ESG Law Outlook 2026: In part two of our focus on regulation, leading practitioners assess how recalibration, rather than retreat, will shape ESG risk across Europe, the UK and beyond in 2026.
Forward Law Review asked leading ESG practitioners to look ahead to 2026. In the second of a two-part feature on regulatory developments and climate-risk reporting, they focus on Europe, the UK and Canada.
Ruth Knox, partner and chair of ESG & sustainable finance at Paul Hastings, London:
We are seeing a sustained roll-back of ESG laws and regulations, which is a natural response to the strongest backlash the industry has faced to date. In several jurisdictions, the pace and scope of ESG regulation have prompted concerns about competitiveness, economic growth and capital deployment.
Even ‘leading light’ regulatory authorities, including the European Union, are now seeing their regulatory frameworks questioned, with aspects of regimes introduced over the past seven years being challenged on the basis that they may have inhibited growth – and in some cases, unintentionally slowed green growth itself.
That said, while the backlash against climate-risk reporting is real, it remains more moderate in nature. For example, under the currently proposed Corporate Sustainability Due Diligence Directive (CSDDD), transition plan development is no longer mandatory. However, climate risk disclosures continue to be required under the Corporate Sustainability Reporting Directive (CSRD) where climate-related risks or impacts are material to the business. This reflects a recalibration rather than a wholesale retreat, with regulators still seeking to preserve decision-useful climate information for investors and stakeholders.
Rita Hunter, partner and head of ESG regulatory at Hogan Lovells, London; Valerie Kenyon, partner, London; and Emily Julier, counsel knowledge lawyer, London:
Last year was tumultuous for sustainability legislation. In the EU, we’ve seen a bus station full of omnibuses promising simplification and reduced compliance burden. The most significant has been the corporate sustainability reporting and due diligence omnibus, expected to be adopted by year-end. This quest for simplification has created uncertainty for those preparing to comply with the Corporate Sustainability Reporting Directive. This year should bring clarity as companies determine scope.
Meanwhile, the UK is consulting on climate reporting and transition plans, joining many countries who adopted such standards in 2025. Although simplification dominated 2025, companies producing sustainability reports and disclosing transition plans will gain a competitive edge going forward. Those managing transition and climate risks will be more resilient and possibly find financing more easily and cheaply. Product companies have also been in flux as regulations reshape operations – from sourcing and design to marketing.
These frameworks demand transparency, lifecycle accountability, and verifiable claims. Rather than burdens, they should be seen as strategic opportunities. Companies investing in accurate data, traceable supply chains, and credible reporting can strengthen trust, unlock innovation, and capture the eco-conscious market. As ESG requirements intensify, proactive adaptation will distinguish leaders from laggards – turning regulatory pressure into resilience and growth.
Rosa Zarza, partner at Garrigues, Madrid, and head of Garrigues Sustainable:
In 2026, the sustainability and ESG agenda in the European Union – and, accordingly, in Spain – is advancing more cautiously, going through a period of adjustment to balance regulatory ambition and business competitiveness.
The implementation of the CSRD directive on sustainability reporting continues (although with countries, such as Spain, that have not yet transposed it into their domestic laws), albeit with flexible deadlines and simplification of requirements, as does the CSDD). Circular economy and eco-design policies are still present, and the energy transition maintains its momentum thanks to investments in renewables and efficiency.
In Spain, the recently approved Sustainable Mobility Law introduces obligations to promote more sustainable travel in companies and cities. At the same time, the initiatives on gender equality in governing bodies will sequentially begin to be mandatory and the beginning of the process for the reforms of corporate governance code for listed companies has been announced.
Overall, 2026 is shaping up to be a year of gradual consolidation and regulatory adjustments, rather than accelerated progress, in a context where sustainability remains a priority, but with a more pragmatic approach.
Doug Bryden, partner and transactions co-lead of the global ESG risk & advisory group at Freshfields, London:
Asset managers should brace themselves for a bustling year ahead. Despite growing anti-ESG sentiment, we foresee sustained pressure from European investors regarding ESG matters such as climate risk, net-zero exposures and supply chain liabilities. Managers will also need to emphasise value creation from their ESG strategies. On the regulatory front, the EU SFDR overhaul will demand attention, alongside the fund naming rules and the looming threat of greenwashing enforcement.
Corporate sustainability reporting will make its way back up the agenda. Following the hiatus caused by the Omnibus, sustainability and treasury teams at large multinationals will need to revisit their IRO assessments and reignite their CSRD efforts. Although the regulations might be somewhat simplified, the broader economic and business environment has shifted will introduce new challenges and friction points.
Learning lessons from the ‘wave 1’ CSRD reporting round will be crucial. Delaying action is not advisable as significant work will be required to reach the finish line. The ISSB rollout is set to continue and, while not as prescriptive as the EU ESRS, will necessitate considerable enhancements to current sustainability reporting for many.
Brussels will undoubtedly remain a focal point. The EU’s ‘simplification’ of its extensive environmental, climate, chemicals, products and trade rulebooks will expand in 2026. Although such regulatory uncertainty is unwelcome and is causing genuine frustration for businesses, there may be opportunities to resolve existing areas of poor regulation.
Quinton Newcomb, partner at Fieldfisher, London:
Whilst we anticipate seeing a rise in corporate fraud investigations following the SFO’s commitment to prosecute under the Economic Crime and Corporate Transparency Act 2023 (ECCTA), one of the highly anticipated developments in 2026 is the proposed extension of Corporate Criminal Liability to all offences, under the Crime and Policing Bill (the Bill). Whilst ECCTA makes a company liable for the criminal acts of its senior managers for financial crime; the Bill proposes to extend this to all criminal offences. Whilst practically, corporations cannot be held accountable for all criminal offences, we expect to see an increase in investigations for a broader range of offences, including health and safety violations, environmental offences, modern slavery and criminal market abuse.
Beyond financial crime, from 1 September 2026, under the new Financial Conduct Authority rules, non-financial misconduct will constitute a breach in circumstances where it violates dignity, creates an intimidating, hostile, degrading, humiliating or offensive environment, or is violent in nature. This, coupled with the spotlight being on corporations to prevent slavery and human trafficking abuses in their supply chains, signifies a major shift in regulatory priorities from focussing solely financial wrongdoing to accountability for ethical and cultural violations.
Pauline Kuipers, partner and leader of the international competition and EU law group at Bird & Bird, The Hague:
This year will be pivotal for the EU’s sustainability and due diligence framework in the tech and comms sector.
Following months of political debate and shifting priorities, the EU’s Omnibus I Simplification Package signals a scale back and restructure of core CSRD and CSDDD elements. However, rather than a true simplification, it may create a fragmented ESG landscape. By enabling quick revisions to EU law through the Omnibus process, the Commission has triggered a wave of simplifications affecting other types of ESG legislation. Considering that the initial Green Deal was set up to create an integrated approach, revising and repealing certain provisions may create a regulatory ‘Jenga’.
Recent postponements and simplification proposals have reduced administrative burdens but triggered sharp criticism. Investors, regulators and civil society warn that these measures risk legal uncertainty and undermine the EU’s global leadership in sustainability regulation – weakening companies’ ability to address supply chain impacts. Exemptions do not equal immunity: other sustainability obligations remain, and narrowing scope doesn’t shield businesses from liability for human rights violations or environmental damage.
For large businesses operating in Europe, the key challenge in 2026 will not be compliance, but navigating an increasingly complex, shifting regulatory framework. Expect a transition period marked by legal uncertainty, hybrid national enforcement and ongoing trilogue negotiations. With political pressure high and economic competitiveness driving the commission’s agenda, 2026 is unlikely to bring regulatory relaxation. Instead, it may redefine what ESG regulation in Europe looks like for the decade ahead.
Dan Gray, sustainable business knowledge lead at Mishcon de Reya, London:
Coming into force on 1 September 2025, the failure to prevent fraud (FTPF) offence has already altered the strategic calculus on greenwashing. Since the only available defence is to demonstrate reasonable fraud prevention procedures, the onus is now squarely on companies to ensure that robust measures are in place to prevent the use of misleading or unsubstantiated claims at source.
The applicability of the FTPF offence not just to marketing claims, but also to regulatory reporting and compliance activities, should also precipitate a broader re-evaluation of how organisations manage their exposure to ESG risks. The emphasis on anticipatory risk management amplifies the need for boards to fully understand their businesses’ sustainability-related risks, impacts and dependencies, and to ensure that any/all stakeholder communications provide a true and fair reflection of the company’s position in relation to them.
Radha Curpen, partner and group head of ESG and sustainability at McMillan, Vancouver; and Sharon Singh, partner and co-head of the indigenous and environment practice, Vancouver:
This year will see continued evolution in ESG regulation and climate-risk reporting. While Canada paused mandatory climate disclosure rules in 2025, voluntary standards like the CSDS and ISSB remain influential.
Financial institutions and large corporations face heightened expectations for climate-related risk governance and disclosure, with board members responsible for oversight. Regulatory bodies are harmonising requirements, but uncertainty persists due to shifting global standards. Companies should anticipate increased mandatory and voluntary reporting, with a focus on materiality, transparency and interoperability. The regulatory landscape will demand robust climate-risk management and proactive adaptation to new disclosure frameworks.