A Guide through the EU and UK’s regulation mosaic

 

Navigating the intricate tapestry of regulations in the European Union and the United Kingdom can be a daunting task for businesses and professionals alike. The regulatory landscape is constantly evolving, with a myriad of directives, standards, and laws that vary in scope and application. This guide is designed to serve as a comprehensive resource, offering clarity and insight into this complex domain. From the cutting-edge sustainability directives of the EU, such as the CSRD and CSDDD, to the Sustainability Disclosure Standards (SDS) in the UK, this guide aims to demystify the regulatory environment. We delve into each regulation’s purpose, scope, status and implications, providing a thorough understanding that is vital for compliance and strategic planning.

UK Regulation

Streamlined Energy and Carbon Reporting (SECR)

About the regulation: The Streamlined Energy and Carbon Reporting (SECR) framework is a UK government initiative aimed at simplifying energy and carbon reporting for businesses. Introduced in April 2019, it consolidates existing schemes to provide a cohesive approach to reporting corporate energy use and associated greenhouse gas emissions. SECR requires qualifying companies to report on energy consumption, efficiency measures, and greenhouse gas emissions as part of their annual financial filings.

What it requires: The SECR framework requires qualifying UK companies to:

  1. Report Energy Use: Companies must disclose their UK energy use, including electricity, gas, and transport fuel consumption.
  2. Disclose Carbon Emissions: They need to report on greenhouse gas emissions associated with their energy use.
  3. Include Energy Efficiency Actions: Companies should provide information on energy efficiency actions taken during the financial year.
  4. Methodology Explanation: An explanation of the methodology used to calculate the energy and carbon information is required.

Who should comply: The Streamlined Energy and Carbon Reporting (SECR) framework applies to:

  • Quoted Companies: All UK-incorporated companies whose shares are listed on the London Stock Exchange or in a European Economic Area state or admitted to dealing on either the New York Stock Exchange or NASDAQ.
  • Large Unquoted Companies and LLPs: These are entities that meet at least two of the following criteria in a financial year: more than £36 million annual turnover, more than £18 million balance sheet total, or more than 250 employees.
  • Large LLPs: Similar to large unquoted companies, large Limited Liability Partnerships meeting the specified size criteria are also required to comply.

Implementation status: As of 2023, the implementation of the Streamlined Energy and Carbon Reporting (SECR) framework in the UK is fully operational. Introduced on April 1, 2019, the SECR simplifies existing energy and carbon reporting policies while reducing the administrative burden on companies.

UK Sustainability Disclosure Standards (SDS)

About the Standards: The UK Sustainability Disclosure Standards (SDS) are a set of guidelines developed to standardise the reporting of sustainability information by companies operating in the United Kingdom. These standards aim to enhance transparency and consistency in how companies disclose information related to environmental, social, and governance (ESG) factors, thereby helping investors and stakeholders make more informed decisions.

What it requires:

  1. ESG Disclosure: Companies are required to disclose comprehensive information on their ESG practices, including their impact on the environment and society.
  2. Risk Assessment: Companies must assess and report on the risks and opportunities related to sustainability, including how these factors influence their long-term strategy.
  3. Performance Metrics: The standards necessitate companies to provide specific metrics and targets related to their sustainability performance.
  4. Governance Structure: Companies need to demonstrate how sustainability is integrated into their governance structures and decision-making processes.

Who should comply:

  • UK-Based Companies: All companies operating in the UK, especially those publicly listed, are expected to comply with these standards.
  • Multinational Corporations: Multinational companies with significant operations in the UK also fall under the purview of these standards.

 

Implementation status:

  • Ongoing Development and Adoption: The SDS framework is in the process of being adopted and implemented by UK companies, with ongoing efforts to refine and enhance the standards.
  • Regulatory Support: The UK government and regulatory bodies are supporting the implementation of these standards, ensuring they align with broader sustainability goals and international ESG reporting frameworks.

UK Sustainability Disclosure Requirements (SDR)

About the Regulation: The UK’s Sustainability Disclosure Requirements (SDR) and investment labels, introduced as a comprehensive package of measures by the Financial Conduct Authority (FCA), are designed to guide consumers in the market for sustainable investment products. These requirements aim to provide transparency and standardisation in sustainability-related disclosures and investment products. The UK government plans to endorse the first two UK Sustainability Disclosure Standards (SDS) by July 2024, based on the International Sustainability Standards Board (ISSB) Standards.

What it requires: The SDR encompasses various requirements, including:

  1. Anti-Greenwashing Rule:
    • This rule applies to all FCA-authorised firms, mandating that sustainability-related claims must be clear, fair, and not misleading.
    • The FCA is also consulting on guidance for this rule to provide further clarity.
  2. Sustainable Investment Product Labels:
    • Four categories of labels: Sustainability Focus, Sustainability Improvers, Sustainability Impact, and Sustainability Mixed Goals.
    • Each label has specific criteria, including a 70% minimum threshold for investing in assets aligned with the sustainability objective.
  3. Disclosure Requirements:
    • Pre-contractual disclosures for labelled products and those with integral sustainability features.
    • Ongoing sustainability product reports for labelled products, detailing performance, and progress towards sustainability objectives.
  4. Entity-Level Disclosures:
    • Based on the FCA’s requirements for TCFD-aligned reporting, focusing on governance, impacts of sustainability-related risks, risk management processes, and metrics and targets.
  5. Naming and Marketing Rules:
    • Restrictions on the use of terms like ‘green’, ‘sustainable’, or ‘ESG’ in retail-facing marketing materials for products without a label.
  6. Interaction with EU SFDR:
    • The SDR is distinct from the EU Sustainable Finance Disclosure Regulation (SFDR), potentially requiring additional adjustments for products largely aligned with SDR labels.
  1. GRI Reporting:
    • Provides a comprehensive framework for sustainability reporting.
    • Aligns with SDR’s focus on transparency and accountability in environmental, social, and governance (ESG) impacts.
  2. Dual Materiality:
    • Considers both the impact of sustainability issues on a company and the company’s impact on sustainability.
    • Enhances SDR compliance by offering a more complete view of sustainability practices.

Who should comply: The SDR applies to UK-registered companies, limited liability partnerships, and UK-listed companies. Firms engaged in the distribution of investment products and asset managers are particularly impacted by these new rules.

Implementation status: The FCA aims to gradually implement the SDR, with specific requirements being phased in. Firms are encouraged to adapt their reporting practices and internal processes to comply with the evolving framework.

Future Developments: The SDR is likely to evolve, with potential future enhancements including further adoption of ISSB standards. The approach to sustainability disclosure and investment labelling is expected to continue developing, influencing both domestic and international financial markets.

Section 172 of the UK Companies Act 2006

About the Regulation: Section 172 of the UK Companies Act 2006 is a legal requirement for company directors in the United Kingdom. It mandates directors to act in a way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole. This includes considering various factors that contribute to long-term success, such as the interests of employees, relationships with suppliers and customers, environmental impacts, and community involvement.

What it requires: Section 172 of the UK Companies Act 2006 outlines specific legal obligations for company directors, emphasising a comprehensive approach to corporate decision-making. These requirements are pivotal in guiding directors to act not only in the interest of shareholders but also in considering a broader array of stakeholders and impacts. The key legal requirements under this section include:

  1. Duty to Promote Company Success: Directors are mandated to make decisions that they believe will best promote the success of the company. This requires them to adopt a long-term perspective, considering how their decisions affect the company’s sustainability and growth.
  2. Consideration of Stakeholders: Directors must take into account the interests of various stakeholders. This includes employees, suppliers, customers, and the communities where the company operates, ensuring that the company’s activities positively impact these groups.
  3. Environmental and Social Impacts: Directors are expected to assess and consider the company’s environmental footprint and its impact on the broader community. This includes a responsibility to understand and address how the company’s operations and policies affect environmental sustainability and social welfare.
  4. Governance and Reporting: Companies are obliged to report on their adherence to Section 172. This typically involves providing detailed accounts in annual reports of how directors have fulfilled their duties, thereby ensuring transparency and accountability to shareholders and other stakeholders.

Who should comply: Under Section 172 of the UK Companies Act 2006, companies defined as “large” must include a Section 172(1) statement within their annual reports. A company is considered large if it meets two of the following criteria:

  1. A turnover of £36 million or more.
  2. Balance sheet assets of £18 million or more.
  3. 250 or more UK employees (excluding those working mainly or wholly outside the UK).

These requirements apply to both private and public companies.

Implementation status: The implementation of Section 172 of the UK Companies Act 2006, requiring large companies to include a statement in their annual reports, has been in effect since the introduction of the Companies (Miscellaneous Reporting) Regulations 2018. This regulation has significantly enhanced corporate governance by ensuring transparency in how directors consider stakeholder interests in their decision-making process. The focus on ESG issues has become increasingly prominent, with companies integrating these considerations more actively into their business strategies.

Corporate Sustainability Reporting Directive (CSRD)

About the Regulation: The Corporate Sustainability Reporting Directive (CSRD), effective from January 2023, is a pivotal EU legislation that expands and strengthens the requirements for non-financial reporting. It builds on the Non-Financial Reporting Directive (NFRD) and introduces more comprehensive rules for reporting on social and environmental impacts.

What it Requires:

  1. Disclosure of Material Information: Companies must disclose material information regarding sustainability-related impacts, risks, and opportunities. This information should be in line with the European Sustainability Reporting Standards (ESRS), aiming for accuracy, consistency, and comparability in corporate sustainability reporting.
  2. Scope of Disclosures: The disclosures are not limited to climate issues but encompass a wide range of sustainability topics, including environmental, social, and governance matters. Companies are required to provide both quantitative and qualitative disclosures, alongside management commentary and data on the company’s strategy, governance, materiality assessment, and performance metrics.
  3. Double Materiality Perspective: The CSRD adopts a double materiality perspective, requiring companies to report both on how sustainability issues affect them and how their actions impact society and the environment. This approach is distinct from other frameworks and may require disclosures above what other frameworks necessitate.
  4. Location of Disclosures: Sustainability information must be disclosed in a dedicated section within the management report, differentiating it from other reporting frameworks that allow disclosures outside of the annual report.
  5. Digital Tagging and Taxonomy: Companies must digitally tag reported sustainability information in accordance with a digital taxonomy, facilitating the location of needed information by users.
  6. Independent Assurance Requirement: The CSRD introduces a robust approach toward the assurance of sustainability information. From the first year of including CSRD disclosures, companies will be required to obtain limited assurance over their compliance with sustainability reporting standards and certain reported indicators. The level of assurance may progress towards reasonable assurance in the future.
  7. Assurance Opinion: A statutory or financial auditor, or an independent assurance services provider, will need to provide an assurance opinion over the sustainability report. The assurance report issued must be publicly disclosed with the annual financial report.

Who Should Comply: The CSRD applies to a wide range of entities, including large EU companies, publicly-listed SMEs, and non-EU companies with significant operations in the EU. Specifically, it targets companies with more than 250 employees, a net turnover exceeding €40 million, or total assets over €20 million.

Implementation Status: The directive entered into force on January 5, 2023, with a phased implementation starting from January 1, 2024, for certain large EU and EU-listed companies. Full implementation for all in-scope companies is expected by January 1, 2028. The initial set of ESRS, relevant for CSRD compliance, was adopted by the European Commission on July 31, 2023, signifying a key step in standardising sustainability reporting across the EU.

Corporate Sustainability Due Diligence Directive (CSDDD)

About the Regulation: The Corporate Sustainability Due Diligence Directive (CSDDD) is a European Union proposal aimed at fostering sustainable and responsible corporate behaviour. Its primary goal is to ensure that large companies operating in the EU market act responsibly regarding human rights and environmental impacts. CSDDD mandates companies to identify, prevent, mitigate, and account for potential and actual adverse impacts in their operations and supply chains. This initiative emphasises transparency, accountability, and the protection of human rights and the environment. It represents a significant shift towards integrating sustainability into corporate governance and business operations on a broader scale.

What it Requires: The CSDDD sets forth stringent obligations for companies to ensure responsible business practices with respect to environmental and human rights impacts:

  1. Due Diligence: Companies must integrate due diligence into policy development and implementation, ensuring a proactive approach to sustainability.
  2. Impact Identification: Entities are required to identify both potential and real adverse environmental and human rights impacts arising from their operations, subsidiaries, and business relationships. This includes an extensive evaluation of their own actions and those of their supply chain partners.
  3. Risk Mitigation: After identifying risks, companies must actively mitigate these within their operations and supply chains. This involves taking measures to prevent or mitigate potential impacts and minimise any real impacts that have been identified.
  4. Action Plan: Affected companies are mandated to develop and implement an action plan, complete with a timeline, to address the identified environmental and social risks. This plan is crucial for demonstrating their commitment to mitigating adverse impacts.
  5. Grievance Mechanisms: The directive requires the establishment of grievance mechanisms for workers and stakeholders, allowing them to raise issues as they arise. This promotes transparency and accountability within business operations.
  6. Alignment with Climate Goals: Companies must align their business model and strategy with the 1.5°C target of the Paris Agreement, indicating a commitment to broader global sustainability goals.
  7. Reporting: Finally, the CSDDD mandates the development and public publication of sustainability reports, with a key focus on the due diligence process. This ensures that companies’ efforts and adherence to the directive.

Who Should Comply: The CSDDD targets specific categories of companies operating within the EU. It applies to EU companies with more than 250 employees and a revenue of about €39 million or those with parent companies of more than 500 employees or global revenue of at least €146 million. Additionally, non-EU companies with a revenue of €39 million within the EU or parent companies with at least €146 million in global revenue and at least €39 million generated in the EU are also under its purview. These criteria ensure that both large European companies and significant non-EU entities engaging in substantial business within the EU are held to the directive’s standards.

Implementation Status: The CSDDD is anticipated to be fully adopted by the end of 2023 and to come into force in 2024. As of June 2023, the directive is in a critical negotiation and refinement phase, with the European Parliament and other legislative bodies working to finalise its provisions and implementation details. This period marks a significant step in establishing a regulatory framework that aligns with the EU’s sustainability and corporate governance objectives.

European Sustainability Reporting Standards (ESRS)

About the Regulation: The European Sustainability Reporting Standards (ESRS) were adopted by the European Commission (EC) on July 31, 2023. This framework consists of 12 finalised standards, including two cross-cutting standards applicable to all sustainability matters, and ten topical standards covering a broad range of ESG issues. The aim of the ESRS, in conjunction with the CSRD, is to ensure that companies provide relevant, reliable, and comparable information on their sustainability-related impacts, risks, and opportunities.

What it requires: The European Financial Reporting Advisory Group (EFRAG) has published 12 ESRSs, in short these is what they require:

  1. Sustainability Statements: From January 1, 2024, companies need to publish separate sustainability statements as part of their management reports. This requirement significantly increases the scope, volume, and granularity of sustainability-related information that companies must collect and disclose.
  2. Double Materiality: The ESRS follow the concept of double materiality, requiring companies to assess and report on both the impact of their operations on sustainability matters (impact materiality) and how sustainability issues affect the company (financial materiality). This approach requires a dual perspective in materiality analysis.
  3. Reporting Boundary: Companies must expand their reporting boundary to include information on their entire value chain, encompassing their own operations and their business relationships.
  4. General Principles and Overarching Disclosures: The first set of 12 ESRSs includes general principles for sustainability reporting (ESRS 1), overarching disclosure requirements (ESRS 2), and specific disclosures focused on environmental (ESRS E1-E5), social (ESRS S1-S4), and governance (ESRS G1) topics.
  5. Sector-Specific Disclosures: EFRAG is developing additional sector-specific standards, which will require companies operating in certain industries to provide further detailed disclosures.
  6. Company-Specific Disclosures: Apart from sector-agnostic and sector-specific requirements, companies are also expected to identify and disclose material company-specific impacts, risks, and opportunities. These disclosures are additional to those already included in the ESRSs

Who should comply: The ESRS apply to all companies subject to the Corporate Sustainability Reporting Directive (CSRD), requiring them to publish separate sustainability statements as part of their management reports from January 1, 2024.

Companies required to comply with the ESRS include large companies with more than 500 employees that are either European public interest entities or non-EU companies with debt or equity securities listed on an EU-regulated market. These companies will need to report according to ESRS for financial years beginning on or after January 1, 2024.

Implementation status: The European Commission adopted the first set of these standards on July 31, 2023, with the final text now available in 23 official languages. This development indicates that companies within the scope of the Corporate Sustainability Reporting Directive (CSRD) must prepare for enhanced sustainability reporting, with requirements expected to take effect from the 2024 reporting period. However, the ESRS are not officially in force until they pass the scrutiny of the European Parliament and Council. Meanwhile, there is significant feedback from the business community, with concerns about the bureaucratic nature of these standards, particularly regarding supplier sustainability reporting.

Waste from Electrical and Electronic Equipment (WEEE)

About the regulation: The Waste from Electrical and Electronic Equipment (WEEE) directive is designed to address the environmental impact of discarded electronic and electrical equipment. It aims to reduce waste by promoting the reuse, recycling, and recovery of such products. The directive sets collection, recycling, and recovery targets for all types of electrical goods, imposing the responsibility for recycling onto the manufacturers of these products. This policy encourages sustainable product design and supports the EU’s environmental protection objectives by reducing hazardous substances in electronic waste and managing its disposal more effectively.

To whom does it apply and what it requires: The WEEE Directive imposes specific requirements on its various stakeholders:

  1. Producers of Electrical and Electronic Equipment: Must design products with recycling and environmental considerations. They are often responsible for funding the collection, treatment, recovery, and environmentally sound disposal of WEEE.
  2. Producer Responsibility Organisations and Extended Producer Responsibility Schemes: Manage the end-of-life processes of electrical and electronic equipment, ensuring compliance with recycling and recovery targets.
  3. Recyclers and Reuse Operators: Ensure that WEEE is treated and processed in an environmentally responsible manner, meeting specific standards for recycling and recovery.
  4. National Governments and Third Country Authorities: Implement and enforce the directive through national legislation, monitor compliance, and manage the cross-border movement of WEEE to prevent illegal exports.
  5. NGOs and Citizens: NGOs play a role in raising awareness and advocating for responsible e-waste management. Citizens are encouraged to participate in proper disposal and recycling initiatives to ensure the success of the directive.

Implementation status: Even though the WEE regulative has been around for almost 2 decades, a set of measures collectively ensures effective implementation and compliance with the WEEE, aiming to improve the environmental management of electronic and electrical waste in the EU. Among these are the following:

Annual Reporting by EU Countries: EU countries are required to report annually to the European Commission on their progress in achieving targets for WEEE collection, preparing for reuse, recycling, and recovery. This data, available since 2006, is crucial for monitoring compliance and effectiveness of the directive across the EU.

Country-Specific Calculation Tools: To support this reporting, there are country-specific WEEE-generated calculation tools, in line with implementing regulations on a common calculation methodology. This helps in accurately assessing the amount of WEEE generated and managed in each country.

Development of Standards by CENELEC: The European Standardisation Organisation (CENELEC) has been tasked with developing standards for the collection, transport, and treatment of WEEE. These standards, which also cover preparation for reuse, aim to help treatment operators fulfil the directive’s requirements efficiently and without unnecessary administrative burdens.

I4R Platform for Recycling Information: The I4R platform, aligned with the requirements of Article 15 of the WEEE Directive, provides treatment and recycling facilities, as well as operators preparing for reuse, with access to crucial information about WEEE recycling. This includes details on the presence and location of materials and components in WEEE that require separate treatment.

Task Force on Climate-Related Financial Disclosures (TCFD)

About the Regulation: The Task Force on Climate-related Financial Disclosures (TCFD) is an initiative established by the Financial Stability Board (FSB) to develop consistent climate-related financial risk disclosures for use by companies, banks, and investors in providing information to stakeholders. The TCFD provides a framework for companies to develop more effective climate-related financial disclosures through their existing reporting processes.

What it requires: The TCFD require companies to disclose on the following matters:

Governance: Disclose the organisation’s governance around climate-related risks and opportunities:

  • Board Oversight: Detail the extent to which the board oversees climate-related risks and opportunities.
  • Management’s Role: Describe management’s role in assessing and managing climate-related risks and opportunities.
  • Organisational Structure: Explain how responsibilities are distributed across the organisation for climate-related issues.
  • Expertise and Training: Discuss the training and expertise of board members and key staff in climate-related issues.

Strategy: Describe the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning:

  • Short, Medium, and Long-Term Risks and Opportunities: Assess how identified climate-related risks and opportunities may impact business operations, strategy, and financial planning over different time horizons.
  • Resilience of Strategy: Evaluate the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.
  • Business Model Impact: Analyse how climate-related risks and opportunities may affect the organisation’s products, services, supply and value chains, and adaptation and mitigation activities.

Risk Management: Explain how the organisation identifies, assesses, and manages climate-related risks:

  • Risk Identification Process: Outline the process for identifying short, medium, and long-term climate-related risks.
  • Risk Assessment: Detail how climate-related risks are assessed in terms of likelihood and magnitude and integrated into the organisation’s overall risk management.
  • Risk Management Integration: Explain how climate-related risks are managed and incorporated into the overall risk management framework, including the use of risk mitigation strategies.

Metrics and Targets: Detail the metrics and targets used to assess and manage relevant climate-related risks and opportunities:

  • Key Metrics Used: Describe the key metrics and indicators used to measure and manage climate-related risks and opportunities, such as greenhouse gas emissions, energy usage, and water consumption.
  • Target Setting and Performance: Discuss any targets the organisation has set to manage climate-related risks and opportunities, including the performance against those targets.
  • Scenario Analysis: Explain any scenario analysis used, particularly related to low-carbon transition and physical risks associated with climate change.
  • Progress Monitoring: Outline how the organisation monitors and evaluates progress against climate-related goals and targets.

Who should comply: Although being voluntary, in the UK, TCFD reporting has become mandatory for the country’s largest firms. This includes over 1,300 UK-registered companies, pension funds, and financial institutions. Specifically, the requirements apply to the largest UK-listed companies, financial institutions, and pension funds, as well as private companies with more than 500 employees or an annual turnover greater than £500 million. Although TCFD reporting remains voluntary for other UK companies, wider adoption is set for 2025.

Implementation status: Established in December 2015, TCFD recommendations became mandatory in the UK from April 2022 for large companies, including banks and insurers. Globally, countries such as Switzerland and New Zealand plan to enforce mandatory TCFD reporting by 2024 and 2025, respectively, with the USA, Canada, France, Germany, Italy, and Japan considering similar measures.

Carbon Border Adjustment Mechanism (CBAM)

About the Regulation: The Carbon Border Adjustment Mechanism (CBAM) is a policy initiative by the European Union, aimed at reducing the risk of carbon leakage by imposing a carbon cost on imports of certain goods from outside the EU. The mechanism is designed to encourage cleaner production processes and ensure that European businesses face fair competition.

What it requires: During the CBAM transitional phase, importers are required to comprehensively report greenhouse gas emissions associated with their imports. This includes both direct emissions from the production processes and indirect emissions such as those from purchased electricity, heat, and steam used in production. This reporting is critical for understanding the carbon footprint of imported goods, and it helps align import practices with EU environmental standards. The scope of reporting covers a range of goods in sectors identified as carbon-intensive, such as cement, iron, steel, aluminium, fertilisers, and electricity.

Transitional Phase (1 October 2023 – 31 December 2025): In this phase, the focus is on establishing a reporting framework without imposing financial burdens. This approach allows businesses, particularly importers, to adjust to the new requirements in a structured and predictable manner. It also provides time for the EU to refine and finalise the methodologies and administrative processes associated with CBAM. During this period, importers are required to collect data and report on emissions, but they are not yet required to pay for the carbon content of their imports.

Methodology Choices: Up to the end of 2024, companies have three options for reporting embedded emissions:

  1. Full Reporting: This involves reporting based on the newly established EU methodology (outlined in the official implementing regulations and guidance documents published by the European Commission), which requires detailed and specific data on the emissions associated with each imported product.
  2. Equivalent Methods: These are alternative methods recognised by the EU as providing a similar level of accuracy and coverage as the EU method. They might include internationally recognised carbon pricing schemes, compulsory emission monitoring schemes, or verified emissions monitoring schemes.
  3. Default Reference Values: Until July 2024, in cases where specific data is unavailable, companies can use default values published by the Commission. These values provide a standardised estimate of emissions for different categories of goods and are intended as a temporary measure until more precise data can be obtained.

Full Implementation (Starting 1 January 2026): From 2026, the CBAM shifts to its permanent phase, where financial adjustments come into play. Importers will be required to annually declare the volume of goods imported into the EU and the associated embedded greenhouse gas emissions. They will then purchase and surrender CBAM certificates equivalent to these emissions. The price of these certificates will be aligned with the EU Emission Trading System (ETS), providing a cost for carbon emissions that mirrors internal EU prices. This mechanism aims to ensure that imports bear a similar carbon cost to products produced within the EU, thus preventing carbon leakage and encouraging cleaner production methods globally.

Who should comply: The CBAM represents a significant policy shift in the EU’s approach to trade and environmental regulation, emphasising the need for global cooperation in reducing carbon emissions. Both EU importers and global manufacturers will need to adapt to these changes, which aim to promote sustainability and mitigate climate change impacts.

EU Importers:

  • Scope of Goods: Businesses that import goods into the European Union are covered under the CBAM regulation. Initially, this includes carbon-intensive products such as cement, iron and steel, aluminium, fertilisers, and electricity. The list may expand to include additional products in the future.
  • Reporting Obligations: These businesses are responsible for reporting the greenhouse gas emissions associated with their imported goods. This reporting is crucial for calculating the carbon cost of imports under CBAM.
  • Data Collection and Verification: Importers need to collect, verify, and report accurate data on embedded emissions in their imports. This includes both direct emissions from the production process and indirect emissions related to the production.
  • Compliance with Reporting Requirements: Importers must comply with the detailed reporting requirements set out in the CBAM implementing regulations and guidance documents.

Global Manufacturers:

  • Target Sectors: Manufacturers outside the EU, particularly in sectors identified as high carbon-emitting, such as cement, iron and steel, aluminium, fertilisers, and electricity. These sectors are targeted because their products, when imported into the EU, can contribute significantly to carbon emissions.
  • Adherence to EU Standards: These manufacturers will need to align with EU standards for carbon emissions if they want to avoid the additional costs associated with CBAM. This may require changes in their production processes to reduce carbon emissions.
  • Provision of Emission Data: Manufacturers are expected to provide data on the emissions associated with their products. This data will be used by the EU importers for CBAM reporting.
  • Collaboration with EU Importers: Manufacturers may need to work closely with their EU counterparts to ensure that the necessary data for CBAM compliance is accurately collected and reported.

Broader Implications for Global Trade:

  • Incentive for Cleaner Production: CBAM incentivises manufacturers worldwide to adopt cleaner, more sustainable production methods. This is because lower-emission products will face lower CBAM costs when imported into the EU.
  • Potential for Competitive Advantage: Manufacturers that can demonstrate low-carbon production processes might gain a competitive edge in the EU market, as their products could be subject to lower CBAM costs compared to higher-emission alternatives.

Future Expansions:

  • Potential Inclusion of Other Sectors: The scope of CBAM is expected to be reviewed and potentially expanded to include other goods and sectors. Manufacturers in other industries should stay informed about these developments, as they might come under the purview of CBAM in the future.

Implementation status: The EU’s Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase on October 1, 2023, focusing on emission reporting without financial adjustments until the end of 2025. Importers must submit their first emission reports by January 2024. To aid in this process, the EU Commission has developed IT tools and provided sector-specific guidance, particularly for industries such as cement and aluminium. Ahead of CBAM’s full implementation in 2026, its scope and effectiveness will be reviewed, with the potential inclusion of more goods by 2030.

Sustainable Finance Disclosures Regulation (SFDR)

About the Regulation: The Sustainable Finance Disclosure Regulation (SFDR) is a pivotal piece of EU legislation that came into effect in March 2021. Its primary objective is to foster sustainability in the financial sector by improving transparency and providing investors with consistent information on the ESG aspects of their investments.

What it requires: The SFDR requires companies to comply with the following aspects:

  1. Transparency of ESG Risks: SFDR mandates financial market participants, including asset managers, to disclose information on how they integrate ESG risks into their investment decision-making processes.
  2. Principal Adverse Impact (PAI) Disclosure: It requires financial market participants to disclose the adverse impacts of investment decisions on sustainability factors, known as Principal Adverse Impact. This disclosure covers both negative and positive effects on the environment and society.
  3. Product-Level Disclosure: The SFDR categorises financial products into three distinct levels based on their sustainability focus. These levels are defined under Articles 6, 8, and 9 of the regulation, each representing different degrees of commitment to environmental or social sustainability:
    1. Article 6 – Products with No Sustainability Focus:
      1. These financial products do not integrate sustainability risks into their investment decisions or advisory processes.
      2. Disclosure for Article 6 products mainly involves stating the lack of sustainability focus, ensuring transparency for investors who may be seeking to avoid sustainability-focused investments.
  • Article 6 serves as a baseline category, distinguishing products that have not integrated any form of sustainability considerations in their strategy.
  1. Article 8 – Products Promoting Environmental or Social Characteristics:
    1. Financial products falling under Article 8 promote, among other characteristics, environmental or social elements in their investment strategy but do not have sustainable investment as their core objective.
    2. These products must disclose how they integrate environmental or social characteristics into their investment decisions and the methodologies used to assess, measure, and monitor these characteristics.
  • Article 8 is sometimes referred to as “light green” investments, indicating a moderate level of sustainability commitment.
  1. Article 9 – Sustainable Investments with Specific Sustainability Goals:
    1. Article 9 covers financial products that have sustainable investment as their explicit objective. These products aim to achieve a measurable, positive social or environmental impact alongside financial returns.
    2. These products are often referred to as “dark green” investments and represent the highest level of commitment to sustainability under SFDR.
  • Disclosure for Article 9 products must be detailed and comprehensive, including information on the sustainable objectives of the product and how these objectives are achieved, monitored, and measured.

Implications for Investors and Financial Market Participants:

  1. The categorisation under SFDR aims to provide clarity and transparency to investors, enabling them to make more informed decisions based on their sustainability preferences.
  2. Financial market participants offering these products are required to make detailed disclosures at the product level, ensuring that the sustainability claims are backed by tangible actions and methodologies.
  3. This tiered approach under SFDR facilitates a diverse range of products, catering to different levels of sustainability appetite among investors, and encourages a gradual shift towards more sustainable financial markets.

Remuneration Policies: Financial market participants must disclose how their remuneration policies are consistent with the integration of sustainability risks, aligning incentives with long-term sustainability goals.

Who should comply: SFDR imposes obligations on various financial market participants operating within the EU. The scope encompasses:

  1. Asset Managers:
    • Asset management companies and investment funds operating within the EU.
    • Entities managing portfolios on behalf of clients.
  2. Insurance Companies:
    • Insurance companies offering services within the EU.
    • Entities providing insurance coverage that involves investment activities.
  3. Pension Funds:
    • Pension funds operating within the EU.
    • Entities managing pension assets and investments.
  4. Investment Advisers:
    • Financial entities providing investment advice within the EU.
    • Professionals advising on financial products and strategies.
  5. Financial Advisers:
    • Professionals offering financial advice, including banks and investment advisers.
    • Entities providing financial services that involve investment activities.
  6. Corporate Entities:
    • Companies that fall under the definition of financial market participants due to their size or activities.
    • Entities engaged in financial activities subject to SFDR regulations.
  7. Publicly Listed Companies:
    • Companies with shares listed on EU stock exchanges.
    • Entities subject to reporting requirements based on market capitalisation.
  8. Private Equity Firms:
    • Firms engaged in private equity investments within the EU.
    • Entities managing private equity funds and investments.
  9. Alternative Investment Fund Managers (AIFMs):
    • Entities managing alternative investment funds within the EU.
    • AIFMs overseeing a range of alternative investments.
  10. Credit Institutions:
    • Banks and financial institutions operating within the EU.
    • Entities involved in lending, investment, and financial services.

Implementation status: The Sustainable Finance Disclosure Regulation (SFDR) officially came into effect in March 2021, marking a significant milestone in the EU’s commitment to promoting sustainable finance. The implementation of SFDR involves a phased approach, with ongoing efforts to ensure compliance and enhance the regulatory framework.

Future developments: SFDR is part of a broader EU sustainable finance agenda. The European Commission is actively working on additional regulatory measures, including the Taxonomy Regulation, to create a standardised classification system for sustainable economic activities.

EU Taxonomy Climate Delegated Act

About the Regulation: The EU Taxonomy Climate Delegated Act, an extension of the EU Taxonomy Regulation, was adopted in June 2021. It represents a crucial step towards establishing a standardised framework for determining which economic activities can be considered environmentally sustainable. The act provides a taxonomy for climate-related activities, aligning with the EU’s broader sustainability goals.

What it requires: The EU Taxonomy Climate Delegated Act requires companies to perform the following activities:

  1. Climate Objectives:
    • The Delegated Act defines criteria for economic activities that significantly contribute to climate mitigation or adaptation objectives.
    • It focuses on activities that contribute to the reduction of greenhouse gas emissions, adaptation to climate change, or the promotion of sustainable land use.
  2. Substantial Contribution:
    • To be deemed environmentally sustainable, an economic activity must make a substantial contribution to at least one of the environmental objectives without significantly harming others.
    • This ensures a balanced approach to sustainability across multiple dimensions.
  3. Do No Significant Harm (DNSH) Principle:
    • The act incorporates the DNSH principle, requiring economic activities to avoid causing significant harm to other environmental objectives.
    • This principle ensures that sustainable activities do not inadvertently contribute to negative environmental impacts.
  4. Transparency and Disclosure:
    • Entities engaging in taxonomy-aligned activities are obligated to disclose the proportion of their revenues, capital expenditures, and operating expenditures associated with these environmentally sustainable activities.
    • This transparency enhances accountability and enables investors and stakeholders to assess the sustainability performance of businesses.

Who should comply: The EU Taxonomy Climate Delegated Act applies to a wide range of entities, including:

  1. Financial Market Participants:
    • Asset managers, investment funds, and financial advisers offering investment products in the EU.
  2. Non-Financial Companies:
    • Companies that fall within the scope of the Non-Financial Reporting Directive (NFRD).
    • Entities subject to disclosure requirements based on their size and activities.

Implementation status: As of its adoption in June 2021, the EU Taxonomy Climate Delegated Act has set the stage for a comprehensive framework for environmentally sustainable economic activities. The implementation involves ongoing efforts to ensure alignment across various sectors.

  1. Phase-In Approach:
    • The regulation introduces a phased approach to its application, with certain disclosure requirements coming into effect progressively.
    • Financial market participants and non-financial companies are encouraged to adapt their reporting practices to comply with the evolving framework.
  2. Regulatory Technical Standards (RTS):
    • The European Supervisory Authorities (ESAs) are actively developing Regulatory Technical Standards (RTS) to provide detailed guidelines on the application of the Delegated Act.
    • These standards will offer clarity on reporting methodologies and ensure consistent implementation across diverse economic activities.
  3. Stakeholder Engagement:
    • Stakeholder engagement remains a crucial aspect of the implementation process, with ongoing consultations involving financial institutions, businesses, and sustainability experts.
    • The feedback gathered contributes to refining the act, making it more robust and reflective of diverse perspectives.

Future Developments: The EU Taxonomy Climate Delegated Act is a cornerstone of the EU’s sustainable finance agenda. Future developments may include:

  1. Expansion of Taxonomy: The potential expansion of the taxonomy to cover additional environmental objectives beyond climate, such as biodiversity.
  2. Global Alignment: Efforts to align the EU Taxonomy with international standards, fostering global consistency in sustainable finance practices.

As the EU progresses towards its sustainability goals, the EU Taxonomy Climate Delegated Act is poised to play a pivotal role in shaping the landscape of environmentally sustainable economic activities.

Green Public Procurement (GPP)

About the Regulation: The Green Public Procurement (GPP) in the European Union is a set of guidelines and criteria aimed at ensuring that public authorities make environmentally conscious choices when procuring goods and services. Introduced as part of the EU’s commitment to sustainable development, GPP leverages the purchasing power of public authorities to drive positive environmental impacts.

What it requires: The GPP requires all public authorities to implement the following aspects of sustainability when selecting a procurement company:

  1. Environmental Criteria:
    • GPP establishes clear and measurable environmental criteria that public authorities must consider when procuring goods and services.
    • These criteria encompass various aspects, including resource efficiency, energy consumption, emissions, and the overall environmental footprint of the products or services.
  2. Life Cycle Perspective:
    • GPP adopts a life cycle perspective, requiring public authorities to assess the environmental impacts of a product or service throughout its entire life cycle — from raw material extraction to disposal.
    • This approach ensures a comprehensive understanding of the environmental implications associated with each procurement decision.
  3. Circular Economy Principles:
    • GPP promotes circular economy principles, encouraging public authorities to favour products designed for durability, reparability, and recyclability.
    • It aims to minimise waste and support the transition towards a more sustainable and circular consumption model.
  4. Innovation and Eco-labels:
    • Public authorities are encouraged to embrace innovation and consider products and services that bear recognised eco-labels, indicating compliance with stringent environmental standards.
    • GPP supports the market for sustainable products by giving preference to those that align with established eco-labelling schemes.

Who should comply:

GPP is applicable to all public authorities within the European Union, including:

  1. Government Agencies:
    • National, regional, and local government agencies involved in procurement activities.
  2. Public Utilities:
    • Entities providing essential public services, such as water, energy, and transportation services.
  3. Educational Institutions:
    • Schools, universities, and research institutions engaging in procurement processes.
  4. Healthcare Providers:
    • Hospitals and healthcare facilities procuring goods and services.

Implementation status: The implementation of GPP involves a concerted effort to integrate sustainability into public procurement practices. Key aspects of its current status include:

  1. National Implementation Plans:
    • EU member states are encouraged to develop and implement National Action Plans for GPP, outlining specific measures to promote sustainable procurement at the national level.
    • These plans contribute to the harmonised implementation of GPP principles across diverse sectors and regions.
  2. Training and Capacity Building:
    • Initiatives for training and capacity building are underway to empower procurement professionals with the knowledge and skills needed to integrate sustainability considerations into their decision-making processes.
    • These efforts aim to foster a culture of sustainability within public procurement practices.
  3. Monitoring and Reporting:
    • Ongoing monitoring and reporting mechanisms are in place to assess the progress of GPP implementation.
    • Regular evaluations help identify areas for improvement, ensuring the continuous refinement of GPP guidelines and criteria.

Future Developments: As the EU advances its sustainability objectives, the future of GPP may witness:

  1. Expansion of Criteria:
    • Continuous refinement and expansion of environmental criteria to address emerging sustainability challenges and opportunities.
  2. Digitalisation and Innovation:
    • Integration of digital tools and innovative solutions to streamline GPP processes and enhance the accessibility of sustainable products and services.

Eco-Management and Audit Scheme (EMAS)

About the Regulation: The Eco-Management and Audit Scheme (EMAS) is a voluntary management tool developed by the European Union, designed for organisations aiming to improve their environmental performance. It provides a structured approach for environmental management, assessment, and continuous improvement.

What it requires: The Eco-Management and Audit Scheme (EMAS) sets forth a series of requirements for organisations seeking to enhance their environmental stewardship. These requirements are designed to ensure that participating organisations not only comply with environmental standards but also continually improve their environmental performance:

  1. Environmental Management System (EMS) Implementation: EMAS mandates the implementation of an effective EMS, aligning with the ISO 14001 standard. This system is crucial for systematically managing and reducing environmental impact.
  2. Environmental Policy Development: Participants in EMAS are required to craft a comprehensive environmental policy. This policy should articulate the organisation’s commitment to sustainable practices and outline its approach to environmental stewardship.
  3. Performance Assessment and Reporting: Regular environmental performance assessments are a cornerstone of EMAS. Organisations must set and monitor specific environmental objectives and targets, ensuring they are on track to meet their sustainability goals.
  4. Environmental Statement Preparation: A key aspect of EMAS is the preparation of an Environmental Statement. This document must publicly disclose detailed information about the organisation’s environmental performance, objectives, and impact, providing transparency to stakeholders.
  5. Independent Audit and Verification: To ensure adherence to EMAS standards, both the Environmental Statement and the EMS undergo rigorous independent auditing and verification processes.
  6. Legal Compliance: A fundamental requirement of EMAS is that organisations comply with all applicable environmental laws and regulations, ensuring that their operations meet the baseline legal standards for environmental protection.
  7. Continuous Improvement: EMAS places a strong emphasis on the continuous improvement of environmental performance. Participating organisations are encouraged to regularly review and enhance their environmental policies and practices, fostering a culture of ongoing environmental responsibility and improvement.

Who should comply: The Eco-Management and Audit Scheme (EMAS) is designed to accommodate a diverse range of participants who are committed to elevating their environmental management practices. While participation is voluntary, EMAS has specific target groups who can greatly benefit from its framework:

  1. Broad Organisational Scope: EMAS is tailored to organisations across various sectors, including both private and public entities. This wide scope encompasses businesses of all sizes, from small and medium-sized enterprises to large multinational corporations, as well as public institutions and non-governmental organisations.
  2. Voluntary Participants: The scheme is particularly suited for organisations that aspire to demonstrate environmental leadership and commitment. Participation in EMAS signifies a willingness to go beyond mere compliance with environmental regulations and to strive for continuous improvement in environmental performance.
  3. Organisations Seeking Credibility: EMAS is ideal for organisations looking to enhance their environmental credibility and public image. The rigorous standards and independent verification involved in EMAS provide a high level of trust and recognition from stakeholders, customers, and regulatory bodies.
  4. Global Applicability: While EMAS originated in the European Union, it welcomes participation from organisations located outside of the EU. This global reach allows multinational companies and organisations with international operations to adopt a consistent and recognised standard for environmental management.

Implementation status: The implementation of the Eco-Management and Audit Scheme (EMAS) reflects its evolving role as a key instrument for advancing environmental management practices among organisations. The current status of EMAS implementation showcases the scheme’s effectiveness and ongoing development:

  1. Widespread Adoption: EMAS has been successfully adopted by a variety of organisations across Europe and beyond. Its adoption signifies a growing recognition of the importance of sustainable environmental practices in the corporate and public sectors.
  2. Recognition and Reputation: Organisations that comply with EMAS standards benefit from enhanced reputation and credibility. The rigor and transparency of the EMAS process assure stakeholders of the organisation’s genuine commitment to environmental stewardship.
  3. Supportive EU Framework: EMAS operates under the umbrella of EU environmental policy, receiving ongoing support and promotion from the European Union. This includes integration with other EU initiatives and policies aimed at environmental sustainability.
  4. Continuous Evolution: The EMAS framework is not static; it undergoes regular updates and revisions to align with new environmental challenges, technological advancements, and best practices in environmental management.
  5. Expanding Influence: While initially more prevalent within the EU, EMAS’s influence has been expanding globally, attracting organisations outside the EU who wish to align with its high environmental standards.
  6. Integration with Broader Environmental Goals: EMAS is aligned with broader international environmental objectives, including the United Nations Sustainable Development Goals (SDGs), making it a key tool for organisations looking to contribute to global sustainability efforts.

Industry specific regulations

EU Strategy for Sustainable Textile

About the Strategy: The EU Strategy for Sustainable Textiles is an initiative addressing the environmental and social impacts of textile production. It outlines a roadmap for the textile industry to embrace sustainability, from fibber to fashion.

What it requires: This strategy requires all stakeholders in the textile industry to adhere to the following principles:

  1. Circular Economy Principles:
    • The strategy encourages the adoption of circular economy principles within the textile industry, promoting recycling, reusing, and reducing waste.
  2. Supply Chain Transparency:
    • Transparency is a key focus, requiring stakeholders to provide clear information about the environmental and social aspects of textile production.
  3. Chemical Management:
    • Emphasis is placed on responsible chemical management, urging the industry to minimise the use of hazardous substances and adopt safer alternatives.

Who should comply: The EU Strategy for Sustainable Textiles calls for compliance from a broad range of stakeholders in the textile supply chain. This includes:

  1. Manufacturers: Those involved in the production of textiles must integrate sustainable practices, from raw material sourcing to manufacturing processes.
  2. Retailers and Brands: Retail companies and fashion brands are encouraged to adopt and promote sustainable textiles, influencing consumer choices towards more sustainable options.
  3. Designers and Fashion Houses: Designers play a crucial role in creating sustainable textiles, with an emphasis on durability, reparability, and recyclability.
  4. Consumers: The strategy involves raising consumer awareness about sustainable fashion choices and encouraging responsible consumption behaviours.
  5. Regulators and Policymakers: Government bodies are tasked with creating conducive environments through policies and regulations that support sustainable textile practices.
  6. Recyclers and Waste Managers: Entities involved in textile recycling and waste management are key to implementing circular economy principles within the industry.

Implementation status: The strategy is currently in the early stages of implementation. Efforts include raising awareness, fostering collaboration, and exploring policy measures to drive sustainable practices in the textile sector.

Future Developments: The future may see the expansion of the strategy, potentially including incentives for sustainable practices and increased alignment with circular economy goals.

Directive on the Promotion of Clean and Energy-Efficient Road Transport Vehicles

About the Directive: The Directive on the Promotion of Clean and Energy-Efficient Road Transport Vehicles is a legislative initiative aimed at accelerating the adoption of clean and energy-efficient vehicles within the EU.

What it requires: This Directive requires all stakeholders to take the following actions:

  1. Clean Vehicle Procurement:
    • The directive encourages public authorities to lead by example, promoting the procurement of clean and energy-efficient vehicles for public fleets.
  2. Infrastructure Development:
    • Emphasis is placed on developing the necessary infrastructure, such as charging stations, to support the widespread use of clean vehicles.
  3. Emission Reduction Targets:
    • The directive sets ambitious emission reduction targets, pushing for advancements in vehicle technology to minimise the environmental impact of road transport.

Who should comply: The directive is applicable to EU member states, public authorities, and entities involved in the procurement and management of road transport vehicles.

Implementation status: In its early stages of implementation, the directive is driving discussions and initiatives aimed at aligning member states with the goals of promoting clean and energy-efficient road transport.

Future Developments: The future may witness the evolution of the directive, potentially incorporating measures to incentivise the production and purchase of clean vehicles and further bolstering the charging infrastructure.

In navigating the landscape of clean and energy-efficient road transport, stakeholders are encouraged to stay informed, actively engage in sustainable procurement, and contribute to the broader objective of a greener transportation sector.

Energy Performance of Buildings Directive (EPBD)

About the Strategy: The Energy Performance of Buildings Directive (EPBD) is an EU legislation aimed at improving the energy efficiency of buildings. It was first implemented in 2002, with subsequent revisions in 2010 and 2018, to align with evolving energy efficiency goals.

What it requires: The Energy Performance of Buildings Directive (EPBD) sets out several key requirements aimed at improving the energy efficiency of buildings within the European Union:

  1. Energy Performance Certificates (EPCs): The EPBD mandates the issuance of EPCs for buildings when they are constructed, sold, or rented out. EPCs provide information on a building’s energy performance and include recommendations for cost-effective improvements to enhance energy efficiency.
  2. Nearly Zero-Energy Buildings (NZEBs): The directive requires that all new buildings constructed after 2021 are Nearly Zero-Energy Buildings, meaning they have a very high energy performance with the bulk of the energy used derived from renewable sources.
  3. Building Renovation: The EPBD promotes the renovation of existing buildings, aiming to upgrade their energy performance. Member states are encouraged to set up strategies to transform existing buildings into NZEBs, with a particular focus on heating and cooling systems.

Who should comply: The compliance with the EPBD extends beyond member states to directly impact various stakeholders in the building sector:

  • Member States: EU member states must incorporate the EPBD into their national laws, adapting the directive’s requirements to their legal frameworks. They are responsible for overseeing the implementation of these standards within their jurisdictions.
  • Building Owners and Developers: This group includes individuals and entities involved in the design, construction, sale, or rental of buildings. They must ensure that new buildings meet the NZEB standards and that existing buildings are renovated in line with EPBD guidelines. Compliance includes obtaining EPCs for buildings, adhering to energy performance standards, and incorporating renewable energy sources. This requirement is crucial for real estate developers, architects, and construction companies aiming to meet energy efficiency and sustainability targets.

Implementation status: The implementation of the Energy Performance of Buildings Directive (EPBD) is an ongoing process across EU member states, each at different stages of integrating the directive’s standards into their national legislation. This gradual implementation reflects the diverse architectural landscapes and energy requirements of the member states. The directive is also regularly reviewed and updated to enhance its effectiveness and adapt to emerging challenges in building energy performance. These updates aim to ensure that the EPBD remains a dynamic and responsive tool in the EU’s efforts to improve building energy efficiency and achieve broader climate goals.

Farm to Fork Strategy

About the Strategy: The Farm to Fork Strategy is a comprehensive initiative that addresses the environmental, social, and economic dimensions of the food supply chain. It outlines a holistic approach to sustainable food production and consumption within the EU.

What it requires: This strategy requires all stakeholders within the EU food systems to undertake the following practices:

  1. Sustainable Agriculture Practices:
    • The strategy promotes the adoption of sustainable farming practices, encouraging environmentally friendly cultivation methods that prioritise soil health and biodiversity.
  2. Reducing Pesticide Use:
    • Emphasis is placed on reducing the use of pesticides and antimicrobials in agriculture, fostering healthier ecosystems and minimising environmental impact.
  3. Promoting Organic Farming:
    • The strategy supports the growth of organic farming, aiming to increase the share of agricultural land dedicated to organic production.

Who should comply: The Farm to Fork Strategy involves various stakeholders, including farmers, food processors, retailers, and consumers, fostering a collaborative approach to sustainable food systems.

Implementation status: Currently in the early stages of implementation, the strategy involves ongoing efforts to raise awareness, facilitate policy alignment, and encourage the adoption of sustainable practices across the food supply chain.

Future Developments: The future may see the Farm to Fork Strategy evolving to include incentives for sustainable farming practices, further research and innovation, and enhanced consumer education to drive conscious food choices.

Renovation Wave Strategy

About the Strategy: The Renovation Wave Strategy is a comprehensive initiative addressing the environmental and social dimensions of building renovation. It outlines a strategic plan to accelerate the pace and quality of building renovations across the EU.

What it requires: This strategy requires from all building and renovations companies across the EU to undertake the following activities:

  1. Energy Efficiency Upgrades:
    • The strategy emphasises the need for energy efficiency upgrades in existing buildings, encouraging the use of innovative technologies and sustainable materials.
  2. Decarbonisation of Heating and Cooling:
    • Emphasis is placed on decarbonising the heating and cooling systems of buildings, transitioning away from fossil fuels to renewable energy sources.
  3. Accessibility and Affordability:
    • The strategy promotes measures to enhance the accessibility and affordability of building renovations, ensuring that all citizens can benefit from improved living conditions.

Who should comply: The Renovation Wave Strategy involves various stakeholders, including building owners, construction companies, policymakers, and financial institutions, fostering a collaborative effort to create sustainable and energy-efficient buildings.

Implementation status: In the early stages of implementation, the strategy involves ongoing efforts to align national policies, mobilise funding, and raise awareness about the benefits of building renovations for both individuals and communities.

Future Developments: The future may see the Renovation Wave Strategy evolving to include incentives for sustainable building materials, further investment in research and innovation, and increased public engagement to drive the adoption of energy-efficient practices.

EU Strategy on Offshore Renewable Energy

About the Strategy: The EU Strategy on Offshore Renewable Energy aims to significantly increase the production of renewable energy from offshore sources. It focuses on harnessing wind, wave, and tidal energy to meet the EU’s climate and energy targets.

What it requires: The EU Strategy on Offshore Renewable Energy outlines comprehensive requirements for the development of sustainable energy sources:

  1. Expansion of Offshore Wind Energy: The strategy sets ambitious targets to expand offshore wind capacity, aiming to increase the EU’s wind energy production significantly. This includes developing large-scale wind farms and investing in new technologies to harness wind energy more efficiently.
  2. Development of Other Technologies: It promotes the advancement of emerging renewable technologies such as wave and tidal energy, supporting research and development to bring these technologies to market readiness.
  3. Cross-border Cooperation: There is a strong emphasis on collaboration among EU member states to develop infrastructure for offshore energy. This includes joint projects for grid integration and shared utilisation of offshore energy resources.
  4. Sustainable Growth: The strategy prioritises environmentally sustainable and inclusive growth in the offshore energy sector. This involves careful consideration of ecological impacts and ensuring that the benefits of offshore renewable energy are shared widely.

Who Should Comply:

The EU Strategy on Offshore Renewable Energy requires active participation from:

  1. EU Member States: They are tasked with developing national strategies and legal frameworks to support and facilitate the expansion of offshore renewable energy. This includes setting national targets, ensuring regulatory support, and providing infrastructure for energy production and distribution.
  2. Energy Producers and Investors: Companies and investors in the energy sector, particularly those specialising in or interested in offshore renewable energy projects, must align their operations and investments with the strategy. This includes adopting new technologies, adhering to sustainable practices, and participating in cross-border energy projects.

Implementation Status:

The implementation of the EU Strategy on Offshore Renewable Energy is ongoing. Member states are actively developing national plans and frameworks to support this initiative, in line with the strategy’s timeline and objectives. A key focus is on building the necessary infrastructure and fostering a market environment conducive to the growth of offshore renewable energy. These efforts align with the EU’s broader goals for renewable energy and sustainability.

Summary

EU and UK regulations present a complex but essential framework for businesses, balancing direct legal obligations with strategies that subtly shape market dynamics and investment climates. While direct regulations provide clear compliance mandates, broader strategies catalyse change in corporate practices through incentives and evolving market conditions. The actual impact on companies hinges on the national implementation of these EU-wide directives, underscoring the need for businesses to stay informed and adaptable in response to this regulatory mosaic. To navigate this landscape, companies should actively monitor legal developments, invest in sustainable and adaptable business practices, and foster robust compliance mechanisms. Proactive engagement with stakeholders and alignment with evolving sustainability and social responsibility goals will be crucial. This approach not only ensures compliance but positions businesses to thrive in a rapidly changing regulatory environment.

 

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Humperdinck Jackman
Leads the daily operations at ESG PRO, he specialises in matters of corporate governance. Humperdinck hails from Bermuda, has twice sailed the Atlantic solo, and recently devoted a few years to fighting poachers in Kenya. Writing about business matters, he’s a published author, and his articles have been published in The Times, The Telegraph and various business journals.

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