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”).
- Second, the European Commission (“Commission”) is in the process of adopting standards (the so-called “ESRS”) for the EU’s mandatory ESG reporting regime—the Corporate Sustainability Reporting Directive (“CSRD”)—that will also cover disclosures on companies’ use of carbon credits (including as emission offsets) and their quality.
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
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
On March 3 and 14, 2022, the European Financial Reporting Advisory Group (“EFRAG”) published its most recent set of Working Papers on the future of the EU’s European Sustainability Reporting Standards (“ESRS”). The ESRS will establish dozens of sustainability-related disclosure requirements that will be mandatory for thousands of EU companies under the Corporate Sustainability Reporting Directive (“CSRD”) (see our blog on the CSRD as background). Companies subject to the CSRD will be required to include these disclosures in their annual reports, and these disclosures will need to be audited. Importantly, this is the first time EFRAG has provided significant detail regarding reporting standards for topics that fall under the “S” pillar of the ESG (environmental, social, and governance) framework. The European Commission is currently aiming to have the CSRD and ESRS apply from January 2023, with initial reports due in 2024, and EFRAG will hold public consultations on its draft reporting standards in the coming months.
Continue Reading European Reporting Standards for the “S” in ESG: EFRAG’s New CSRD Disclosure Requirements for Workers and Human Rights Take Shape
Addressing climate change has been a priority for President Biden since his first day in office. On December 8, 2021, President Biden continued that focus by issuing Executive Order (EO) 14057, Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, which includes a number of requirements directed at introducing sustainability to federal acquisitions.
Continue Reading Contractors Have an Opportunity to Help Shape ESG Requirements
The European Commission seeks stakeholders’ feedback until 18 November on its proposal to define cross-border projects in the field of renewable energy generation that would be eligible to receive EU funding under Connecting European Facility instrument.
Continue Reading European Commission Opens Public Consultation to Define Selection Criteria for Renewable Energy Projects Eligible of EU Funding
As of July 3, single-use plastic products marketed in the EU/EEA must comply with the requirements and restrictions of Directive 2019/904 on the Reduction of the Impact of Certain Plastic Products on the Environment (“Single-Use Plastic Directive” – “SUPD”). To help Member States implement the SUPD into their national laws and apply its requirements, on May 31, 2021, the European Commission published its long-awaited Guidelines on the Scope of the SUPD. The Guidelines take different and controversial approaches on the scope the SUPD and the nature of plastics and continue to leave important issues unanswered.
Continue Reading New EU Restrictions on Single-Use Plastic Products to Enter into Force
The European Commission has published a proposal for a Corporate Sustainability Reporting Directive (2021/0104) (“CSRD”), which forms just one part of a comprehensive package of sustainable finance measures (see our blog here). The Commission has put forward these measures in response to demand for stronger and wider sustainability reporting standards, over and above what the EU Non-Financial Reporting Directive currently provides. The CSRD seeks to mandate sustainability reporting and assurance through the amendment of existing EU laws, including the Transparency Directive, the Accounting Directive, and the Audit Directive. More fundamentally, according to the Commission, it will move the EU one step closer to realizing its aim of having sustainability reporting be “on a par” with financial reporting, in terms of attached weight and importance. This is reflected in the change of terminology used in the CSRD proposal, from a focus on “non-financial” information reporting, to “sustainability”.
We cover below the background and detail, but in summary, these are the key elements of the CSRD proposal that corporates should be aware of:
- Scope: The CSRD reporting requirements will apply to all large EU companies and all listed companies, including listed small and medium-sized enterprises (“SMEs”). This is estimated to cover around 49,000 companies.
- Reporting: The so-called “double materiality” principle remains, but in-scope companies will now have to report according to mandatory sustainability standards. Simpler and “proportionate” standards will apply to listed SMEs.
- Audit: The CSRD will require, for the first time, a general EU-wide audit (assurance) requirement for sustainability information.
- Digitization: The sustainability information must be published in companies’ management reports — and not separately reported — and the information will need to be digitized or “tagged” so it can be incorporated into a planned European Single Access Point.
- Timing: If the proposal is adopted and standards can be agreed in line with current ambitious estimates, large in-scope companies must comply from financial years starting on or after 1 January 2023, publishing reports from 2024; whilst SMEs have to comply from 1 January 2026.