Sustainability

On September 13, 2023, the California Legislature passed Assembly Bill 1305 (AB 1305), which imposes wide-ranging disclosure requirements on (1) entities that market or sell voluntary carbon offsets and (2) entities that purchase and rely on these offsets to advertise their climate goals.  The bill has been enrolled and is currently on Governor Newsom’s desk.

AB 1305 comes on the heels of escalating criticism of voluntary carbon offsets, including arguments that corporations use low-quality offsets to engage in greenwashing.  AB 1305 is likely to prompt companies to engage in careful due diligence before making climate-related claims and to ensure that they rely on high-quality offsets that correspond to real emission reductions or removals.…

Continue Reading Law Enacted by California Legislature Would Require Companies to Disclose Key Details About Voluntary Carbon Offsets and Claims Made in Reliance Upon Them

Last week, the California Legislature passed two bills comprising the core of a landmark “Climate Accountability Package.”  Together, the two bills will impose extensive new climate-related disclosure obligations on thousands of U.S. public and private companies with operations in California.  Senate Bill 253 (SB 253) would require companies with greater than $1 billion in annual revenues to file annual reports publicly disclosing their Scope 1, 2 and 3 greenhouse gas (GHG) emissions.  Senate Bill 261 (SB 261) would require companies with greater than $500 million in annual revenues to prepare biennial reports disclosing climate-related financial risk and describing measures adopted to mitigate and adapt to that risk.

Yesterday afternoon during an appearance at Climate Week NYC, Governor Newsom told the audience emphatically, “of course I will sign those bills.”  When he does, many more companies will be required to improve the accuracy, completeness and rigor of their GHG reporting and climate risk disclosures. Because of the complexity of GHG reporting, we have focused the remainder of this post on SB 253.  Please see our separate post on SB 261 here.…

Continue Reading California Legislature Passes Landmark Climate Disclosure Laws: Spotlight on SB 253

Last week, the California Legislature passed two bills as part of the state’s landmark “Climate Accountability Package.”  If signed by Governor Newsom as anticipated, the two laws—Senate Bill 253 (SB 253) and Senate Bill 261 (SB 261)—will usher in significant climate-related disclosure requirements for thousands of U.S. public and private companies that do business in California.

SB 253 and SB 261 mark the most extensive emissions- and climate-disclosure laws enacted in the United States to date.  SB 253 requires companies with greater than $1 billion in annual revenues to file annual reports publicly disclosing their direct, indirect, and supply chain greenhouse gas (GHG) emissions, verified by an independent and experienced third-party provider.  SB 261 requires companies with $500 million in annual revenues to prepare biennial reports disclosing climate-related financial risk and measures they have adopted to reduce and adapt to that risk, with the first report due by January 1, 2026.

This post focuses on SB 261’s climate-related financial risk disclosure requirements. You can find our post on SB 253’s GHG emissions reporting requirements here.…

Continue Reading California Legislature Passes Landmark Climate Disclosure Laws: Spotlight on SB 261

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 26 June 2023, the International Sustainability Standards Board (“ISSB”) published its inaugural International Financial Reporting Standards Sustainability Disclosure Standards (the “ISSB Standards”) (read our previous blog post on this here).  In August 2023, the UK Financial Conduct Authority (“FCA”) published Primary Market Bulletin 45, confirming its intentions to update its climate-related disclosures for listed companies under the Listing Rules (see LR 9.8.6 R (8) and LR 14.3.27 R) to reference UK-endorsed ISSB Standards.…

Continue Reading Corporate Reporting in the UK: The International Sustainability Standards Board

On 26 June 2023, the International Sustainability Standards Board (the “ISSB”) issued its inaugural International Financial Reporting Standards (“IFRS”) Sustainability Disclosure Standards (the “Standards”), heralding progress in the development of a global baseline of sustainability-linked disclosures. The Standards build on the concepts that underpin the IFRS Accounting Standards, which are required in more than 140 jurisdictions, but notably not in the United States for domestic issuers subject to regulation by the Securities and Exchange Commission (“SEC”), which must apply US Generally Accepted Accounting Principles (“US GAAP”).  Despite broad investor appetite for  transparent, uniform and comparable disclosure rules, the scope of required sustainability disclosure and timing for adoption of the SEC’s pending climate disclosure rule remains unresolved.…

Continue Reading ISSB Issues Inaugural Global Sustainability Disclosure Standards

On March 30, the Integrity Council for Voluntary Carbon Markets (ICVCM),  an independent governance body that aims to set and maintain a global standard for quality in the voluntary carbon market, announced the launch of its Core Carbon Principles. The Core Carbon Principles (CCPs) are intended to establish fundamental principles for high-quality carbon credits that create a verifiable climate impact, based on the latest science and best practice. On the same day, ICVCM also issued the Program-level Assessment Framework and the Assessment Procedures, both designed to assist carbon-crediting programs in verifying that such programs and the credits that they issue comply with the CCPs.  Given the role that ICVCM has assumed in recent discussions concerning integrity in the voluntary carbon market (VCM), the CCPs and related Program-level Assessment Framework and Assessment Procedures are likely to draw significant attention from stakeholders at all stages of the VCM-supply chain. …

Continue Reading ICVCM Launches Core Carbon Principles for Voluntary Carbon Market

The European Union (“EU”) is coming closer to adopting mandatory rules for companies that use carbon credits.

  • First, the European Parliament and Council are considering for adoption a Commission for a Regulation on a Carbon Removal Certification Framework (“CRCF Regulation Proposal”).

These two regulatory initiatives are closely tied to each other.  In effect, the draft ESRS that the Commission is considering for adoption require subject entities to disclose GHG removals and GHG mitigation projects financed through carbon credits.

The EU’s aim of regulating carbon credits coincides with its push for carbon neutrality by 2050, and a related significant proliferation of companies publicly committing to achieve “net-zero” emissions by mid-century, which has triggered an uptick in strategic purchases of carbon credits in the voluntary carbon market (“VCM”). The CRCF Regulation Proposal and the upcoming ESRS will help to expand sustainable and verified carbon removals and encourage investment in technological innovation.   

Companies turning to the VCM to reach their net zero goals, and others active in the generation, trading, and use of carbon credits, will want to follow these initiatives closely.  Opportunities remain for companies to express views that may shape the final contours of these regulations.…

Continue Reading The EU’s Emerging Mandatory Disclosure and Certification Rules for Carbon Credits

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