The EU agrees to further simplify ESG rules, Verra rejects four Chinese carbon projects over falsified documents, and Filipino typhoon survivors sue Shell in a landmark climate case — plus other key updates.
Lexology PRO explores some of the most useful articles published on Lexology and externally across key environmental, social and governance (ESG) areas to help businesses stay abreast of the most pressing issues.
This article has been summarised with the assistance of Microsoft Copilot.
Shutterstock.com/hrui
Decarbonisation and carbon markets
On 17 December 2025, the European Commission announced plans to expand the scope of the Carbon Border Adjustment Mechanism (CBAM), promising to close loopholes and adding 180 products to its scope. The CBAM has been in a transitional phase for the last two years, but will begin to apply in full from 1 January 2026. The changes will apply from January 2028.
On 12 December 2025, carbon-credit standards non-profit Verra rejected four Chinese forestry projects due to falsified government approvals. The decision impacts 4.42 million verified carbon units, requiring replacements for retired credits. Verra has also launched quality control reviews of 35 additional and 10 withdrawn projects.
On 10 December 2025, the European Commission agreed on a legally binding climate target of a 90% reduction in net greenhouse gas emissions (GHG) by 2040. The agreement allows the use of up to 5% high-quality international credits from 2030.
On 10 December 2025, Germany’s federal government approved amendments (German language only) to the GHG Reduction Quota Act 2021 to boost demand for green hydrogen in transport. The revised law increases blending quotas for renewable fuels and introduces incentives for hydrogen-based solutions.
Environment and climate change
On 16 December 2025, Canada’s Environment and Climate Change Minister finalised the Enhanced Methane Regulations, targeting emissions from oil and gas sectors and landfills. The regulations aim to reduce methane emissions by 40-45% by 2028 and cumulatively cut 304 megatons of carbon dioxide (CO2) equivalent by 2040.
On 12 December 2025, the European Commission reached a provisional agreement to overhaul the End-of-Life Vehicles (ELV) Regulations. The new rules mandate at least 25% recycled plastic content in vehicles by 2036, 20% of which must come from ELVs, while improving dismantling standards, producer responsibility, and spare parts reuse.
On 12 December 2025, the US Bureau of Ocean Energy Management held its Gulf of America offshore oil and gas lease sale, the first since 2023, under the One Big Beautiful Bill Act 2025. The auction offered more than 80 million acres across 181 blocks at a reduced royalty rate of 12.5%, generating over US$300 million in high bids and marking the first of 30 mandated sales under the legislation.
On 11 December 2025, South Korea’s Climate, Energy, and Environment met with the bottled water industry (Korean language only) to prepare for the label-free bottled water system, which takes effect on 1 January 2026. The scheme replaces traditional labels with QR codes for key product details and includes a one-year transition for small business owners.
ESG disclosures and sustainable finance
On 16 December 2025, the European Parliament reached an agreement to simplify sustainability reporting and due diligence rules. The revised Corporate Sustainability Reporting Directive (CSRD) now applies to companies with over 1,000 employees and a net annual turnover of €450 million. The Corporate Sustainability Due Diligence Directive (CSDDD) applies to companies with more than 5,000 employees and a turnover exceeding €1.5 billion.
On 16 December 2025, the Network for Greening the Financial System announced plans to publish updated long-term climate scenarios by November 2026. The move came after a controversy over a retracted “damage function” model, criticised for overstating climate-related economic harm.
On 11 December 2025, the International Sustainability Standards Board (ISSB) issued targeted amendments to IFRS S2 to clarify scope three GHG emissions disclosures. Key changes include optional measurements limited to financed emissions and alternative classification systems. The amendments are effective for reporting periods beginning on or after 1 January 2027.
On 11 December 2025, the Science Based Targets initiative published new guidance for mandatory five-year target reviews, introducing resources such as a review manual, step-by-step guidance, and commitment statuses. Companies have up to 12 months from the review start date to complete the process.
On 10 December 2025, the European Commission published an “Environment Omnibus” further trimming ESG rules. This next round of changes include simplifications of environmental legislation in industrial emissions, circular economy regulations, environmental assessments and geospatial data.
On 10 December 2025, the Global Reporting Initiative launched a consultation to update labour-related disclosure standards. Proposed changes cover four topics: forced labour, child labour, freedom of association, and workers in business relationships. The consultation ends on 18 February 2026.
On 9 December 2025, the California Air Resources Board issued draft regulations implementing SB 253 and SB 261, with a comment period until 9 February 2026. Key elements include initial deadlines for scope one and two emissions reporting in 2026 and phased rulemaking on assurance.
On 9 December 2025, Lexology PRO reported that UK officials have cast doubt on whether it will proceed with import rules aimed at preventing deforestation. Under the Environment Act 2021, the government had committed to creating a Forest Risk Communities Regulation via secondary legislation.
On 8 December 2025, the Securities Commission (SC) Malaysia set out its approach for enforcing compliance with sustainability reporting standards. The SC emphasises capacity building and skill enhancement during the review process, while addressing non-compliance through active engagement and corrective action.
Energy
On 15 December 2025, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) issued permits to 28 companies for flare-gas utilisation projects, expected to reduce up to six million tonnes of CO2 emissions annually.
On 10 December 2025, the Indonesian government reportedly cancelled the planned early retirement of the 660MW Cirebon-1 coal-fired power plant, opting instead to look for alternatives. The move follows uncertainty over financing support and penalty costs, prompting a search for less disruptive retirement options.
On 10 December 2025, Taiwan’s Environment Minister delayed approval (traditional Chinese language only) of the Hualien Ocean Thermal Energy Conversion project due to environmental concerns over deep-sea water extraction. The minister has requested supplemental data and mitigation measures before proceeding with the review.
Climate litigation
On 12 December 2025, 20 US states filed a lawsuit challenging the Trump administration’s new US$100,000 fee for handling hazardous waste permits. The complaint alleges the fee violated federal law and imposes unlawful burdens on businesses and state agencies.
On 11 December 2025, the US Court of Appeals struck down the Trump administration’s ban on wind energy permitting. The court ruled the directive exceeded presidential authority and violated statutory requirements for renewable energy development, thereby reinstating permitting for offshore wind projects.
On 9 December 2025, survivors of a 2021 typhoon in the Philippines filed legal action against Shell in the UK. The lawsuit accused Shell of contributing to climate change through negligence and misinformation.
ESG and DEI policies
On 11 December 2025, US President Donald Trump issued an executive order targeting proxy advisory firms, including ISS and Glass Lewis, citing concerns over foreign ownership and “politically-motivated agendas” including ESG. The order directs the Securities and Exchange Commission to impose stricter disclosure requirements on ownership structures, conflicts of interest, and methodologies used by these firms.
On 10 December 2025, Florida Attorney General James Uthmeier filed a lawsuit against Starbucks, alleging illegal race-based quota policies in its hiring and contracting practices. The complaint claims these policies violate state anti-discrimination laws and impose unlawful preferences.
See our new interactive Compliance Calendar for key deadlines and dates in core compliance areas, including enforcement dates, reporting deadlines and changes to regulations.