UK & EU Sustainability
Regulation: 2026

Introduction

2026 has been a year of significant regulatory movement across UK and EU sustainability policy. From the fundamental restructuring of CSRD scope under Omnibus I to the continued uncertainty around MEES Band C, organisations across multiple sectors have had to reassess their compliance positions.

This article summarises the key changes that affect commercial landlords, public sector suppliers, and companies in the sustainability reporting pipeline. Where regulations are proposed but not yet enacted, this is clearly stated.

CSRD Omnibus I

The most significant regulatory change of 2026 was the entry into force of Directive (EU) 2026/470, commonly known as "Omnibus I", on 18 March 2026. This directive fundamentally narrowed the scope of the Corporate Sustainability Reporting Directive (CSRD) by raising the applicability thresholds.

Under the original CSRD (Directive 2022/2464), companies were in scope if they met either of the following: more than 250 employees or more than €40 million in annual turnover. Under Omnibus I, the thresholds have been raised significantly and now require both conditions to be met:

• More than 1,000 employees, AND
• More than €450 million in annual turnover

Both conditions must be satisfied for a company to fall within mandatory CSRD scope. The effect is an approximately 80% reduction in the number of companies subject to mandatory sustainability reporting across the EU. Assurance requirements have also been simplified under the revised framework.

Companies that were preparing for CSRD under the old thresholds should reassess their position. Many mid-market companies that were previously in scope are now outside mandatory reporting requirements, though they may still face value-chain disclosure requests from larger companies that remain in scope.

MEES Band C 2028 (Proposed)

The UK government has proposed raising the Minimum Energy Efficiency Standards (MEES) for commercial lettings from the current Band E minimum to Band C by 1 April 2028. The current legal requirement, a minimum of Band E under SI 2015/962, has been in force since April 2023 for all existing commercial leases.

The Band C proposal remains exactly that: a proposed regulatory target, not current law. The consultation has closed and the Government response is awaited as of April 2026. The final statutory instrument has not been laid before Parliament.

Under the current penalty regime (SI 2015/962, Regulation 39), non-compliance penalties are calculated using a rateable-value formula: up to 10% of rateable value for breaches under three months (minimum £5,000, maximum £50,000) and up to 20% for breaches of three months or more (minimum £10,000, maximum £150,000). These are per-property penalties based on rateable value, not a flat amount.

PPN 002: Social Value in Procurement

Procurement Policy Note 002 (PPN 06/20, updated by PPN 002 in February 2025) requires a minimum 10% social value weighting in UK central government procurement. There have been no material changes to the policy note itself during 2026.

However, the practical impact of PPN 002 continues to grow. Procurement volume evaluated under social value weighting criteria has increased significantly, and many contracting authorities now apply 15-20% social value weighting, well above the 10% minimum. This reflects a broader trend of authorities using social value as a meaningful differentiator in bid evaluation rather than a compliance checkbox.

For suppliers, this means that social value scoring increasingly determines contract outcomes. Organisations that have not invested in defensible social value measurement and narrative development are at a growing competitive disadvantage.

UK Green Taxonomy

The UK Green Taxonomy remains in the consultation phase as of April 2026. The Treasury and DESNZ have been developing a UK-specific taxonomy framework to classify environmentally sustainable economic activities, but no binding obligations have been introduced.

The UK Green Taxonomy is not directly comparable to the EU Taxonomy Regulation (Regulation 2020/852) in scope or implementation timeline. Organisations should monitor progress but are not currently required to report against UK Taxonomy criteria. Voluntary alignment with the EU Taxonomy remains an option for companies with cross-border operations or investor reporting requirements.

Biodiversity Net Gain (BNG)

Biodiversity Net Gain (BNG) became mandatory for major planning applications in England from February 2024, under the provisions of the Environment Act 2021. The requirement was extended to small sites from April 2024. BNG requires developers to deliver a minimum 10% net gain in biodiversity, measured using the Defra biodiversity metric, with gains maintained for at least 30 years.

Now in its second year of implementation, BNG is an established part of the planning process. The biodiversity credits market has developed, though pricing remains variable. For commercial property developers and landlords undertaking significant development or change-of-use projects, BNG assessment and delivery is now a standard planning obligation.

Summary