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On 7 August 2024, the European Commission published a set of frequently asked questions on the implementation of the EU Corporate Sustainability Reporting Directive (Directive (EU) 2022/2464) (“CSRD“) and the interpretation of certain legal provisions in the Accounting Directive (Directive 2013/34/EU), the Transparency Directive (Directive 2004/109/EC) and the Sustainable Finance Disclosure Regulation (Regulation (EU) 2019/2088). The FAQs take into account input received from in-scope companies and cover issues such as scope, timing and exemptions. For example, the FAQs include a flowchart illustrating the process to determine whether an entity is in scope of the sustainability reporting requirements and from which financial year (see page 12 of the FAQs), as well as a table illustrating the different application dates for the different types of undertakings subject to sustainability reporting (see page 13 of the FAQs).

The FAQs also cover some aspects of the associated European Sustainability Reporting Standards (“ESRS“).

The EFRAG – the technical adviser to the European Commission that developed the ESRS – has separately published implementation guidance in relation to the ESRS, the most recent of which was published on 31 May 2024.

You can read the FAQs here: Frequently asked questions on the implementation of the EU corporate sustainability reporting rules – European Commission (europa.eu).

You can read the latest iteration of the EFRAG ESRS implementation guidance here: ESRS implementation guidance documents | EFRAG.

For more information on the CSRD and the ESRS, you can read our earlier updates here: The EU Corporate Sustainability Reporting Directive is upon us – what non-EU companies should know and do | Insights | Mayer Brown; and European Commission adopts the European Sustainability Reporting Standards | Insights | Mayer Brown.

On July 15, 2024, Governor Gavin Newsom proposed amendments that would, among other things, delay initial reporting deadlines for two of California’s recently enacted climate-related disclosure laws by two years.

Governor Newsom signed the two bills, Climate Corporate Data Accountability Act (California Senate Bill 253 (SB-253)), relating to greenhouse gas (GHG) emissions disclosures, and the Climate-Related Financial Risk Act (California Senate Bill 261 (SB-261)), relating to climate-related financial risk disclosures, into law in October 2023.  See our Legal Update discussing the two bills.  The first-of-their-kind state laws apply to all US companies doing business in California that meet certain annual revenue thresholds: more than $1 billion for SB-253 and more than $500 million for SB-261.  The California laws go beyond the SEC’s final climate-related disclosure rules, which have been stayed due to legal challenges.  See our blog post discussing the SEC’s stay. The California laws are similarly subject to challenge, but have not yet been stayed.  See our Legal Update discussing this challenge.

Under Governor Newsom’s proposal, companies subject to SB-253 would not have to disclose Scope 1 and Scope 2 GHG emissions until 2028, and Scope 3 GHG emissions until 2029.  The proposal would not require companies subject to SB-261 to report climate-related financial risks until 2028.  Like EU climate change disclosure rules, California will require disclosure of Scope 3 GHG emissions, which are defined as emissions that result from activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain, according to the US Environmental Protection Agency. While initially proposed by the SEC, Scope 3 GHG emissions disclosure requirements were removed from the SEC’s final climate-related disclosure rule.

At the time of signing SB-253 into law, Governor Newsom noted, in his Governor’s Message, his concerns about the bill, saying “The implementation deadlines in this bill are likely infeasible, and the reporting protocol specified could result in inconsistent reporting across businesses subject to the measure.”

Learn more about the different climate change-related disclosure requirements across the globe.

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On 24 July 2024, the European Securities and Markets Authority (“ESMA“) published an opinion on the sustainable finance regulatory framework (the “ESMA Opinion“), which outlines the ESMA’s long-term vision for the functioning of the EU’s sustainable finance framework (the “Framework“). The ESMA Opinion builds on the findings of the ESMA’s progress report on greenwashing, published on 31 May 2023, and the European Supervisory Authorities’ (“ESA“) joint opinion on the assessment of the EU Sustainable Finance Disclosure Regulation (the “SFDR“), published on 18 June 2024 (the “ESA Opinion“). Through these publications, the ESMA has acknowledged that although the Framework is relatively well developed and already contains safeguards against greenwashing, the Framework should evolve to facilitate investors’ access to sustainable investments and support the effective functioning of the sustainable investment value chain.

Continue reading at Mayerbrown.com.

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A major overhaul of the UK’s planning (zoning) system was unveiled on 30 July.  This is aimed at tackling the UK’s chronic housing shortage, as well as the challenge of net zero.  The lack of affordable housing in the south-east of England, for example, means that average house prices there are ten times the average wage.  At the same time, public sector housebuilding has slowed to a trickle and rents have soared.  Similarly, the planning system has been identified as a major block on renewables and low-carbon developments in the UK.     

In response, the new UK Government has announced significant changes to the National Planning Policy Framework (“NPPF“) which guides decision-making on individual planning applications as well as the content of local planning policies (against which applications for individual sites are assessed).  The main aim is to kick-start an unprecedented programme of housebuilding with a huge proposed target of 371,000 per year against current delivery of about 200,000 units per year.  There will also be increased requirements on developers to provide affordable housing on new housing developments.  Commentary so far has rightly focused on these important housing-related changes in the draft NPPF, but the draft NPPF goes much further than housing.  Specific focus is given to renewables and low-carbon projects, digital technology, gigafactories, laboratories and logistics.

In this briefing, we summarise the main proposed changes in the draft NPPF and identify further likely upcoming reforms to be made to the planning system including through the new Planning and Infrastructure Bill. 

Continue Reading UK planning reforms to focus on social developments and net zero
Governance

According to the Grantham Institute’s 2024 Global Trends in Climate Change Litigation Policy Report (the “Report“) – which was published on 27 June 2024 – climate-related litigation against private sector actors continues to be on the rise. The Report highlights that over 230 climate-related lawsuits have been initiated against corporations and trade associations since 2015, with over two thirds of those lawsuits filed since 2020. The Report also highlights that the growth rate of climate-related cases is showing signs of stabilisation, at over 200 new climate-related cases per year. The risk of private sector actors facing climate-related lawsuits is not, therefore, showing any signs of diminishing.

Continue Reading CLIMATE LITIGATION – THE GRANTHAM RESEARCH INSTITUTE ON CLIMATE CHANGE AND THE ENVIRONMENT PUBLISHES ITS 2024 GLOBAL TRENDS IN CLIMATE LITIGATION REPORT
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Deforestation is now the second leading cause of climate change globally, after burning fossil fuels, and is responsible for around 11% of all greenhouse gas emissions.  In the last 60 years more than half of tropical forests worldwide have been destroyed, reducing biodiversity and endangering rare species (see Fifth Special Report of Session – 2023-24:  The UK’s contribution to tackling deforestation: Government’s Response to the Committee’s Fourth Report.)

Commodities such as cattle and palm oil (used in frying fats, chocolate and cosmetics) have been identified as some of the key drivers of deforestation.  From December 2024, the EU Deforestation Regulation (“EUDR”) prohibits the placing on the market or making available in the EU,  certain commodities and products unless they are de-forestation free and produced in compliance with local law.  Stringent due diligence and reporting requirements are imposed on in-scope large and medium size companies and, from 30 June 2025, micro-undertakings and small companies.

The UK is developing its own Forest Risk Commodity (“FRC”) regime: the enabling legislation is set out in the Environment Act 2021 and, through a recent consultation process, the Government has set out the details of the proposed scheme.  This will require secondary legislation which was expected in early 2024, but this has been delayed by the General Election. In this update, we summarise the key design features of the UKFRC and highlight some of the key ways it diverges from the EUDR.

Continue reading at Mayerbrown.com.

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The Commission Delegated Regulation (EU) 2024/1700 supplementing Regulation (EU) 2017/2402 with regard to regulatory technical standards (“RTS”) was adopted on June 18, 2024. These RTS set out the content, methods and presentation of information in relation to the principal adverse impacts (“PAIs”) of the assets financed by the underlying exposures on sustainability factors for securitizations and the new rules will enter into force on 8 July 2024. ESG STS disclosure is a key feature of the EU’s objectives to promote sustainable finance and steer capital flows towards sustainable activities.

Continue Reading Be prepared: The technical standards on STS securitizations’ ESG disclosures enter into force on July 8, 2024
Governance

The First Civil Senate of the German Federal Court of Justice, which is in charge of competition law, has ruled that advertising with an ambiguous environmental term (here: “climate neutral”) is generally only lawful if the specific meaning of the relevant term is explained in the advertising itself.

Judgment of June 27, 2024 – I ZR 98/23

Continue Reading German Federal Court of Justice on advertising with an ambiguous environmental term
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After the results of the European elections, where the presidential political party lost a significant number of seats at the European Parliament, the president of the French Republic Emmanuel Macron decided to dissolve the National Assembly. This dissolution was effected by the presidential “Decree of June 9, 2024 dissolving the National Assembly“, which was published in the Official Journal of the French Republic on June 10, 2024.  

At the time of the dissolution, several projects and proposals of laws were pending adoption within the French Parliament and the question of the status of these texts was scrutinized by the media shortly after the dissolution. Particular concern was raised by certain media articles about the consequences of the dissolution on pending environmental legislation, including the proposed legislation to protect the population from risks linked to Perfluoroalkyl and Polyfluoroalkyl Substances (“PFAS“) (the “Proposed PFAS Law”).

The Proposed PFAS Law had drawn quite substantial public attention as, if enacted, France would become the first EU Member State to heavily prohibit PFAS in products. The Proposed PFAS Law was also developed in parallel to the development of a PFAS restriction at the EU level, which drew criticism from industry bodies and some French parliament representatives.

Continue Reading Dissolution of the French National Assembly: what does it mean for the Proposed PFAS Law?
Risk Management

Multinational companies are facing increased pressure to ensure that they have adequate ESG-related policies in place and (more importantly) that they are implementing those policies in practice within both their business and associated supply chains via appropriate systems and controls. Companies that are found not to have implemented or adhered to those policies face increased legal and reputational risk which has the potential to have a materially negative impact on their business.

Although there are various formal legal routes through which a company that is found to have failed to implement or adhere to ESG-related policies can be held to account, National Contact Points (“NCPs“) are increasingly being used as a means of holding companies’ “feet to the fire” regarding their ESG non-compliance.

Companies that are subject to an adverse NCP finding, or publicly known complaint, may expose themselves to additional risks, including reputational damage and follow-on civil litigation. This article will explain what NCPs are, why they are becoming increasingly relevant and what businesses should be doing to minimise their exposure to an NCP complaint.

Continue reading at Mayerbrown.com.