ESG

On April 9, the Board of Trustees of the Science Based Targets initiative (SBTi), a climate action organization that has validated corporate decarbonization targets for more than 4,200 companies to-date, issued a statement announcing that environmental attribute certificates (EACs), including carbon credits generated by voluntary carbon projects, may be used to abate Scope 3 greenhouse gas (GHG) emissions. It is possible to view the Board’s statement, unprecedented for SBTi, as recognition of the practical challenges associated with achieving Scope 3 emissions abatement without utilizing EACs. Yet, the statement also drew swift criticism from some stakeholders and observers, who argue that it represents a departure from SBTi’s science-based approach to corporate climate action. 

Following the criticism, on April 11, “the overwhelming majority” of SBTi’s staff, which felt “compelled to issue multiple clarifications” of the Board’s statement, published a remarkable public response.  Thereafter, on April 12, the Board supplemented its April 9 statement to clarify that no changes to the SBTi standards had been finalized. However, the Board’s statement and staff’s response show that interested stakeholders will have opportunities to provide SBTi with critical input regarding the use of EACs in Scope 3 emissions abatement that could have a material effect on any related revisions to the SBTi standards.  Continue Reading SBTi Board Announces Role for Carbon Credits in Scope 3 Emissions Abatement; Staff Clarifies Review Remains On-going

Yesterday, the European Parliament approved a new (recast) Urban Wastewater Treatment Directive (“UWWTD”) that will impose new additional costs on producers marketing pharmaceutical and cosmetic products in the European Economic Area by the end of 2027.  Some studies suggest that the costs that producers would have to collectively pay could be around €1 billion per Member State.  This is well above the figures published in the Commission’s impact assessment, which estimated the annual cost of implementing the various requirements of the UWWTD in all Member States at €3.8 billion, including €1.2 billion for micro-pollutants treatment.

The upcoming UWWTD lays down rules on the collection, treatment, and discharge of urban wastewater, and puts particular emphasis on the implementation of the polluter pays principle.  The Directive aims to address the environmental and health concerns resulting from the presence of micro-pollutants, other pollutants (e.g., heavy metals, PFAS), microplastics and antimicrobial resistant (“AMR”) bacteria in European waters.  It introduces new measures for the treatment of wastewater, including quaternary treatment for micro-pollutants, and makes producers of pharmaceutical and cosmetic producers pay for such treatment.Continue Reading New EU Wastewater Treatment Fees on Producers of Pharmaceutical and Cosmetic Products

California’s Department of Resources Recycling and Recovery (CalRecycle) recently released a preliminary report analyzing data related to the recyclability of certain materials in California.  The report, issued in accordance with CalRecycle’s obligations under California Senate Bill 343 (SB 343), is intended to help the public determine whether businesses may legally…

Continue Reading California Publishes Preliminary Report on Recyclability of Materials Under SB 343

The European Commission is currently holding a public consultation on a Draft Delegated Act (“DDA”) on a common rating scheme on the energy performance of data centers in the European Union and European Economic Area (“EU/EEA”).  The DDA will lay out the energy key performance indicators that operators and owners of data centers must report, the sustainability indicators that will be calculated per data center, and the aggregated data that will be made publicly available, in accordance with the new EU Energy Efficiency Directive (“EED”). 

The adoption of the DDA will introduce specific mandatory environmental and energy performance reporting requirements for data centers for the first time in the EU/EEA, and probably in the world.  These reporting requirements may be the first step for the EU to adopt mandatory environmental performance targets for data centers within the next decade.Continue Reading Upcoming Sustainability Reporting Requirements for Data Centers in the EU

In the early hours of December 14, 2023, the Council of the EU (“Council”) and the European Parliament (“Parliament”) reached a provisional political agreement on the Corporate Sustainability Due Diligence Directive (“CSDDD”). Described as a “historic breakthrough” by Lara Wolters, who has led this file for the Parliament, the CSDDD will require many companies in the EU and beyond to conduct environmental and human rights due diligence on their global operations and value chain, and oblige them to adopt a transition plan for climate change mitigation.

Given the CSDDD’s relevance for companies’ ongoing compliance planning on environmental and human rights matters, this blog aims to advise clients on the basic elements of the CSDDD agreement based on press releases from the Council, Parliament, and the European Commission (“Commission”), even if much uncertainty remains. Although a political agreement has been reached, the text of the agreement is not publicly available and a number of details of the legal text will need to be finalized in follow-up technical meetings. Covington will publish a more detailed alert on “how to prepare” for the CSDDD once the full text is available (likely in early 2024).Continue Reading Provisional Agreement on the EU’s Corporate Sustainability Due Diligence Directive (CSDDD): Key Elements of the Deal

The following interview originally appeared in the National Law Journal.

What you need to know

  • One of the significant issues many of their multinational clients have is the growing divide between how they operate and what’s expected of them in the U.S. versus Europe.
  • At the same time the legal field has experienced this anti-ESG backlash over the last year in the U.S., the EU has moved full speed ahead on many ESG initiatives with significant consequences for businesses, including the EU Taxonomy, the Sustainable Finance Disclosure Regulation, the Corporate Sustainability Reporting Directive, and the Corporate Sustainability Due Diligence Directive.
  • There is also growing litigation risk because with so much more scrutiny, and so much more information in the public domain, there are a range of stakeholders and potential plaintiffs on ESG issues, from state officials to NGOs

The Biden administration has set clear policy goals to establish effective corporate net-zero strategies on the one hand, yet there has also been growing pushback against the climate aspect of ESG in many red states. How do you advise clients on climate regulation in this very fluid environment?

Jayni Hein: We are all witnessing this summer, yet again, record-breaking land and ocean temperatures and pervasive wildfire smoke. It’s undeniable that climate change is affecting how we live today and how businesses operate. How both the government and the private sector respond is critically important.Continue Reading Q&A: Navigating Climate and ESG Amid Regulatory Uncertainty

On 19 June 2023, after almost 20 years of negotiations, the United Nations (“UN”) member states adopted a landmark treaty to ensure the conservation and sustainable use of marine Biodiversity of areas Beyond National Jurisdiction (the “BBNJ” treaty).

One of the cornerstones of the BBNJ treaty is the creation of a new mechanism for the fair and equitable sharing of benefits arising from activities with respect to “marine genetic resources” (“MGRs”) and “digital sequence information” (“DSI”) from MGRs.  This mechanism is groundbreaking because it will require companies to pay for the use of genetic resources beyond national jurisdiction for the first time.  Until now, under the existing Convention on Biological Diversity (“CBD”) and its Nagoya Protocol, companies were required to make (non-)monetary contributions only for the utilization of genetic resources under national jurisdiction (e.g., from national territories, national seas and exclusive economic zones).  The BBNJ creates new “Access and Benefit-Sharing” (“ABS”) obligations on MGRs from maritime areas beyond national jurisdiction (i.e., the High Seas and the Area). 

Companies in sectors whose R&D depends on marine genetic resources will be required to contribute to share financial and other benefits.  In this blog we focus on those provisions of the BBNJ which will have the most direct impact on companies.Continue Reading Historic Marine Biodiversity Treaty creates new Access and Benefit-Sharing obligations for life sciences companies

Sustainability governs all policies and sectors of social and economic life. The goal of sustainable development is to meet the needs of today’s generations without compromising the self-sufficiency of future generations. Companies are called upon to innovate as economic conditions indicate a change in the direction of sustainability. Sustainability considerations and green developments have increasingly caught the attention of competition law’s enforcers. Competition authorities such as the European Commission (“Commission”), the Hellenic Competition Commission (“HCC”), the Dutch Competition Authority (“ACM”) and the German Competition Authority (“Bka”) have taken a positive stance towards accepting sustainability initiatives proposed by the private sector. How can companies balance both sustainability and competition law? In this blog post, we analyze recent developments that further explain the sustainability framework that companies have to navigate.Continue Reading Building a sustainability strategy – what companies can (not) do from a competition law perspective

The European Commission is expected to present a Proposal for a Directive on Green Claims  (“Proposed Green Claims Directive” or “the Proposal”) within the next few months.  Together with the Proposal for a Directive empowering consumers for the green transition through better protection against unfair practices and better information (“Consumer Empowerment Directive Proposal”), the Proposed Green Claims Directive would contribute to the EU’s green transition towards a circular, climate-neutral and clean economy by creating a common methodology for the substantiation of green claims that concern the environmental footprint of products, services and companies.  It would aim to reduce greenwashing and enable consumers to take informed purchasing decisions based on reliable information about the sustainability of products and traders.

If adopted, it is likely to significantly limit the environmental claims that businesses can make in the EU/EEA.  Businesses may want to consider approaching the Commission to try to influence the final legislative proposal that it is expected to present by March 2023.  Once the Commission presents its legislative proposal, businesses should consider proposing amendments to the European Parliament and Council. Continue Reading Upcoming EU Rules on Green Claims

The Greenhouse Gas Protocol (“GHG Protocol” or “Protocol”)—a leading standard setter for measuring and managing corporate greenhouse gas emissions, borne of a partnership between World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD)—has opened stakeholder surveys concerning the revision of its Corporate Accounting and Reporting Standard, Guidance on Scope 2 Emissions, and the Scope 3 Standard and Scope 3 Calculation Guidance.Continue Reading Corporate Carbon Counting Under Scrutiny—Comments Requested on Pending Updates to the Greenhouse Gas Protocol