Bumper week for EU’s sustainability agenda
It’s been a busy week for sustainability regulation in Brussels. Here are the highlights.
Final European Sustainability Reporting Standards (ESRS)
On Friday afternoon, the European Commission released the final ESRS.
They’re largely in line with advice from EFRAG, but with some changes in relation to disclosures on emissions, microplastics and human rights.
For more details, read Frank Bold’s blog here.
The N-ESRS, which will apply to non-European countries, have also been renamed ESRS-TC this week, following a vote at EFRAG.
TC stands for Third Country.
Consultation on Taxonomy disclosure rules
On Wednesday, the European Securities and Markets Authority (ESMA) opened a consultation on how companies should disclose against the EU Taxonomy.
Its main proposals for simplifying the framework at Level 2 are focused on limiting operational expenditure disclosures to Research & Development spending, with an option to bolt on other forward-looking indicators like green procurement.
ESMA also suggests simpler ways to deal with group-level reporting under the Taxonomy Regulation, and advises the Commission to strengthen the framework’s link with the ESRS and the IFRS – especially in relation to how business activities are defined.
It will hold a public hearing to present the proposals and engage with stakeholders on July 22nd.
The Commission asked for the advice in March, to help it with its efforts to streamline the bloc’s reporting rules.
Fellow supervisors the European Insurance and Occupational Pensions Authority and the European Banking Authority have also launched consultations on their Taxonomy recommendations.
All three run for six weeks, and the final advice will be presented to the Commission in October.
Leaks on EUDR product list
Meanwhile, the latest plans to change the products in scope of the EU Deforestation Regulation (EUDR) have been leaked.
According to a document circulating this week, the Commission is preparing a delegated act and accompanying annex that would see a number of products taken out and added into the list.
As expected, leather is set to be removed, while soluble coffee and palm-based soap will be added.
Other palm-oil derivatives used to make food emulsifiers, cosmetics and detergents will also be added, according to the leaked proposal, while soybeans for growing would be cut.
The Commission wants to delay the inclusion of the new products until December 2027.
The European Parliament and Council will have two months to veto the final proposal once it’s formally adopted by the Commission.
Practical guidelines for Forced Labour Regulation
On Tuesday, the Commission published key guidelines on the EU Forced Labour Regulation, providing clarifications about how it will work in practice – including its scope, enforcement and implementation.
The guidelines confirm that it’s up to companies how they ensure products aren’t made with forced labour, and they explain how due diligence processes could be applied (although they’re not mandatory).
They provide a thorough explanation of the investigative process, outlining some types of information that national competent authorities (NCAs) might request, but also calling on those authorities to be proportionate in their approach.
Member States must explain their penalty rules to the Commission by the end of the year.
In the meantime, the Commission will run training webinars on the Forced Labour Regulation after the summer.
Clarity for the Empowering Consumers for the Green Transition Directive (EmpCo)
The Consumer Protection Cooperation (CPC) Network published a common understanding on how NCAs should approach ‘old stock’ situations in relation to EmpCo on Tuesday.
Old stock situations relate to products or packaging still in circulation when EmpCo takes effect in September, but breach the rules around sustainability claims and branding.
There has been debate about whether those items should have to be destroyed in order to comply with the anti-greenwashing regulation by the deadline, or whether that would undermine the law’s environmental objectives by generating unnecessary waste.
The CPC Network, which is a group of relevant public authorities convened by the Commission, agreed on some shared principles for dealing with such situations.
“Traders are expected to take timely and good-faith steps to comply with the new rules and to adapt their business-to-consumer practices without delay,” the Commission explained, adding that authorities can take a nuanced, phased approach based on the realities of specific situations.
Authorities should avoid moves that “result in excessive costs or unnecessary environmental harm” and consider corrective measures and guidance before pursuing sanctions.