Bite-size: Sustainability regulation and ESG litigation - what to watch in 2026

As 2026 starts, sustainability regulation in the UK and EU is entering a period of recalibration. Several key regimes are being delayed, simplified or refined as policymakers respond to concerns about administrative burden. That said, regulators remain clear that expectations around compliance, data quality and environmental protection have not reduced.

On the regulatory front, the EU Deforestation Regulation has been delayed and streamlined, with later application dates and reduced due diligence obligations for downstream operators. Reforms to the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive significantly narrow scope, raise thresholds and push back timelines, concentrating obligations on the largest companies. At the same time, regulation of PFAS is accelerating across both the UK and EU. This includes new and proposed restrictions covering chemicals regulation, firefighting foams, toys, food-contact packaging and water quality and a coordinated UK PFAS plan expected in 2026.

Alongside regulatory change, ESG litigation continues to evolve. English courts are increasingly willing to hear large-scale overseas environmental claims, particularly where parent company control and group-wide governance are in focus. New climate claims are also testing the boundaries of causation, including attempts to link individual companies’ historical emissions to specific extreme weather events. Courts and regulators are also applying greater scrutiny to the approval of carbon-intensive projects, with recent case law clarifying minimum climate assessment and public consultation standards.

Finally, sustainability-related advertising remains under close scrutiny. UK regulators continue to take enforcement action against broad or unsubstantiated environmental claims, reinforcing the need for clear evidence and careful wording in sustainability communications.

Key takeaway:
While parts of the sustainability regulatory framework are being simplified, legal, regulatory and reputational risk is increasing. Businesses should use this period to strengthen governance, improve sustainability data and ensure that both operational practices and public claims can withstand growing scrutiny.