Sustainability compliance is becoming increasingly crucial for businesses as regulations expand to cover most supply chain aspects, including manufacturing and distribution. While numerous laws address business operations, some regulations may have a greater impact on specific industries.
Non-compliance with industry regulations can result in penalties, lawsuits, reputational damage, and even operational restrictions. These consequences can severely hinder business growth and profitability, making it essential to understand and address them. However, navigating regulations can be complex due to the challenges of gathering and analysing large amounts of data from various sources.
To stay sustainability compliant, take these five actions
To stay compliant with upcoming sustainability regulations, businesses should take these five key actions:
1. Assess Compliance Readiness
Identify which regulations apply to your company based on size, industry, and operations including but not necessarily limited to: SECR, CSRD, SDS, CBAM.
2. Close Reporting Gaps
Review your sustainability data management and reporting structures to ensure compliance with SECR, SDS, and CSRD as required.
3. Prepare for Carbon Costs & Border Taxes
If likely to be affected by CBAM, ETS, or the UK Green Taxonomy, start calculating product carbon footprints and emissions exposure.
4. Engage Supply Chain Partners
Work with suppliers to track Scope 3 emissions and ensure alignment with.
5. Invest in Tools to help you along your journey
AI-enhanced Life Cycle Assessment (available from Unipart) and carbon accounting tools can help streamline compliance, reduce admin burden, and improve reporting accuracy.
Sustainability regulations: A guide for your business type & size
| Regulation | Regulation context | When is this happening? | Who does it affect? |
| EU Emissions Trading Scheme (EU ETS) | Costs for carbon-intensive imports projected to reach €100 per tonne of CO2 between 2026 and 2030; an approximate 20% increase from current prices. | Already in effect. The regulation covers emissions upstream for buildings and road transport by 2027. | Applicable to emissions from: – Power and heat generation – Energy-intensive industries such as cement, steel, aluminum, refineries, and chemicals – Flights within the European Economic Area (EEA) – Maritime transport: Large ships (over 5000 gross tonnage) calling at EU ports. |
| Carbon Border Adjustment Mechanism (CBAM) | Carbon tax applied to imported goods based on the amount of greenhouse gases emitted during their production. | EU CBAM regulation takes effect in January 2026 and January 1st, 2027 for the UK. | Imported carbon-intensive products where there’s a significant risk of carbon leakage: cement, iron and steel, aluminum, fertilisers, electricity, and hydrogen |
| Streamlined Energy and Carbon Reporting (SECR) | Large businesses are required to report their energy use and greenhouse gas emissions. | Came into effect in 2019, companies should already be reporting on this. | Companies are obligated to report if they meet two or more of the following criteria: – Annual turnover of £36 million or more – Balance sheet total of £18 million or more – 250 or more employees |
| Energy Savings Opportunity Scheme (ESOS) | Large businesses are mandated to assess their energy consumption and identify energy efficiency opportunities at least once every four years. | ESOS is already in effect. Phase 4 compliance date began December 2023 and will end December 5, 2027. The qualification date for Phase 4 is December 31, 2026. | Large UK undertakings and their corporate groups that meet at least one of the following criteria: – Employs 250 or more people – Has an annual turnover exceeding £44 million – Has a balance sheet exceeding £38 million |
| UK Sustainability Reporting Standards (SDS) | Set of standards currently under development that will require companies to disclose information about their sustainability-related risks and opportunities for reducing Scope 3 GHG emissions and net zero transition plans. | The SDS is expected to be finalised in the first half of 2025 and will likely apply to financial years starting on or after July 1, 2025. | Large and listed UK companies. The government has not yet finalised the specific thresholds for which companies will be required to comply. |
| Corporate Sustainability Reporting Directive (CSRD) | An EU regulation that will require many companies to publish regular reports on their environmental and social impact activities. | The CSRD is already in effect. | All large EU companies, as well as listed companies (except micro-enterprises). Non-EU companies with significant activity in the EU will also be required to comply. |
| UK Green Taxonomy | A classification system that defines which economic activities can be considered environmentally sustainable. To create a common understanding of “green” investments and prevent “greenwashing”. | Consultation period ended on 6th February 2025, expected to come into effect sometime after the consultation process is complete. | It will have a broad impact across various sectors, but those most significantly impacted are companies: – With environmentally focused activities – In transitioning sectors – Financial Institutions – With supply chains – Seeking green financing |
| Extended Producer Responsibility (EPR) | An environmental policy approach that makes producers responsible for the costs of managing their products at the end of their life. | In the UK, the new packaging EPR regulations come into full effect in 2025, data collection and reporting started in 2024. | The regulations will apply to all obligated UK organisations that import or supply packaging. Companies must collect and report packaging data for a given year if all the following apply: – An individual business, subsidiary or group (but not a charity) – Annual turnover of £1 million or more, based on your most recent annual accounts up to 7 April – Responsible for importing or supplying more than 25 tonnes of packaging to the UK market in the previous calendar year – Carry out any of the packaging activities |
What do I need to do next to comply with the upcoming sustainability regulations?
To ensure a smooth transition and compliance with upcoming sustainability regulations, businesses should prioritise proactive measures by thoroughly familiarising their teams with the specific sustainability standards relevant to their industry and operating regions. By regularly assessing their current sustainability reporting practices to identify gaps and areas needing improvement, businesses can develop a detailed plan to close these gaps, including timelines, responsibilities, and necessary resources. Through engaging with stakeholders, including investors, customers, and suppliers, companies can understand their information needs and tailor reporting accordingly.
Moreover, businesses should take concrete steps to prepare for assessments and audits. Start by allocating sufficient resources and appointing a Lead Assessor to oversee the process. Gather comprehensive energy consumption data across all operations, ensuring accuracy and completeness, then conduct a thorough audit to identify areas for improvement and potential energy efficiency opportunities. This audit should not only focus on direct energy use but also consider indirect emissions and supply chain impacts. By taking these steps, businesses can not only comply with regulations but also identify opportunities to enhance sustainability practices, reduce costs, and improve their overall environmental performance. Embracing these changes proactively will position your organisation for long-term success by abiding with sustainability laws.
Dan McLaughlin, Sustainability Lead at Unipart Consultancy, commented on how businesses can prepare for the regulations on embedded emissions:
“Proactively integrating embodied emissions data into operations is more than compliance – it’s a strategy for resilience and growth. As global economies shift towards circularity, UK manufacturers who embed emissions reduction into product design and sourcing will not only mitigate risks like resource scarcity and carbon pricing, but also unlock new opportunities for innovation and leadership in their respective markets. By embracing, and importantly, prioritising, these measures in 2025, businesses can differentiate themselves, meet evolving customer requirements, and strengthen their position in sustainable manufacturing.”
If you’re looking for more support with your supply chain’s sustainability journey, get in touch here.