Why Your Business Should be Thinking about Sustainability: Regulations You Need to Know About
Key Contact: Declan Goodwin
Environmental, Social and Governance concerns have never been more important in the business landscape. Sustainable and efficient operations can benefit not only the environment but the company purse.
But sustainable operations are being increasingly codified in the regulatory and legislative frameworks that companies must operate by. Governments and industry bodies recognise that, despite good intentions, many businesses will not consider sustainable alternatives to materials, practices or processes until the law or regulation compels them to.
In an increasing number of cases, it does – particularly where companies are prevented from tendering for work unless they have a carbon plan in place.
We have picked out some of the key pieces of regulation and legislation that could impact your business.
Social Partnership and Public Procurement (Wales) Act 2023
This came into force last year and places a statutory duty on certain public bodies to consider socially acceptable public procurement and to ensure that socially responsible outcomes are pursued by using contract clauses across the entire supply chain for large construction projects. The aim is to ensure that public spending, which amounts to around £8 billion annually, promotes fair work, sustainability, and long-term benefits for communities.
Minimum Energy Efficiency Standards (MEES) regulations
The MEES regulations are intended to improve the energy efficiency standards of UK domestic and non-domestic rented properties. Under UK law, properties are required to hold a valid Energy Performance Certificate (EPC) which, for rented properties, now needs to be at the level of “E”, or higher (up to “A”). The goal of these regulations is to ensure that properties require as little heating as possible, thereby using less energy. The Regulations permit a financial penalty on Landlords who do not comply or do not register an exemption.
Notably, the Bank of England announced in May 2024 that it would not accept rental properties with an EPC rating of less than “E” to be eligible as collateral under its Sterling Monetary Framework (SMF), unless a valid exemption is in place and evidenced.
Sustainability Disclosure Requirements and investment labels regime
The Financial Conduct Authority introduced measures to minimise “greenwashing” in sustainable investment products.
- an anti-greenwashing rule for all authorised firms to make sure sustainability-related claims are fair, clear and not misleading (from 31st May 2024)
- product labels to help investors understand what their money is being used for, based on clear sustainability goals and criteria (from 31st July 2024)
- naming and marketing requirements so products cannot be described as having a positive impact on sustainability when they don’t (from 2nd December 2024)
Further measures are in development globally as regimes look to regulate companies’ right to claim sustainability benefits.
More legislation and regulation to encourage sustainable business practices is highly likely to be introduced in future. UK businesses should also be aware of the need to check the applicability of legislation such as the Corporate Sustainability Reporting Directive (CSRD) to European operations, as they could fall within its scope.
For more information on compliance with environmental and other sustainability-related laws and regulations, contact our Environmental, Social & Governance team.
