Sustainability Blog #16

Legislation and regulation

On 14 December, a provisional agreement was reached between the Council of the EU and the European Parliament regarding the Corporate Sustainability Due Diligence Directive (CSDDD). The directive will impose mandatory due diligence requirements on both EU and non-EU companies and lay the groundwork for companies to face liability for breaches of these obligations. The provisional agreement has led to a reduction in the CSDDD’s scope, but it includes stronger provisions on civil liability and sanctions. The agreement defines the scope of the directive to cover large companies that have more than 500 employees and a net worldwide turnover over EUR 150 million. For non-EU companies, it will apply if they have over EUR 150 million net turnover generated in the EU, three years from the entry into force of the directive. The Commission will have to publish a list of non-EU companies that fall under the scope of the directive. 

The provisional agreement reached with the European Parliament now needs to be endorsed and formally adopted by both institutions.

On 5 December, three European Supervisory Authorities (ESAs) – EBA, EIOPA and ESMA – published their final report amending the draft Regulatory Technical Standards (RTS) for the Delegated Regulation supplementing the Sustainable Finance Disclosure Regulation (SFDR). The publication follows a request by the European Commission in April 2022 for the ESAs to review the RTS set out in the SFDR, including the indicators for principal adverse impact (PAI) and financial product disclosures. The ESAs’ review suggests several significant modifications, including an expansion and refinement of the list of PAI indicators that outline the negative effects of investment decisions on sustainability factors. Moreover, the mandatory PAI indicators have been broadened to encompass social aspects. The European Commission will study the draft RTS and decide whether to endorse them within three months.

News & Publications

December’s major event was the UN Climate Change Conference (COP28) held in Dubai.
Taking place from 30 November to 12 December, COP28 marked the conclusion of the first Global Stocktake (GST), the main mechanism for assessing progress under the Paris Agreement. The first GST aimed to help align efforts on climate action, including measures that need to be put in place to bridge the gaps in progress.

On the inaugural day, the parties formally launched the Loss and Damage Fund at the World Bank, concluding a three-decade journey. The fund is intended to aid developing economies in coping with the current impacts of climate change. While initial commitments to the fund have reached USD 700 million, uncertainty looms over future financing. The summit also witnessed the endorsement of a number of agreements aimed at ensuring access to essential minerals crucial for electric vehicles, renewables, and other clean energy technologies. Acknowledging the increasing demand for these materials and the geopolitical uncertainties impacting their supply, all five United Nations Regional Commissions stressed the importance of international coordination in the development of critical minerals. Also, during the conference’s fourth day, around 50 countries and companies involved in oil and gas production committed to achieving nearly zero methane emissions by 2030. Given that methane’s effect on global warming is 30 times greater than that of carbon dioxide, reducing methane emissions has become a pivotal objective. Building on this commitment, some of the world’s highest-emitting countries announced USD 1 billion in grant funding.

CMS was honoured to be the official provider of legal services to the United Nations Climate Change Conference.