Sustainability Blog #11

Legislation and regulation

The European Sustainability Reporting Standards (ESRS) were one of the main topics this month, as the public consultation on the initial set of ESRS has been concluded by the European Commission. These standards will encompass the precise disclosure criteria that companies falling under the scope of the EU’s upcoming Corporate Sustainability Reporting Directive (CSRD) must adhere to when reporting. Subsequently, the European Commission will review the feedback received, with the targeted adoption date for the ESRS set in the third quarter of 2023.

However, recently proposed changes to the ESRS, which would ease several aspects of the CSRD, have not been entirely welcomed by some stakeholders. A coalition of investment and sustainable investing groups, including Eurosif, PRI, IIGCC, EFAMA and UNEP FI as well as more than 90 asset managers, announced the publication of a joint statement calling on the European Commission to reconsider its recently proposed changes to the ESRS. One of the main points of the statement emphasizes that, “the proposed approach would limit investor access to the consistent, comparable and reliable information needed to inform decisions and allocate capital in line with sustainability goals, including those of the European Green Deal, the EU Biodiversity Strategy for 2030 and the EU Climate Law.”

You can find the statement here.

On 3 July, the European Commission changed the comment deadline for its proposal concerning ESG ratings and sustainability risks in credit ratings to 30 August 2023. It announced that the feedback period, initially set at eight weeks, will be extended daily until the proposal is available in all EU languages. All feedback received will be condensed by the European Commission and subsequently presented to the European Parliament and Council, aiming to contribute to the legislative discussion.

On 12 July, the European Parliament adopted its position on the EU Nature Restoration Law (NRL), approving the European Commission’s proposal. The NRL focuses on restoring damaged ecosystems and includes a key target for the European Union to have restoration measures in place by 2030 covering at least 20% of its land and sea areas. However, the process of adopting this position wasn’t exactly smooth sailing. The European People's Party (EPP) led a campaign opposing the proposed law, which has significantly jeopardized its future. The Environment Committee of the European Parliament voted on its version of the law last month, but it failed to secure a majority. As a result, a motion to reject the law was tabled for a full vote in Parliament. The motion to dismiss the proposals narrowly failed with a vote of 312 to 324 and 12 abstentions. Subsequently, Parliament approved its position with a vote of 336 to 300 and 13 abstentions. The adopted text incorporated various modifications aimed at addressing the concerns of opponents. Notably, a new article was included, emphasizing that new renewable energy infrastructure installations that serve a significant public interest will be safeguarded to prevent any obstruction by the new law.

On July 25, the European Council announced the adoption of a series of laws and regulations under the Fit for 55 package, aimed at achieving the EU’s climate goals. These new laws will regulate energy efficiency, alternative fuels infrastructure, and the decarbonisation of the maritime sector, aiming to reduce final energy consumption by setting more ambitious energy efficiency targets. This package includes:

1. adoption of the Energy Efficiency Directive (EED), which will help member states collectively reduce final energy consumption by at least 11.7% by 2030, compared to the energy consumption forecasts for 2030 made in 2020;
2. adoption of the Alternative Fuels Infrastructure Regulation (AFIR), a new law for more recharging and refuelling stations across Europe;
3. adoption of the FuelEU maritime initiative, a regulation with the goal of increasing demand for and consistent use of renewable and low-carbon fuels, and reducing greenhouse gas emissions in the shipping sector, while ensuring the smooth operation of maritime traffic and avoiding distortions in the internal market.

News and publications

On 27 July, the new head of the Intergovernmental Panel on Climate Change, Jim Skea, emphasized that the governments have not put in place policies that are ambitious enough to allow the goals of the Paris agreement to be met. Consequently, we are “committed to at least some degree of overshoot,” he said.

Also, the United Nations Global Compact has issued an interesting guide with 6 tips to improve your supply chain’s social sustainability. These tips are intended to offer practical guidance that goes beyond internal operations, helping companies enhance social sustainability across their supply chains.

You can find more information here.