The EU’s pre-election push on environmental-related regulation

Biodiversity, Thought Leadership, Greenwashing, Policy, Transparency & Traceability, Multi-Asset

Legislative time is running short before the European Parliamentary elections on 6-9 June 2024. European legislators are frantically working on a range of regulations to finalise their adoption at the final Parliament Plenary sessions this month.

In this final push before the Parliamentary recess, Planet Tracker provides a summary of the status of environmental-related regulations which ranges from nature restoration and anti-greenwashing requirements to waste & packaging and supply chain due diligence controls. Only one is already approved, while four are in the balance (pending), and two are scheduled for discussion post-election. Corporates and investors should watch this pre-election period with considerable interest.

                                                                   Source: Planet Tracker

Restoring Nature

  1. EU Nature Restoration Law: in support of the Global Biodiversity Frameworki and in line with the EU Biodiversity Strategy for 2030, the current text proposes multiple binding (some with reserves) restoration targets and obligations across a broad range of ecosystems, from forests and agricultural land to urban areas, rivers, and marine habitats. Specifically, present measures would cover at least 20 % of the EU’s land and sea areas by 2030, and all ecosystems in need of restoration by 2050. A few derogations made it into the text, such as temporary suspension for agroecosystems, the so-called ‘emergency brake’ clause, and that the 2030 target applies only to areas under the EU’s Natura 2000 network.

On 27th February 2024, the EU Parliament formally adopted it in the plenary,ii while the EU Council struggled to find an agreement on 25th March 2024. In April 2024, the EU Council could discuss it, however if any changes to the text are made, it will require further Parliamentary approval, which may not come before the June elections.

The EU’s Anti-Greenwashing Package:

  1. The Directive on Empowering Consumers for the Green Transitioniii aims to prevent greenwashing and the avoidance of misleading product information in commercial consumer communication. Specifically, it:
    1. forbids the use of generic environmental claims without backing these up with substance;
    2. allows for the use of sustainability labels only if established by a public authority or if the label is based on certification schemes;
    3. prohibits the claim, based on GHG emission offsetting, that a product has a neutral, reduced or positive climate impact on the environment.

In March 2024, EU Council and Parliament gave the Directive the green light and now the EU Member States have 24 months to transpose it into national legislation.

  1. The Green Claims Directiveiv complements the EU’s ban on greenwashing and introduces a verification system for companies that make environmental-related claims. It would set minimum requirements on the substantiation and communication of environmental claims and labelling, such as demanding lifecycle analysis or a Product Environmental Footprint (PEF). Furthermore, it would ask EU Member States to appoint independent verifiers and establish procedures for complaints.

MEPs adopted their position on this proposal in March 2024 and discussions are timetabled to continue after the European elections in June 2024.

  1. The Ecodesign Directivev would establish enhanced rules entailing the integration of environmental considerations into product development, aiming to create goods with the lowest possible environmental impact throughout their life cycle. The new rules would significantly broaden the scope of products to which it applies and require a Digital Product It would also introduce additional requirements and minimum standards for durability, reparability, energy efficiency and recycling. Finally, it introduces a direct ban on the destruction of unsold apparel and clothing accessories.

The EU Parliament and EU Council reached a provisional agreement on 5 December 2023. However, the agreement still needs to be formally approved by the co-legislators. The EU Parliament will decide its status in the April plenary session.

On Waste and Packaging

  1. The Revised option of the EU Waste Framework Directive was discussed by the EU Parliament on 13th March 2024, which adopted the following position. The Parliament is proposing new targets for the Waste Framework Directive which propose more stringent rules on food waste, reducing it at a national level by at least 20% by the end of 2030 in food processing and manufacturing and by at least 40% per capita in retail, restaurants, food services and households. Furthermore, MEPs agreed to extended producer responsibility (EPR) schemes, to cover the costs of collecting, sorting and recycling waste. The new rules would cover products such as clothing as well as items which contain textile-related materials such as leather, composition leather, rubber or plastic.

These negotiations will be followed up by the new Parliament after the 6-9 June 2024 European elections.vii

  1. The Revision of Regulation on Packaging and Packaging Waste is intended to tackle over-packaging and to reduce packaging waste. This regulation would require new specific targets to be set for the reduction of plastic packaging waste generated on a per capita basis (as compared with 2018) by at least -5% by 2030, -10% by 2035 and -15% by 2040. The proposed bans on the sale of a number of packaging formats (e.g. shrink wrap for suitcases, grouped packaging, very lightweight carrier bags and secondary packaging) would start by 31 December 2027. Furthermore, the rules would introduce sector specific reuse targets for beverages, transport and e-commerce (with specific exclusions such as cardboard), as well as rules for refill. A direct ban on PFAS and mandatory deposit return schemes are also included in the text. The new rules would also require recycling targets (65% of packaging needs to be recyclable by 2025, and 70% by 2030) and recycled content targets for plastic packaging (30% of plastic beverage bottles (PET) by 2030 and 65% by 2040. Micro-companies (<10 people and have a turnover or a balance sheet total viii

On 4th March 2024, the EU Parliament and EU Council reached a provisional agreement on the proposed Regulation. The Parliament’s plenary vote on the provisional agreement is scheduled for the Plenary II session in April. If approved, it could enter into force at the end of 2024.ix

Due Diligence

  1. The EU Directive on Corporate Sustainability Due Diligence (CSDDD) aims to foster sustainable and responsible corporate behaviour throughout global value chains by identifying, preventing and mitigating adverse impact of their activities on human rights and on the environment. This proposed Directive would work in partnership with the Corporate Sustainability Reporting Directive (CSRD), which was approved in 2022.x The rules would apply to EU and non-EU companies and parent companies with over 1000 employees and with a turnover of more than EUR 450 million, and to franchises with a turnover of more than EUR 80 million if at least EUR 22.5 million is generated by royalties. The requirement to prevent, end or mitigate their negative effects also encompasses companies’ upstream partners working in design, manufacture, transport and supply, as well as downstream partners, including those dealing with distribution, transport and storage. Companies will also have to integrate due diligence into their policies and risk management systems and adopt and put into effect a transition plan making their business model compatible with the global warming limit of 1.5°C under the Paris Agreement. The transition plan should include the company’s time-bound climate change targets, key actions on how to reach them, and an explanation, including figures, of what investments are necessary to implement the plan. Firms will be liable for non-compliance with the regulation and face penalties.

The EU Council and Parliament reached a political agreement in March 2024, which is expected to be confirmed in the April Parliament plenary session, despite the current political turmoil surrounding this measure.xi

vi The Digital Product Passport should accompany products, providing consumers with all the relevant information needed to help them make informed decisions, such as:

  • providing information on performance, traceability, technical documentation, harmful chemicals, user manuals etc.
  • providing information on the environmental impact of the purchase
  • making products easier to repair or recycle.

x The CSRD and the CSDDD are closely inter-related and complementary to each other. The CSRD, adopted in November 2022 and entered into force in January 2023 sets the framework for EU companies to disclose sustainability issues from a “double materiality” perspective, ensuring transparency of operations by providing third-party audited reports on how such issues affect their business as well as how their business affects people and the environment. Meanwhile, the CSDDD requires companies not only to conduct due diligence of the potential impact of their operations and supply chains (EU and non-EU) on the environment and human rights, but also which policies are in place to mitigate risk and establishes a liability mechanism. In summary, while CSRD focuses on transparency and disclosure; the CSDDD focuses on reducing negative effects.

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