Commercially Connected Shorts - 5 March 2025

This week we look at:

• EU publishes proposals to reduce scope of sustainability due diligence and reporting regulation
• Global sustainability and ESG themes for 2025
• Update on UK consultation on copyright and AI
• The UK Employment Rights Bill: family friendly rights changes, including flexible working

EU publishes proposals to reduce scope of sustainability due diligence and reporting regulation

On 26 February 2025 the EU published its anticipated proposal to simplify sustainability due diligence and reporting via two Omnibus Directives. These would amend the Corporate Sustainability Due Diligence Directive (CS3D) and the Corporate Sustainability Reporting Directive (CSRD), together with other EU legislation.

This proposal is part of an EU drive to simplify administrative burdens on business, boost competitiveness and unlock investment capacity.

The proposals would delay the coming into force of CS3D, with the deadline for Member States to transpose CS3D into national law postponed for one year until 26 July 2027, and the compliance deadline for the first wave of in-scope companies also postponed by one year until 26 July 2028. The date for publication of compliance guidance by the EU Commission would be brought forward to July 2026 to give businesses more time to prepare for compliance.

Crucially the proposals would also water down the due diligence measures contained in CS3D. At present, CS3D will require in-scope businesses to conduct due diligence to identify, prevent, and mitigate adverse human rights and environmental impacts across their operations and chain of activities (upstream and downstream) using a risk based approach. Proposals to reduce this scope include the following.

• Reduce the scope of due diligence, so that in-depth risk assessments are only required in relation to direct business partners (unless there is plausible information in relation to adverse activities by indirect partners), and the scope of information that can be required from direct business partners with less than 500 employees is reduced. Stakeholder engagement obligations would also be reduced.
• Where a business identifies potential or actual adverse impacts in their supply chain and continues to deal with the offending supply chain partner, liability under CS3D would not be triggered if there is a reasonable expectation that a remediation action plan will succeed. Provisions that require the relationship with that partner to be terminated as a last resort would also be removed.
• Requirements to monitor and assess the effectiveness of due diligence would be reduced from an annual to a 5 yearly review.
• Watering down of obligations to put into effect climate transition plans.
• Removal of an EU-wide civil liability mechanism.
• Reduce Member States’ ability to impose more stringent measures than those set out in CS3D.

If these proposals come into effect this will significantly reduce the reach of CS3D and therefore the compliance burden in relation to supply chains. In the meantime, businesses preparing for compliance are left in an uncertain position as to how far their policies and procedures need to go.

The proposals relating to CSRD are intended to “remove around 80% of companies from the scope of CSRD, focusing the sustainability reporting obligations on the largest companies which are more likely to have the biggest impacts on people and the environment”. If the proposals are implemented CSRD would only apply to:

• EU large undertakings with more than 1000 employees.
• Non-EU companies with an EU branch or large subsidiary that, broadly, have a net EU turnover of more than EUR 450m for the last two years.

Reporting requirements would also be postponed by 2 years for the companies that were due to comply for financial years 2025 and 2026.

The proposals must be approved by both the EU Parliament and Council before coming into force. Given that the proposals go beyond a simplification exercise and significantly reduce the scope and reach of CS3D and CSRD, they are likely to prove contentious. In-scope businesses should monitor progress of these proposals as any changes to current regulation will directly impact on the scope and nature of compliance.

Global sustainability and ESG themes for 2025

In Eversheds Sutherland’s Global Sustainability and ESG Themes for 2025 we outline the evolving landscape of sustainability and ESG across critical themes.  

In 2025, we anticipate sustainability and ESG themes will focus on regulatory challenges, with new regulations already set to take effect in the EU and US, and others, whether expanding or curtailing the reach of government in this area. We focus across supply chain due diligence, reporting requirements, worker protection, integration of AI and ESG, ESG litigation and green claims, and the circular economy.

Update on UK consultation on copyright and AI

On 25 February 2025 the Government’s consultation on copyright and AI closed. The consultation sought views on proposals to address the interaction between copyright law and the training of AI systems in a way that promotes certainty and that supports both the UK creative industries and the UK AI sector.

The proposal favoured by the Government is to make an exception to copyright law for text and data mining, i.e. use of copyright works for this purpose would be permitted by default. This would be subject to a right for the copyright holder to “reserve their rights” in order to prevent use of their copyright works for this purpose, or to make such use subject to a paid-for license.

This proposal is proving to be highly contentious.

On 26 February 2025, following evidence sessions, the cross-party Culture, Media and Sport Committee and Science, Innovation and Technology Committee published a joint response to the consultation, making the following key points:

• “Everyone should receive fair remuneration for their creative work.”
• “The government should introduce practical measures to provide transparency on AI training data, whatever its approach to copyright law.” This would help rights holders to monitor use of their works, promote good governance and help consumers to use AI in an informed manner.
• “The government’s preferred option should not be taken forward without a technical solution that works, is implementable and accessible to all.” This is likely to be technologically challenging and it may not be possible to do this quickly.
• “The government should publish a full impact assessment for each option set out in the consultation”, with clear economic analysis.
• “Robust mechanisms are needed to enforce compliance, enforcement and redress”, based on principles of fairness, practicality and accessibility.

The accompanying press release emphasised the technological difficulties of implementing the opt-out approach for rights holders, with Dame Caroline Dinenage MP saying “the government’s proposal for the onus to be on creators to opt-out of AI training is like burglars being allowed into your house unless there's a big sign on your front door expressly telling them that thievery isn't allowed”.

The UK News Media Association has also launched an advertising campaign with the slogan “Make it fAIr”, saying “The government wants to change the UK’s laws to favour big tech platforms so they can use British creative content to power their AI models without our permission or payment. Let’s protect the creative industries – it’s only fair”.

We await the Government’s response to consultation, but it is becoming increasingly evident that there is no silver bullet to fix this issue, and reaching a position that is both palatable to all stakeholders and technologically feasible will be extremely challenging.

You may also be interested in Latest developments in UK and EU data protection, AI, and data used in training AI models | Eversheds Sutherland, a recent article published in Data Protection Leader by One Trust Data Guidance and Eversheds Sutherland’s Philip James, Anna Maria Allen and Robbert Santifort, discussing the latest regulatory developments in the UK and EU in and around data used to train AI models.

The UK Employment Rights Bill: family friendly rights changes, including flexible working

The Employment Rights Bill (Bill) is currently progressing through its parliamentary stages and is expected to be finalised this summer, with a staged implementation during 2025 and 2026 (and potentially beyond).

The Bill includes 28 employment reforms and, cumulatively, the scale, breadth and complexity of the changes are significant for employers (read our Employment team's tracker to keep abreast of developments, including timescales for implementation).

To support employers as they prepare their response to the Bill’s diverse measures, our Employment law team’s more detailed briefings focus on specific topics within the Bill and include the latest developments and practical implications for employers. For our briefing focusing on the Bill’s changes to:

• trade union and collective rights, read our update.
• collective redundancies, read our update.
• dismissal and re-engagement (“fire and rehire”), read our update.

In the latest briefing, the team analyses the proposed changes to family friendly rights, including flexible working: family-friendly-rights-changes-including-flexible-working.