be stranded at the EU border without the necessary due diligence statement to evidence their compliance with the regulation.

This 12-month delay will therefore give businesses more time to prepare by tracking or diverting supply chains, and by investing in supply chain tracing technology where necessary.

The EU Commission is also expected to offer more certainty around the EUDR during this period, including by providing a list of regions that will be classified as "low risk" for import by 30 June 2025. Importing from "low risk" regions will require a lower standard of due diligence, and this information being provided six months in advance of the EUDR coming into force will be invaluable to businesses who may need to assess their supply chains and work with suppliers in higher risk regions to get ready to comply.

Whilst the 12-month delay will be welcomed by many businesses, giving them much needed time to map their supply chains, work with their suppliers, and collect the necessary evidence to comply, proactive preparation will be still be important - particularly given the onerous nature of the obligations and the amount of preparation that is likely needed.

Check out our previous update with guidance on the steps that businesses should take to get ready.

Sophie Tuson
Senior Associate, Environment and Climate Change Practice Lead
+44 7712 511815
sophie.tuson@rpclegal.com

Tom Jenkins
Senior Associate
+44 7856 279455
tom.jenkins@rpclegal.com

Noonie Holmes
Associate
+44 7754 857999
noonie.holmes@rpclegal.com

Our expertise covers all key areas of ESG, from strategic advisory and governance to regulatory compliance, culture change initiatives, dispute resolution, ESG investigations, and transactional support. We work closely with clients to co-create bespoke solutions that drive sustainable growth, mitigate risks, and enhance long-term value for business, people and planet. Leveraging our deep industry expertise and networks, we pride ourselves on providing a holistic service to our clients, working with them between advisory mandates to support them on their continuing ESG journeys.

Discover how we support clients on their ESG journeys

Recent developments

ESG supply chain due diligence in a changing regulatory landscape

What is happening?
RPC recently hosted a roundtable discussion exploring supply chain due diligence in the context of recent and upcoming ESG legislation in the UK and EU. The roundtable centred on the EU's flagship Corporate Sustainability Due Diligence Directive (CSDDD) which will require companies to address the environmental and human rights impacts of their supply chains and to report publicly to stakeholders on their progress.

The event was chaired by Sam Tate, RPC's Head of White Collar Crime and Compliance, supported by members of RPC's ESG advisory team, and was attended by a number of RPC's multinational clients from across the retail, food, fashion and energy sectors.

The roundtable explored the key challenges faced by businesses in preparing for and rolling out supply chain due diligence, the benefits

and challenges of ESG legislation interoperability and the role of technology in ESG compliance. Below we unpack some of the key takeaways and practical insights from the discussion.

Key challenges in preparing for the CSDDD

Participants highlighted several key challenges in preparing for new ESG requirements such as the CSDDD. A primary concern was the lack of clear guidance. Overlapping requirements and the absence of detailed guidance from the European Commission on due diligence obligations, risk factors, and transition plans continue to create uncertainty. In some cases, this has slowed companies' preparation and has led to inconsistent compliance practices.

Participants also emphasised the difficulties in obtaining reliable supplier data. With complex and global supply chains, many companies are finding their suppliers lack the systems to track and report on ESG performance or are reluctant

to share this information. This data gap hinders efforts to conduct thorough due diligence and ensure compliance with regulatory standards, potentially exposing companies to significant risks.

Another key challenge is the lack of internal readiness to implement compliance measures. Attendees noted gaps in third-party risk management systems, limited budgets, and the absence of governance structures like implementation steering groups. Many organisations reported feeling squeezed by the influx of new ESG legislation which is creating multiple competing demands on (already stretched) internal budgets and resource.

Opportunities to build on existing frameworks

Despite these challenges, attendees discussed opportunities to leverage existing compliance frameworks and practices to address ESG requirements. Many companies have robust systems in place for anti-bribery, corruption, and money laundering compliance. These processes can be adapted to integrate ESG-specific obligations, such as those under the CSDDD, reducing the need for entirely new frameworks. Participants also discussed the value of international standards, such as the OECD Due Diligence Guidance and the UN Guiding Principles on Business and Human Rights, which provide actionable steps for compliance while formal guidance from the European Commission is still being formulated.

The roundtable also highlighted the synergies between various regulatory frameworks, including the CSDDD, the Corporate Sustainability Reporting Directive (CSRD), and the EU Deforestation Regulation (EUDR). Many participants noted that efforts made for CSRD compliance, such as mapping supply chains and assessing material impacts, can be repurposed to meet the requirements of the CSDDD, particularly given the aligned definition of "materiality" under both regulations. Similarly, companies subject to the EUDR can draw on existing work on supply chain traceability to streamline compliance with the CSDDD.

Preparing for transition plans

Transition planning for climate change mitigation, as required by the CSDDD, was another area of focus at the roundtable. Participants acknowledged the importance of aligning these plans with the Paris Agreement’s 2050 climate neutrality objective and the intermediate targets established under the European Climate Law. However, the absence of formal guidance from the European Commission on the content of these transition plans has created uncertainty for companies about how to proceed.

Pending further guidance from the EU, companies can leverage existing transition plan disclosure frameworks and guidance to get started.

For example, the Transition Plan Taskforce (TPT) disclosure framework offers practical guidance on credible transition plan disclosures, with sector-specific advice and implementation steps. Meanwhile, the Chancery Lane Project has recently published helpful best practice guidance on preparing and delivering a climate transition plan, including associated contractual clauses to embed this within supply chains.

Technology solutions

The role of technology in meeting ESG obligations emerged as a critical topic during the discussions. Participants emphasised the need for scalable, user-friendly platforms capable of mapping supply chains, conducting due diligence, and monitoring risks. Such tools must integrate seamlessly with existing enterprise systems and offer functionalities like supply chain network mapping, third-party risk assessments, and real-time monitoring.

User accessibility was also highlighted as key to ensuring adoption across the supply chain. For example, platforms should feature intuitive interfaces to accommodate the diverse geographic and cultural backgrounds of users, including suppliers in emerging markets. Attendees stressed the importance of providing free access for suppliers, as financial barriers can hinder participation, particularly for smaller entities.

Effective implementation of these platforms is equally crucial. Participants discussed the need for clear policies, targeted training, and pilot testing to ensure that tools meet organisational needs. By aligning technology solutions with business goals, companies can enhance supply chain transparency, improve data accuracy, and help ensure compliance with the CSDDD and other ESG regulations.

Conclusion

The roundtable discussions underscored the complex challenges multinational companies face in navigating the rapidly evolving ESG regulatory landscape. From the absence of clear guidance and reliable supplier data to gaps in readiness and technology adoption, businesses across the retail, food, fashion, and energy sectors are grappling with significant hurdles.

However, these challenges also present opportunities. By leveraging existing compliance frameworks, adopting international standards, and embracing synergies between overlapping regulations, companies can proactively address the demands of legislation such as the CSDDD. In doing so, they can also reap the commercial benefits of supply chain due diligence, including operational efficiencies, better supply chain resilience,

proactive management of legal and reputational risks, and greater confidence in making sustainability claims and commitments to attract new ethically-minded consumers.

For further guidance on the CSDDD, see our expert briefing here.

Sam Tate
Partner
+44 7375 489750
sam.tate@rpclegal.com

Sophie Tuson
Senior Associate, Environment and Climate Change Practice Lead
+44 7712 511815
sophie.tuson@rpclegal.com

Robert Semp
Associate
+44 7545 100522
robert.semp@rpclegal.com

Sarah Barrie
Associate
+44 7955 313102
sarah.barrie@rpclegal.com

Recent developments

CMA publishes green claims guidance for the fashion retail sector

What is happening?
On 18 September 2024, the Competition and Markets Authority (CMA) published new green claims guidance for the fashion retail sector aimed at helping retailers understand how to comply with UK consumer protection law when making green claims about their products. The guidance follows the CMA's recent investigation into green claims made by ASOS, Boohoo and George at Asda which concluded in March 2024 with all three retailers signing up to undertakings (for further commentary on this, see our recent blog).

Despite the focus on fashion retailers, the CMA highlights that the new guidance may also extend to manufacturers and suppliers in the retail sector as the entire supply chain is responsible for ensuring green claims are accurate and substantiated. The guidance will also be of interest to other consumer-facing businesses outside the fashion retail sector

as it builds on the CMA's Green Claims Code (GCC) and provides additional insight into how the CMA might interpret and enforce green compliance more generally.

Key principles from the guidance

The guidance draws on the key principles from the CMA's fashion retail investigation and the undertakings signed by ASOS, Boohoo and George at Asda. It sets out the CMA's expectations around: (1) the presentation and communication of green claims; (2) specific types of green claim (such as claims about "green" product ranges); and (3) the internal processes that businesses should have in place to ensure green claims are accurate. The guidance also includes illustrative examples to help fashion retailers comply.

1. Presentation and communication of green claims

The guidance reiterates that green claims must be clear and accurate, irrespective of whether they are made on the product, in advertising, in store or online. One of the key components of this is that important information (eg information that qualifies a claim, or that consumers need to make an informed purchasing decision) should not be hidden. Businesses must consider how they present this information and the overall impression created. In particular, important information should be featured clearly and prominently, in plain language, should be easily understood, and in close proximity to the relevant green claim. Consumers should not have to take further action to locate this information (eg by clicking on a link or QR code).

The CMA endorses a "layered" approach whereby important information must be included clearly and prominently with the claim, but further supporting details can be included elsewhere as long as businesses clearly signpost to it (eg in a drop-down menu or via a link to a sustainability hub on the website).

The CMA also stresses that insufficient space (eg on a product label) is not an excuse for failing to comply and businesses should consider whether it is appropriate to make the claim at all if all important information that the consumer needs to understand that claim does not fit on the product as intended.

2. Green product ranges

One of the other big focus areas for the CMA is green product ranges - these are defined as "items grouped according to specific criteria relating to their impact on their environment"', for example a "conscious" or "sustainable" range. According to the guidance, there must be an objective set of environmental criteria for determining which products are included in the range, and no product should be included unless it meets the criteria. Businesses must also publish a clear and prominent summary of the relevant criteria for the green product range - eg in store, on their website, and in any marketing materials or social media posts promoting the range. Finally, businesses must also ensure the name of the product range is not itself misleading and should therefore avoid describing ranges using broad terms like "sustainable" or "eco" which are generally interpreted as meaning the relevant products have no negative environmental impact – a largely impossible standard to meet.

3. Internal green claims processes

Finally, the guidance reiterates that businesses should have robust internal processes in place to ensure that green claims are accurate. The guidance builds on the GCC by indicating what good practice looks like – this could include: developing internal green claims policies, conducting regular staff training, implementing internal systems like spot checks and employee prompts to ensure product listings are accurate, and maintaining good records to be able to demonstrate compliance.

All claims must be substantiated by robust, credible and current evidence and this requirement extends to suppliers and third parties as each business in the supply chain must ensure its claims are accurate and substantiated. For own-brand products, retailers should ensure that their suppliers can back up claims with evidence (such as final scope and final transaction certificates), get copies of these certificates before offering the relevant product for sale, and do at least an annual spot check on a representative sample of certificates. For third party-branded products, retailers must satisfy themselves that claims made in relation to their products are not misleading and can be backed up with evidence. This may be done by requiring third parties to complete a self-assessment questionnaire or offer evidence of an independent verification process.

Conclusion

The new guidance demonstrates the CMA's continued sectoral focus on green claims, with other green claims investigations focusing on sectors such as green heating and the FMCG sector. The guidance elaborates on key principles from the GCC, providing helpful additional colour and insight on how the rules may be interpreted and enforced by the CMA.

The CMA's enforcement activity is set to step up a gear from next April 2025 when it will get strengthened consumer enforcement powers under the Digital Markets, Competition and Consumers Act 2024 (DMCCA) - including the ability to fine companies up to 10% of worldwide turnover for consumer law breaches. Given the significant increase in exposure for businesses making green claims, all businesses should review their green claims now to ensure they are accurate and can be substantiated. For further information and practical considerations for compliance, please see our previous blog.

Ciara Cullen
Partner
+44 7747 033165
ciara.cullen@rpclegal.com

Sophie Tuson
Senior Associate, Environment and Climate Change Practice Lead
+44 7712 511815
sophie.tuson@rpclegal.com

Elizabeth Terry
Trainee Solicitor
+44 7542 601338
elizabeth.terry@rpclegal.com

For now, it appears that the CMA's enforcement approach is working - most recently illustrated by the closure of its investigation into Unilever following positive changes by both Unilever and in the wider sector relating to green claims. It remains to be seen how the CMA's approach will evolve from here, however one thing is clear – green claims will continue to be in the spotlight.