ESG reporting and governance in the life sciences sector: 2025 and beyond

As we move into 2025, the landscape of environmental, social, and governance (ESG) reporting continues to evolve. Life science businesses are facing new disclosure obligations, as governments worldwide introduce mandatory ESG reporting and sustainability governance frameworks. In this article, we focus on changes in the EU and the UK.

Meeting ESG disclosure requirements – a challenging task

Life science companies encounter unique challenges in meeting ESG disclosure requirements because of their complex supply chains, the societal and individual impacts of their products, their use of natural resources, and production of waste materials. These factors contribute to the volume and complexity of the data involved.

Clients we’ve worked with take these compliance obligations seriously and recognise the wider benefits of doing so. Life sciences business are used to being held to high ethical standards across their development pipeline from clinical research to product promotion, and have seen how this can be positive for the business reputationally across their varied stakeholder groups.

Accurate disclosure requires robust processes for data collection, availability, consistency, accessibility, and quality. Inconsistent and erroneous data can lead to inaccurate ESG claiming which brings its own risks. Ensuring that ESG claims are accurate and verifiable is central to avoiding accusations of inflated compliance claims (“greenwashing”) and potential regulatory action. The UK Competition and Markets Authority’s (CMA) Green Claims Code, applicable to all industries, underscores the importance of accuracy. Inaccurate ESG claims can not only lead to regulatory scrutiny by the CMA, but can also damage stakeholder trust, incur significant costs, and tarnish a company's reputation.

With the new “failure to prevent fraud” offence coming into force in the UK on 1 September 2025, companies must be especially vigilant about greenwashing. While the offence, part of the Economic Crime and Corporate Transparency Act 2023, primarily targets financial fraud, it also covers broader fraudulent activities. For example, if a company publishes misleading information about its ESG performance and profits from it, there’s potential for liability under the legislation.

EU and UK disclosure requirements – 2025 and beyond

We highlight below some key developments in the EU and the UK.

We would note however, that the EU programme should be viewed in the light of the recently released “Competitiveness Compass”. This outlines a roadmap aimed at boosting Europe’s productivity and global competitiveness. One of the first initiatives will be an “Omnibus” package, expected shortly. This will “cover a far-reaching simplification in the fields of sustainable finance reporting, sustainability due diligence, and taxonomy”. New EU level legislation will aim to streamline corporate reporting by consolidating the CSRD, CSDDD, and the EU Taxonomy Regulation into a single framework, and reduce bureaucracy by 25% while maintaining high standards and promoting consistency across Member States. The Omnibus package is part of the EU’s effort to simplify its legislative environment, ensuring businesses can focus on compliance and sustainability.

• EU – Deforestation-free Regulation (EUDR): The EUDR requires any company selling products into the EU market to ensure that certain commodities linked to deforestation are deforestation-free, applying strict due diligence requirements to prevent deforestation and forest degradation. Commodities that will be captured by the EUDR include rubber, palm oil and soya, amongst others. The EUDR, which entered into force in June 2023, will be fully applicable from December 30, 2025, for large and medium companies, and from June 30, 2026, for micro and small enterprises. Its UK counterpart, the Forest Risk Commodity Regulation (UK FRC), was expected to be introduced in 2024 but has been indefinitely delayed.
  
  
• EU – Corporate Sustainability Reporting Directive (CSRD): The CSRD mandates sustainability reports prepared according to the European Sustainability Reporting Standards (ESRS). Phased implementation begins in 2025, with large EU public interest entities reporting first. The CSRD includes a requirement for companies to carry out a double materiality assessment, have their sustainability information assured, and digitally tag ESG data by 2026.
  
  
• EU – Corporate Sustainability Due Diligence Directive (CSDDD): The CSDDD requires companies to identify and address adverse human rights and environmental impacts in their operations and value chains. The Directive entered into force in July 2024 and EU Member States must transpose it into national law by July 2026, with full application by July 2029. However, there have been requests to postpone the implementation of CSDDD to give companies reporting under CSRD more time to understand and adapt.
  
  
• UK – Sustainability Reporting Standards (UK SRS): The UK Government plans to consult on drafts of the UK SRS in early 2025, with implementation expected from January 2026. Based on the International Sustainability Standards Board’s (ISSB) IFRS S1 and IFRS S2 standards, the UK SRS will apply primarily to UK-listed companies and potentially large private companies and public interest entities. Companies will need to disclose sustainability-related financial information and climate-related disclosures.
  
  
• UK – Green Taxonomy: The UK Government consulted on a UK Green Taxonomy (closed on 6 February). Like the EU Green Taxonomy, the taxonomy will define criteria for environmentally sustainable economic activities, focusing on objectives like climate change mitigation, adaptation, and biodiversity protection. By distinguishing sustainable from unsustainable economic activities, it aims to driving investment towards greener projects and companies and is a key tool within the UK Green Finance Strategy. The final taxonomy is expected later in 2025.
  
  
• UK – Extended Producer Responsibility (EPR) Regulations: From January 2025, businesses placing certain products on the market must pay the full lifecycle costs associated with those products. Companies with an annual turnover of £1 million or more and who supply over 25 tonnes of packaging annually must track and report this data to a government-appointed compliance scheme. Packaging refers to materials used to cover or protect goods, ensuring safe handling and transport, and also to enhance the appeal of goods for sale and display a company's logo or brand.

Benefits of robust data governance and reporting structures

The benefits of robust data governance and reporting structures extend beyond compliance with regulation. According to a recent Deloitte survey, 21% of life science and healthcare executives identified talent attraction and retention as the top business outcome from improved ESG reporting, followed by brand/reputation enhancement (18%) and risk reduction (16%).

Stakeholders are increasingly concerned with how businesses manage sustainability risks. To ensure effective data governance and reporting structures, we recommend that businesses consider the following areas:

• Transparency: Ensure clear and open communication about data practices and policies.
  
  
• Horizon scanning: Keep abreast of industry developments and upcoming regulations to stay ahead of changes.
  
  
• Utilising AI: Invest in sustainability reporting technologies and tools to enhance data management, while developing governance protocols to ensure safe and transparent AI use.
  
  
• Using established ESG reporting frameworks: Utilise existing frameworks like the ISSB’s IFRS S1 and S2, and the Global Reporting Initiative (GRI) to enhance the credibility and comparability of ESG disclosures.
  
  
• Cross-functional reporting team: A diverse team can provide comprehensive oversight and ensure all aspects of data governance are covered.
  
  
• Legal review of ESG disclosures: Conduct a legal review before making ESG disclosures public to ensure compliance and accuracy.

By adopting strong governance and reporting structures, life science companies can navigate the evolving ESG landscape and leverage these changes for competitive advantage.

Our specialist ESG team can support you with your compliance journey. We offer a range of tailored services, including horizon scanning for your business, and legal review before making ESG disclosures public to ensure compliance and accuracy.

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