EU Updates - June
Public Consultation on European Commission Delegated Act Consultation on the ESRS Expected for early June
The European Commission is set to release delegated acts with key amendments to the European Sustainability Reporting Standard (ESRS), following an interservice consultation. The delegated acts are likely to be issued in early June for a month of public consultation.
Changes have been made to EFRAG’s proposed standards, which were criticised already in the past for their rebuttable presumption mechanism. The Commission is expected to bring all mandatory disclosure requirements within the scope of the materiality evaluation.
The Commission is also expected to implement a number of phase-in measures as well as new sets of intermediary criteria to aid small businesses in complying. A third adjustment is that a number of 'shall disclose' mentions in the draught standards have been reworded as 'may disclose'.
The absence of a list of mandatory disclosures, as well as the emphasis placed on the materiality assessment, will help preparers in focusing their reporting on what needs to be reported. The audit of the materiality assessment will remain a crucial part of the reporting.
As said above, the delegated act will be published in early June for a one-month public consultation period. Following the publication, the European Parliament and the Council will have a two-month 'accept or reject' period. So, all parties concerned still have a lot to play for, and the final dot at the bottom of the first set of ESRS is far from being pencilled in.
We will continue to work and engage with our members in the Markets Leaders Hub to make the ESRS work for businesses.
For more information
Contact Giorgia Miccoli
EU Affairs Senior Specialist
The New European Parliament Elections Confirmed for June 6 to 9, 2024
The European Parliament elections, which occur every five years over a four-day period, are the world's largest transnational vote, with over 400 million eligible voters from various nationalities participating.
The next elections to elect the 705 Members of the European Parliament will take place between 6 and 9 June 2024, as confirmed by the ambassadors from the 27 member states in a meeting. As the lawmakers are renewed, changes at the top of the European Commission and Council are also triggered. This means that the current positions held by Ursula von der Leyen and Charles Michel will be available, with von der Leyen yet to confirm her plans for a second term as the President of the European Commission while Michel cannot continue as the leader of the European Council due to a two-term limit.
The previous elections saw a general turnout of 50.66%, showing an increase of eight points compared to the 2014 vote. The upcoming campaign is expected to focus on a variety of issues, including Russia's invasion of Ukraine, the cost-of-living crisis, energy supplies, climate change, and migration.
CSR Europe will continue to work with its members to build a policy position for the next European Sustainability Strategy 2024-2029 to be presented to the next European leaders.
For more information:
EU Affairs Senior Specialist
The European Parliament Takes a Stand against Greenwashing
European legislators voted their position on new EU measures to combat greenwashing, asking for a prohibition on claims based purely on carbon offsets.
In March 2022, the European Commission proposed an anti-greenwashing proposal aimed at empowering consumers for the green transition.
The Parliament goes farther than the EU executive's initial recommendation in its report on the issue, suggesting that corporations must be prohibited from saying their products are carbon neutral based on carbon offsets.
Many businesses, including airlines, use carbon offsetting programs to pay for CO2 emissions and to promote a green image. These projects have come under scrutiny, with protesters and scientists claiming inefficiency and a lack of transparency. The Parliament also wants to get rid of phrases like "environmentally friendly".
The proposal for a new directive on empowering consumers for the green transition was approved by an overwhelming majority of 544 votes in favour, 18 against, and 17 abstentions in plenary, paving the path for final negotiations with EU member states.
The rule, which was introduced in March of last year, intends to assist customers in making ecologically friendly choices and to encourage businesses to produce more durable products.
If generic environmental claims such as 'environmentally friendly,' 'natural,' 'biodegradable,' or 'eco' are not substantiated by evidence, the draught regulation prohibits their use. Other deceptive practices, such as making green claims about the entire product when only one component is sustainable, will be prohibited.
For more information:
EU Affairs Senior Specialist
Deforestation Regulation to Become Reality after European Parliament and Council Positions
On April 19, 2023, the European Parliament adopted its position on the European Commission (EC) Proposal for a Deforestation Regulation at first reading.
Companies will be able to sell products in the EU only if the product's supplier has issued a "due diligence" statement confirming that the product does not come from deforested land or has resulted in forest degradation, including irreplaceable primary forests.
Also, the Council approved the regulation aimed at reducing the risk of deforestation and forest degradation linked with products placed on or exported from the EU market.
The EU is a significant consumer and trader of goods and products that contribute significantly to deforestation. The new restrictions are intended to ensure that the EU's consumption and trade of these commodities and products do not contribute to deforestation or further degradation of forest ecosystems.
Due Diligence requirements in the Regulation
The Regulation establishes mandatory due diligence procedures for all operators and merchants that place, make available, or export from the EU market the following commodities: palm oil, cattle, timber, coffee, cocoa, rubber, and soy.
The requirements also apply to a variety of derivative items, including chocolate, furniture, printed paper, and specified palm oil-based derivates (used as components in personal care products, for example).
Operators must be able to trace the goods they sell back to the plot of land where they were grown. Simultaneously, the new rules seek to eliminate duplication of requirements and to reduce administrative burden on operators and authorities. Small operators may also be able to rely on larger operators to prepare due diligence declarations.
The rule establishes a benchmarking system in which nations inside and outside the EU are assigned a level of risk connected to deforestation and forest degradation (low, standard, or high).
The level of special duties for operators and member state agencies to carry out inspections and controls will be determined by the risk category. This will allow for improved surveillance in high-risk nations while simplifying due diligence in low-risk countries.
Competent authorities will have to conduct checks on 9% of operators and traders dealing products from high-risk countries, 3% from standard-risk countries, and 1% from low-risk countries to ensure that they are fulfilling the regulations' requirements. Furthermore, responsible authorities will conduct checks on 9% of the mandatory commodities.
The revised guidelines also consider the protection of human rights associated to deforestation, and a reference to the principle of free prior and informed consent of indigenous peoples has been inserted.
Penalties are included in the regulation, and member states must ensure that they are effective, appropriate, and dissuasive.
Fines proportionate to the environmental harm and the value of the relevant commodities or products should be set at 4% of the operators' annual sales in the EU and should entail a temporary exclusion from public procurement processes and access to public funding.
Stay up-to-date with the latest news on the Deforestation regulation by subscribing to CSR Europe EU Update Webinar on Sustainable Supply Chains taking place on the next 6th of June.
For more information:
EU Affairs Senior Specialist
