Sustainability Blog #7

Legislation and regulation

On 10 March, the European Commission, the European Parliament and the Council agreed on a provisional agreement to reform and strengthen the EU Energy Efficiency Directive. This deal will mark a further step in completing the ‘Fit for 55' package to deliver the European Green Deal and the REPowerEU Plan. The provisional agreement states that the annual energy savings obligation must nearly double in order to ensure continual progress. EU countries will be required to achieve new savings each year of 1.49% of final energy consumption on average, from 2024 to 2030, up from the current level of 0.8%. They will eventually have to reach 1.9% by the end of 2030. This provisional agreement now only needs to go through the formal adoption procedure before entering into force.

On 23 March 2023, the European Commission proposed the new Green Claims Directive which aims to tackle misleading environmental claims by companies about their products. The proposal marks a welcome step towards combating greenwashing by providing more specific rules and complementing the proposed changes to the Unfair Commercial Practices Directive. If eventually adopted, this Directive would have a significant impact on businesses making green claims about the products they sell in the EU. The list of requirements is pretty expansive and would require businesses to substantiate environmental claims (for example, all claims must rely on widely recognised scientific evidence) and there would be further requirements for environmental labelling schemes. Moreover, the Directive proposal states that businesses would only be able to use environmental labels that are EU‑approved and included in a central EU list. Businesses would no longer be able to create and use an environmental label (either independently, or as a group). You can find the proposal here.

On 14 March the EP adopted its position on the proposed revision of the Energy Performance of Buildings Directive (EPBD). All new buildings should be zero-emission from 2028 and existing buildings will have to comply with MEPS (Minimum Energy Performance Standards) to reach climate neutrality by 2050. Moreover, residential buildings will have to achieve a minimum energy performance rating of Class E by 2030 and Class D by 2033. The difficult process of trilogues starts soon, although it seems that it’s going to be an uphill battle for EP negotiators against EU countries, where a large coalition of at least 16 countries strictly opposes mandatory renovations for individual buildings.

Also, it’s important to mention news regarding the European Sustainability Reporting Standards (ESRS). European commissioner Mairead McGuinness has publicly called on EFRAG to prioritise its efforts on capacity building for the implementation of the first set of ESRS over the preparatory work for the draft sector-specific standards. This means that the ESRSs will probably be delayed as EFRAG announced that they are “adjusting their workplan to this new priority whilst carrying on under a modified timetable”.

News and publications

The SustainAbility Institute by ERM issued a 2023 Rate the Raters report on how investors and companies rate ESG raters and their services. The 2023 report is based on analysis of survey responses from a broad range of corporate sustainability professionals and investors, while survey data are supplemented by in-depth interviews and secondary research. The findings reveal ongoing evolution in the ESG ratings space, with the landscape becoming more complex as ratings increase in importance to investors and companies. Despite high usage, investors and companies are frustrated by the shortcomings of ESG ratings. Most investors and companies surveyed have only modest confidence that ESG ratings accurately reflect sustainability performance, while a sizeable minority of corporates feel they do not. You can find the entire report here.

On 9 March, The European Commission has adopted a new Temporary Crisis and Transition Framework to foster support measures in sectors key for the transition to a net-zero economy, in line with the Green Deal Industrial Plan. The new Framework amends and prolongs in part the Temporary Crisis Framework, adopted on 23 March 2022 to enable Member States to support the economy in the context of Russia's war against Ukraine.