deforestation

On 2 October 2024, the European Commission (“Commission”) made public its proposal to postpone application of the EU Deforestation Regulation (“EUDR”), by way of an amendment to the EUDR that would postpone (a) its date of entry into application from 30 December 2024 to 30 December 2025 (and till 30 June 2026 for small and micro-enterprises) and (b) benchmarking deadline to 30 June 2025.

On the same day, the Commission also released the long overdue EUDR Draft Guidance Document (“Guidance Document“) and an updated version of the EUDR Frequently Asked Questions (“FAQs”). The Guidance Document as well as the FAQs provide a useful reference for anyone who must comply with the EUDR by clarifying and elaborating on the key definitions and obligations imposed by the EUDR, whilst discussing the role of certifications and third party verification schemes in risk assessment and risk mitigation.

Finally, the Commission also released updated information on the General Principles on the Benchmarking Methodology, which suggest that a large majority of countries worldwide are expected to be classified as low risk. This is encouraging news for operators since no risk assessment and risk mitigation would need to be performed for products containing or made of commodities originating in low risk countries.

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Following the UK Competition and Markets Authority’s (“CMA“) recent investigation regarding ‘Green Claims’ in the fashion industry (discussed here), the CMA has now published a Compliance Guide to help fashion businesses “stay on the right side of consumer law”. This is part of the CMA’s “essential” work to ensure consumers can make informed choices based on environmental claims that they can trust.

In short, all of your environmental claims must be clear and accurate. The Compliance Guide is full of concrete examples of green claims in the fashion industry, which are not compliant with consumer law and explanations of how they can be made compliant. It seems to be deliberately drafted to be accessible and broad in application (a similar approach has been adopted in the CMA’s guidance on green collaborations between competitors: CMA Guidance on Environmental Agreements | Insights | Mayer Brown).

Firms at all levels of the supply chain should take note

The CMA emphasises that each business in the fashion supply chain has a responsibility to ensure that its claims are accurate and substantiated. While the focus of the Compliance Guide is on fashion retail (including sales of a retailers own or third-party products via a marketplaces), the CMA notes that it will also be relevant to manufacturers and suppliers (including third party branded suppliers) and wholesalers and distributors (referring to paragraphs 2.20 and 2.21 of the Code).

What is a Green Claim?

These are claims that show how a product, service, brand, or business provides a benefit, or is less harmful to the environment.

Green Claims are used by many businesses to market their products or services – this is an area of growing importance for the increasingly eco-conscious consumer. This also ties in to the CMA priorities set out in its annual plan of working so that the whole UK economy can grow productively and sustainably, as well as people being confident they are getting great choices and fair deals.

CMA’s Dos / Don’ts

Do…Don’t…
Ensure that all Green Claims are clear and accurate, including important information prominently displayed in this manner and having regard to the overall presentation of any claimsHide important information, such as qualifying or other important information that is needed to ensure a claim is not misleading. Examples of hidden information include: placing information away from the claim itself – e.g. the other side of a tag; through a hyperlink or scan of a QR code; or expanding a drop down list
Ensure that any criteria for product ranges are clear and available (e.g. include minimum thresholds that are part of the criteria), ranges should be named accurately, and criteria applied correctly to products
Ensure that any criteria for product ranges are clear and available (e.g. include minimum thresholds that are part of the criteria), ranges should be named accurately, and criteria applied correctly to productsMake a claim if there is not enough space for the necessary important information, where the claim could be misleading without it
Make sure that any comparisons are clear, e.g., between competing products and businesses, or between different versions of a similar product Use unclear terms, such as broader, general or absolute claims – like ‘green’, ‘sustainable’ or ‘eco-friendly’ which are much more likely to be inaccurate and to mislead customers
Explain clearly any action a consumer needs to take, e.g., if you make a claim which is only true if the consumer takes certain action, that action needs to be clearly statedUse imagery and icons in a way which could lead consumers to believe a product is more green than it is
Make sure that any navigational tools or filters are clear and only return qualifying products, e.g. ensuring the filters refer to specific characteristics such as ‘50%+ recycled’ instead of ‘sustainable’Refer to affiliations and accreditations in a way that could mislead customers, e.g. referring to an accreditation relating to product characteristics in respect of an individual product that does not have those characteristics
Make sure your suppliers can back up claimsRely entirely on third parties, because retailers are ultimately responsible for any claims made relating to third-party products they sell and need to satisfy themselves that such claims are not misleading. Adequate supply chain due-diligence is therefore of key importance
Put in place internal processes to make sure all environmental claims are accurate and do not mislead customer
Ensure environmental targets are presented clearly, including at least what the target is aiming to achieve, the date on which the target is expected to be met, and the main ways by which you intend to achieve the target
Make it clear if a claim is based on specific parts of a product’s life cycle 
Describe fabrics clearly and precisely, e.g. including the composition of the fabric and what the percentage make up is
Provide supporting information regarding any affiliations and accreditations, including summary of associated environmental benefits, your connection to the organisation (if any), link to further information, and link to the provider/ scheme’s website

This new Compliance Guide is a clear signal that the CMA is willing to resort to stronger intervention in this space going forward, bolstered particularly by direct consumer enforcement powers and possibility of severe financial penalties following the introduction of the Digital Markets, Competition and Consumers Act 2024 (“DMCC“), with relevant provisions set to come into force around the end of Q1 2025. For further information regarding the DMCC, further reading is here.  

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On 3 September 2024, the UK Government published its factsheet on the Great British Energy Bill which received its Second Reading in the House of Commons on 5 September.

The purpose of the Bill is to establish a publicly-owned energy company designed to drive clean energy deployment and support the UK Government’s aim of decarbonising the UK’s electricity system by 2030.

Great British Energy (“GBE”) will be backed by an initial capitalization of £8.3 billion over the life of this Parliament. It will have five overarching functions:

  • Project investment and ownership – GBE will seek to generate revenue through the ownership and operation of clean energy projects;
  • Project development – GBE will identify and develop clean energy assets in partnership with others. To this end, the Government has announced a partnership between GBE and The Crown Estate (which owns, amongst other things, the seabed off the coast of the UK). The intention is that together, GBE and The Crown Estate will bring forward 20-30 GW of additional off-shore wind leases by 2030 and leverage up to £30-60 billion of private investment;
  • Local Power Plan – GBE will deliver a Local Power Plan with the aim of partnering with and funding local authorities and community groups to roll out small and medium-sized renewables projects using established technologies, up to 8GW in total;
  • Supply chain – GBE will work with others,  including The National Wealth Fund, which has allocated a further £7.3 billion of funding to the UK Infrastructure Bank, to support clean energy supply chains – from off-shore wind to carbon capture  and storage.
  • Nuclear – Great British Nuclear was  established in March 2023 to provide specialist skills to deliver the Government’s nuclear, including small nuclear, programme: GBE will assist in as yet unspecified ways, to support the work of Great British Nuclear.

A consultation  process is already underway to identify the policy priorities for GBE. Under the Great British Energy Bill, a Statement of Strategic Priorities must be developed and laid before Parliament as soon as possible after GBE is established. Juergen Maier, former Siemens UK CEO, has been appointed as Chair of GBE and is understood to be engaging with shareholders on GBE’s policy priorities.

On September 16, 2024, Brazil’s Attorney General filed a lawsuit seeking compensation for climate damage resulting from environmental infractions allegedly perpetrated by livestock farmers inside a Conservation Unit, more specifically the Jamanxim National Park, located in the Amazon Rainforest.

In Brazil, a Conservation Unit is a type of specially protected area, legally established by public authorities, to which a special protection and management regime applies. In this specific case, following investigations spearheaded by Brazil’s Federal Police, the farmers are being accused of deforestation, irregular cattle breeding, and introducing exotic species to the Conservation Unit.

The Attorney General seeks compensation equivalent to BRL 635 million, which has been calculated based on the social cost of carbon, as per the calculation methodology developed by the Organization for Economic Co-operation and Development (OECD). In this novel case, the deforestation attributed to the defendants amounted to a GHG emission of approximately 1,139,000 tons of CO2.

In addition to the compensation for climate damage, the Attorney General also requests that the defendants are compelled to vacate the Conservation Unit and demolish all structures that were illegally built. The lawsuit also seeks to suspend the defendants’ access to financing by official credit agencies, in order to prevent the use of public funds for environmentally harmful activities.

This approach of estimating climate damages by establishing a direct cause and effect between deforestation and the emission of GHG, and applying the social cost of carbon methodology to calculate the compensation, is becoming a trend in Brazil´s climate litigation. As discussed here and here, this same legal tactic has been used by the Attorney General before, as a means of seeking compensation beyond environmental damages per se, i.e., the recovery of areas degraded by deforestation.

Energy innovation light bulb graphic interface.

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.

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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.

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