Over the past decade, the UK government has established a framework of regulations and policies to support its commitment to reach net zero emissions by 2050. As the country is increasingly exposed to biodiversity loss, natural resource scarcity and climate change, the pressure is mounting on British firms to align their business practices with the sustainability agenda. An overview of some of the most recent ESG and sustainability regulatory developments reveals that initiatives largely focus on carbon emissions, energy efficiency, equality and circularity:
To not only achieve compliance with these frameworks, but also gain a competitive edge, UK-based organizations should prioritize:
- Aligning with the FCA’s sustainable investment labelling regime.
The Financial Conduct Authority (FCA) Sustainability Disclosure Requirements (SDR) and investment labels regime introduces a set of rules aimed at protecting consumers and enhancing market trust in sustainable investments. It encompasses sustainable investment labels, disclosure requirements, and naming and marketing rules for UK asset managers, as well as anti-greenwashing rules for FCA-authorized firms. While the fund labels were only made available to use in June 2024, over 100 funds are already using them.
- Delivering biodiversity net gain on all new development sites.
In February 2024 the government adopted a Biodiversity Net Gain (BNG) regulation, requiring developers to demonstrate at least a 10% net gain in biodiversity for all new developments in order to secure planning approval. To achieve biodiversity net gain, the regulation encourages developers to prioritize on-site biodiversity improvements. If needed, they can combine on- and off-site measures, such as purchasing off-site biodiversity units. As a last resort, they may purchase statutory biodiversity credits from the government. - Scaling up sustainable aviation fuel production to meet government mandates.
The UK’s Sustainable Aviation Fuel (SAF) Mandate, which came into force in January 2025, sets a requirement for 2% of total jet fuel demand to be met by SAF in the first year, with the percentage increasing to 10% in 2030 and 22% by 2040. Due to the challenges of decarbonizing aviation, the SAF Mandate will have a significant impact on the UK’s net zero ambitions – some estimates suggest it could deliver 6.3 mega-tonnes of carbon savings per year by 2040. However, meeting the government’s SAF targets will require a substantial increase in domestic production. To scale production, the government has introduced a revenue certainty mechanism – in the form of a Guaranteed Strike Price (GSP) – to incentivize investment in SAF.
To read more about ESG and sustainability regulations in the UK, read the Verdantix report Strategic Focus: Understanding ESG And Sustainability Regulations In The UK.
