U.S.: California Air Resources Board Advances Corporate Climate Disclosure Regulations
On February 26, 2026, the California Air Resources Board (“CARB”) approved an initial regulation implementing aspects of the state’s corporate greenhouse gas emissions and climate-related financial risk disclosure laws, commonly referred to as “SB 253” and “SB 261,” respectively. The rules are designed to operationalize statutes enacted in 2023, as later amended, that require large companies doing business in California to disclose greenhouse gas emissions arising from their activities, as well as climate-related financial risks. The regulation also introduces a fee structure intended to cover the state’s administrative and program implementation costs associated with overseeing the reporting system.
Under the proposal, reporting entities will begin submitting emissions disclosures for Scope 1 and Scope 2 emissions by August 10, 2026, while CARB will collect annual fees to fund program administration and maintain the reporting infrastructure. CARB emphasized that it developed the regulation following public workshops and stakeholder consultations. CARB also noted that, pursuant to a court order, it is not currently enforcing SB 261, and climate-related financial risk reporting under that statute is voluntary at this time.
Link:
Proposed Regulation
UK: Finalized Sustainability Reporting Standards Released
On February 25, 2026, the UK government published its finalized UK Sustainability Reporting Standards (“UK SRS”) based on the International Sustainability Standards Board (the “ISSB”) standards, IFRS S1 (on general requirements for disclosure of sustainability information) and IFRS S2 (on climate-related disclosures). The UK government consulted on the UK SRS S1 and S2 in 2025 (see our previous ESG Update on the topic here).
One notable change from the ISSB standards is the removal of specific time limits on transitional reliefs. The ISSB standards allow companies disclosing for the first time to defer disclosing certain sustainability-related information beyond climate for one year. The ISSB standards also include a one-year transitional relief from Scope 3 reporting for companies disclosing for the first time. The UK SRS have removed the specific time references for these transitional reliefs, allowing companies to use them indefinitely.
The UK Financial Conduct Authority (the “FCA”) is currently consulting on amendments to the UK Listing Rules, with the consultation open until March 20, 2026. The outcome of the consultation could determine whether certain UK entities will be required to report under UK SRS S2 and certain elements of UK SRS S1. In its consultation documents, the FCA stated it would impose limits on the use of UK SRS transitional reliefs.
The UK government has separately indicated that it will consider whether, as part of its “Modernising Corporate Reporting” program, private entities should be required to report under the UK SRS.
The UK SRS are currently available for voluntary use.
Links:
UK SRS S1 and S2
Consultation Response
EU: French Company Found in Breach of Its Duty of Vigilance in Relation to Its Foreign Subsidiary
On March 12, 2026, a Paris court found that Yves Rocher breached its obligations under the French law on the corporate duty of vigilance (the “Vigilance Law”). This decision marked the first time a French company was found in breach of the Vigilance Law in connection with the actions of a foreign subsidiary.
The Vigilance Law requires large French companies to establish and implement a vigilance plan. The plan must set out reasonable measures to identify and prevent serious human rights and environmental risks arising from their own activities, as well as those of their subsidiaries, subcontractors, and suppliers. Failure to do so can give rise to potential civil liability. For more on the Vigilance Law, see our Debevoise In Depth on the topic here.
The case was brought by 81 former employees of the Turkish subsidiary of Yves Rocher, who had been dismissed as a result of joining a trade union, as well as the Turkish trade union the employees had joined and two French NGOs. The court held that the 72 former employees who had accepted settlements from Yves Rocher no longer had standing and focused instead on the claims of the remaining nine employees, the trade union and the NGOs.
The court found that the French legislator intended the Vigilance Law to be mandatory in cases of damage suffered in France or abroad resulting from a breach of the vigilance plan obligations. The court concluded that although the damage occurred in Turkey, the Vigilance Law liability framework constitutes an overriding mandatory law within the meaning of Article 16 of the Rome II Regulation, displacing Turkish law.
The court found that Yves Rocher’s risk mapping for its 2017 and 2018 vigilance plans was inadequate on the basis that it was limited to Yves Rocher’s suppliers and high-risk purchases but did not consider its subsidiaries. The omission of subsidiaries from its plans violated the Vigilance Law, exposing the company to potential civil liability.
The court also found that there was a causal link between the failings in these vigilance plans and the harm suffered by the former employees. Specifically, the court found that Yves Rocher had sufficient information to identify the risk of a serious infringement of trade union freedom at the Turkish subsidiary level and had the power and the means to intervene.
The court awarded six of the nine former employees €8,000 in compensation each, the trade union €40,000 and the NGOs symbolic compensation of €1. The court also dismissed the claim of three of the nine former employees as insufficiently substantiated. A de novo appeal before the Paris court of appeal remains available.
Links:
Court Press Release
Decision
EU: Italy’s Business Minister Calls for Pause to the EU’s Emissions Trading System
On February 26, 2026, Adolfo Urso, Italy’s Minister for Business, called for the European Commission to suspend the Emissions Trading System (the “ETS”) pending a comprehensive review of emissions benchmarks and the mechanisms for allocating allowances, as well as the introduction of a stable support mechanism for exporting companies.
Minister Urso argued that the ETS effectively operates as an additional tax on European companies, raising costs and undermining their competitiveness. He also highlighted the need for greater policy coherence between ongoing revisions to the Carbon Border Adjustment Mechanism (“CBAM”) and the ETS. Broadly, the ETS aims to drive emissions reductions domestically, whereas CBAM seeks to address unfair competition from imports produced under weaker climate regimes by imposing carbon costs on certain imported goods based on their embedded emissions and the carbon price paid in the country of origin.
On March 3, 2026, Italy and France signed a joint declaration emphasizing the need for greater support for European exporters and further reforms to both the ETS and CBAM regimes. In recent weeks, following developments in the Middle East crisis, Italian Prime Minister Giorgia Meloni has called for the immediate suspension of the application of the ETS to electricity generation from thermal sources until global fossil fuel prices return to their pre-crisis levels.
Link:
Franco-Italian Joint Declaration (in Italian)
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