Sustainability Blog #19

Since the current term of the European Parliament is inching towards its final days, we have been witnessing a lot of last-minute votes on EU ESG and climate change legislation in the last two months. The main one being the CSDDD, of course, which was the talk of the town for the past two months, but also a large number of other pieces of legislation that have long been in the making.

On 6 March, the European Parliament and the European Commission announced that they had reached a provisional agreement on new rules banning products made with forced labour from being sold on the EU market, imported or exported. In September 2022, the European Commission had put forth an initial proposal aimed at tackling modern slavery. This proposal has now evolved into an agreement, emphasizing the importance of preventing products made with forced labour from entering the EU market. The agreement directs customs authorities to identify and intercept such products at EU borders. Furthermore, it empowers national authorities of member states to take action against products suspected to be made with forced labour, subsequent to thorough investigations.

On 12 March, the EP also voted in favour of the Green Claims Directive. The directive seeks to establish a framework where companies must validate their claims of environmental friendliness before marketing their products as such. This initiative is designed to enhance transparency and build consumer trust. Under the new directive, companies are required to furnish evidence substantiating environmental claims like "biodegradable", "low pollution", "water-saving" or "bio-based". Verifiers appointed by EU member states will be tasked with assessing and approving the validity of these claims prior to their use.

Moreover, on 11 April, members of the European Parliament adopted a new law aimed at establishing a certification system to quantify, monitor and verify carbon removals, and to counter greenwashing – the so-called EU carbon removal certification framework. The approval, achieved with a 441-139 majority vote from MEPs, represents a significant milestone in advancing EU legislation towards the implementation of a robust framework for carbon removal and soil emission reduction. This initiative aims to promote the utilization of carbon removal methods while also tackling concerns related to greenwashing. With adoption by Parliament completed, the new legislation will now need to be approved by member states in the EU Council before entering into force.

April also marked the formal adoption of the revised Energy Performance of Buildings Directive (EPBD), with new rules aimed at reducing energy use and emissions from buildings across the EU. The main goals of this revision include for all new buildings to be zero emissions (ZEB) by 2030, and to phase out the use of fossil fuels in building heating systems by 2040. The legislation also sets targets to phase out or improve the lowest-performing buildings, with requirements for member states to adopt a national trajectory for residential buildings to reduce primary energy use by 16% by 2030 and 20-22% by 2035.

We described the complex process of adopting the Corporate Sustainability Due Diligence Directive (CSDDD) extensively in our previous blog. It has been a complicated and challenging journey, but on 24 April, the MEPs in the EP finally voted in favour of the CSDDD with a vote of 374 to 235. You can find more details of this process in our previous blog, and we also want to draw your attention to the relevant CMS tool, the CSDDD Navigator.

On 25 April, the European Parliament approved the Net-Zero Industry Act (NZIA), a new law aimed at supporting EU manufacturing of key technologies needed to achieve Europe’s climate and energy goals. The aim of the Net-Zero Industry Act is to facilitate investment in green technologies by streamlining permit processes and backing strategic projects. It also proposes making it easier for strategic tech products to enter the market, boosting European workforce skills through Net-Zero Industry Academies, and establishing a platform to coordinate EU efforts in this domain. To encourage innovation, the act suggests establishing favourable regulatory environments for developing, testing, and validating new technologies.

Finally, on 30 April, member states in the European Council approved a directive delaying the adoption of sector-specific European Sustainability Reporting Standards (ESRS) for 2 years. Moreover, the ESRS for reporting by companies outside the EU have also been postponed by 2 years. The period for adopting the ESRS concerning non-EU companies will be extended until the end of June 2026. Although the deadline for sector-specific ESRS has been postponed by two years, legislators emphasized the importance of the Commission promptly publishing and adopting sector-specific ESRS once they are ready, well ahead of the new 2026 deadline.