Emperor Sustainability Briefing 18.12.2025

Issue #11

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Progress over perfection 

It’s the type of line you’d find in a Christmas cracker, but bears repeating in the world of sustainability: “Perfect is the enemy of good”. The idea has been popular in the past few months – Heineken’s refined sustainability strategy celebrates an “imperfect journey”, while Patagonia’s self-deprecating report from earlier this year was widely praised for its candour, proudly announcing that “Nothing We Do Is Sustainable”. 

At the end of a year that’s been testing on the sustainability front, it’s a good time to join them in reflecting on imperfection. More than ever, it’s accepted for companies to be transparent about their challenges, and open on their impacts. And while policy support may ebb and flow, sustainability remains a firmly established aspect of economies worldwide – even if the picture is incomplete. 

This week, we can take some strength from the EU, who have affirmed a 90% emissions reduction target by 2040, and from the range of companies who have become early adopters of ambitious nature targets. For now, however, we hope you can take a break – and we’ll see you for our next Briefing in the new year!

In this Briefing…

S2 emissions – SBTN adopters

Simplified ESRS – GRI labour standards

APAC floods – FCA on ratings

California regs – Omnibus agreed

Heineken’s strategy

Regulation and frameworks

IFRS S2 softens financed emissions requirements

The IFRS has amended its S2 sustainability standard – its climate-focused standard – to reduce burden when reporting scope 3 category 15, known as financed emissions. Financial firms reporting against S2 may now limit category 15 to just emissions associated with loans and investments or assets under management, but not those associated with investment banking activities or insurance activities. A handful of other changes are outlined in the IFRS’ release. As this amendment is to S2 and not to the GHG Protocol itself, if a company is in a jurisdiction which already requires or expects GHG Protocol-aligned reporting, then we would expect that company to still report the ‘full’ category 15. 

As category 15 has long been a somewhat unwieldy category, which for financial firms often dwarfs all other reported emissions sources, many will welcome the streamlining. The IFRS claims that the change won’t significantly affect the decision-usefulness of reported information. However, it’s hard not to see this amendment in the context of wider rollbacks to regulation globally. The update is set to be effective for reporting periods beginning after the 1st January 2027. 

Nature calls, 24 companies answer: SBTN’s initiative sees early adopters

The Science Based Targets Network (SBTN) has announced the first 24 companies joining its Step Up for Nature initiative, which challenges businesses to go beyond carbon and disclose their next milestone towards setting science-based targets for nature. Each company’s commitment is tracked on SBTN’s public Ambition Board, showing next steps, timelines and progress – not dissimilar to the SBTi’s decarbonisation targets, although the two organisations are distinct. 

Early adopters include Adidas, H&M Group, John Lewis Partnership and Ørsted, spanning multiple sectors and reinforcing the growing corporate focus on nature, biodiversity and ecosystem services’ role in business longevity. With TNFD gaining traction and investors sharpening their lens on nature-related risks, acting early could mean avoiding compliance headaches later, especially with the IFRS’ sustainability arm preparing nature-related disclosures. 

The companies that have signed up so far tend to have complex supply chains and high nature dependencies, making early adoption a strategic move in anticipation of stricter stakeholder expectations. If your company has a similar profile, it may be worth using SBTN as a starting point for reflecting on how nature is integrated into your strategy. With the UK government significantly weakening Biodiversity Net Gain (BNG) rules, one of its key nature protection policies, it’s more encouraging than ever to see companies aiming to take action into their own hands.

EU Deforestation Regulation (EUDR) delay agreed

In what will likely be our last EUDR story for a while – we appreciate there has been some flip-flopping! – the EUDR has now officially been postponed, with the regulation set to come into force at the beginning of 2027, rather than 2026 as had been planned. A ‘simplification review’ will begin, which will likely target reducing the strength and/or scope of the regulation, and conclude by April 2026. 

Simplified ESRS now finalised

EFRAG has finalised its proposed revisions to the European Sustainability Reporting Standards (ESRS) and handed them over to the European Commission. The ESRS are the reporting standards required under the EU’s CSRD. 

The proposed revisions have not changed much from what was released earlier this year and covered in previous Briefings. Headline takeaways include: 

• 61% reduction in mandatory datapoints and metrics, with the deletion of all voluntary disclosures

• Clearer guidance for materiality assessments, with reduced documentation and better alignment with audit needs

• Principles-based rules for narrative sections, aimed at giving companies more freedom on how to present information

The earliest possible entry into force of these revisions is summer 2026, assuming no more curveballs, which makes them likely to be in effect for FY27 reporting periods. To support reporters, EFRAG have refreshed their reporting hub – aka one more link for you to save down. In the meantime, if you need guidance on how this might impact your reporting approach, please be in touch with Emperor and our sustainability team will be happy to help. 

UK FCA’s proposals for ESG ratings 

Following the announcement that the UK Government would regulate ESG ratings providers under the supervision of the Financial Conduct Authority (FCA), the FCA have now published proposals to make ESG ratings more ‘transparent, reliable and comparable’. 

While the FCA have not clarified their specific intended changes, their ambitions around improving transparency and governance will likely have direct effects on ratings providers, and therefore an eventual read-across for companies. It’s therefore one to keep an eye on if you communicate your ESG ratings publicly. 

Feedback is invited as part of a consultation open until 31st March 2026, with the final rules expected to in Q4 2026 and new regime in effect from June 2028.      

Global Reporting Initiative (GRI) releases draft labour rights standards

The new publications, covering labour rights across four different standards – including ‘Forced Labor’ and ‘Child Labor’ – are accessible here, and are the product of around 4 years of work by the GRI. There will now be a consultation held until 9th March 2026. If you currently report using GRI, in particular the 408 / 409 standards on forced labour, then you may well want to consult these drafts to see what may be coming down the line. 

Science

APAC countries facing $27bn in coastal flooding costs annually

A paper has found that across 29 countries in the APAC region which face coastal flooding, impacts are already driving $26.8bn in damage annually – with costs set to rise steeply in ‘hotter’ climate change scenarios. While the scale of the physical impacts of climate change aren’t news to anyone, the research is a stark reminder of what is at stake in climate change mitigation, and how exposures might change for businesses with APAC operations. Small island nations, as opposed to larger countries such as Bangladesh and Indonesia, are predictably at the greatest economic risk. In 2023, the UN reported that developed nations provided $26bn in adaptation finance – although you’ll note that this is a little less than the total yearly cost of $27bn from impacts. 

Policy 

Omnibus approved in Parliament, signalling major cuts to EU sustainability regulation 

The EU parliament has now approved an agreement on the Omnibus, the EU’s legislation for reducing the scope and burden of its sustainability regulation. The final reductions to which companies need to report against the CSRD and CSDDD frameworks are ultimately more sweeping than what we had first seen from Omnibus earlier in the year, but don’t come as a surprise to anyone who has followed the last couple weeks of negotiations. For CSRD:

• EU firms with over 1,000 employees and €450m in net turnover will be required to report
• Non-EU headquartered groups will be required to report from FY28 if they both generate over €450m in net turnover within the EU, and have a branch generating over €200m in the EU

Companies that are already reporting but will now fall out of scope for FY27, will not have to report against CSRD for FY25 or FY26 – unless the member state opts to not exempt these companies when it transposes Omnibus into law. 

For CSDDD, the thresholds have been raised to cover only the very largest companies:

• EU firms with over 5,000 employees and €1.5bn net turnover
• Non-EU firms with over €1.5bn net turnover within the EU

Additionally, the climate transition plan requirement of CSDDD has been removed.

If you have now fallen out of scope of CSRD, it’s likely that you’ve been assessing your options for the past few months since seeing the thresholds. We’d generally advise, as a first move, to check with your legal teams on your exact exposure to gain confirmation. From the point of view of next steps, the good news is that the groundwork you may have done into preparing for CSRD – including upgraded materiality assessments, refining of governance structures, and preparation of policies – remains usable and valuable. For those heading into the second year of CSRD aligned reporting, you may want to consult the revised ESRS (please see the other story). The general hope in the space, for the past year, has been that Omnibus will free up sustainability teams from the burden of reporting to focus on action – but the extent to which this materialises will probably vary greatly from company to company. If you’re assessing your next steps now, then be in touch with us and our sustainability team will be happy to share a view.

California’s TCFD-style regulation put on hold; New York proceeds

In a previous Briefing, we featured a story on California’s new Climate Disclosures Rules – or the catchily-titled SB 261 – as something of a beacon within the US’ broad sustainability push-back. However, following a lawsuit led by the U.S. Chamber of Commerce arguing that the rules violate the First Amendment, the enforcement of SB 261 has been halted.

The ruling would have required any companies over a $500m revenue threshold to produce TCFD-style climate-related financial risk reports. SB 253, which requires greenhouse gas emissions disclosures from companies with revenues exceeding $1bn, is still going ahead. The rules affect companies with any business in California, making them worth keeping an eye on for those operating in the state. A ruling on SB 261 will arrive early next year, which we advise any companies who are likely to be in scope to monitor. As SB 253 remains unaffected and is likely to be in force from 2026, those gearing up for emissions reporting based on this regulation should continue. 

Elsewhere in the US, New York state’s environmental body announced the finalisation of new regulations to implement mandatory greenhouse gas emissions disclosure from carbon-intensive sectors, with reporting expected to begin in 2027. As progress in the US continues in certain states, at odds with federal pressures, we may see an increasingly fragmented landscape where US-operating companies will have to watch closely for extraterritorial effects at the state level.  

Corporate

Heineken simplifies its sustainability strategy 

Drinks brewer Heineken has announced a simplification (or distillation, perhaps?) of its sustainability strategy. While its decarbonisation goals remain, its ‘social’ pillar has gone through a rework, with some goals being retired in the process. In phrasing their approach as an “imperfect journey to a better world”, we feel that a partial comparison can be drawn with Patagonia’s “Work in Progress” report, which celebrated incremental progress while being candid around challenges. 

As more companies than Heineken are facing challenges over the scale of their strategies and goals, a ‘refocusing’ of sustainability strategy is emerging as a shrewd – and if done correctly, authentic – way of honing in on where a company can succeed, and where it can have the greatest impact. If you’ll be reviewing the journey that you’re on in 2026, be in touch if you’d like to have an initial chat around your focus. 

One Number

One Number: 90%

The EU’s new legally binding emissions reduction target for 2040, setting the stage for a near-total decarbonisation push across the Bloc. The EU commission is required to review progress every two years as part of the roadmap to climate neutrality by 2050.

Short List

Knight Frank have signed a three-year deal with TotalEnergies, valued over £180m, to power their managed commercial properties with renewable energy. 

To discuss any of these topics in more detail or speak to one of our Sustainability team about how to better your corporate sustainability efforts, email [email protected] -we'd love to hear from you.