6 Sustainability Takeaways in EU Antitrust & Regulatory — July 2023

1. European Commission proposes a directive on “green claims”

European Commission | March 2023

In March 2023, the European Commission proposed a directive on regulating “green claims” including requirements on the substantiation, communication, and verification of voluntary environmental claims and labels. The directive would apply to voluntary claims, rather than mandatory claims or those already covered by existing regulation.

The proposal would oblige Member States to enact legislation to ensure that traders making voluntary explicit environmental claims present these accurately to the consumer, in order to help combat greenwashing.

Member States would have 18 months to transpose the proposal into national legislation once it has entered into force.

See Latham’s Client Alert for more detail.

2. European Commission adopts new antitrust guidelines for ESG competitor agreements

European Commission | June 2023

The European Commission recently adopted the revised horizontal regime. The legislative package encompasses the revised horizontal guidelines, the revised research and development block exemption regulation, and a revised specialisation block exemption regulation. The new guidelines cover a range of topics, including agreements on R&D, specialisation and joint production, joint purchasing, joint commercialisation, standardisation, and standard terms. The most important amendment is the addition of a separate chapter on sustainability agreements. This chapter outlines the antitrust assessment of agreements between competitors related to ESG initiatives, including combating climate change, reducing pollution, limiting the exploitation of natural resources, upholding human rights, ensuring a living income, protecting animal welfare, and reducing food waste. The guidelines clarify that the antitrust rules do not interfere with agreements between competitors that pursue a sustainability objective. They contain, inter alia, a “soft safe harbour” presumption: agreements that fulfil six cumulative conditions will be considered as falling outside the scope of the cartel provision. The new regime entered into force on 1 July 2023. The revised horizontal regime shall apply until 30 June 2035.

See Latham’s Client Briefing for more detail.

3. European Commission opens consultation on ESRS

European Commission | June 2023

On 9 June 2023, the European Commission issued its formal consultation on the European Sustainability Reporting Standards (ESRS). The ESRS set out the disclosure requirements for companies required to report under the Corporate Sustainability Reporting Directive (CSRD) in regard to sustainability-related risks, impacts, and opportunities.

Notable updates were made to the final draft of the ESRS published in November 2022 by the European Financial Reporting Advisory Group (EFRAG). In particular, changes relate to the materiality assessment process with all ESRS and disclosure requirements subject to a double materiality assessment (with the exception of ESRS 2), the phasing-in of certain requirements, and making certain disclosures voluntary.

See Latham’s blog post for more detail.

4. EU’s Carbon Border Adjustment Mechanism enters into force

European Commission | May 2023

The Carbon Border Adjustment Mechanism (CBAM) under the EU's new carbon border tax (Regulation (EU) 2023/956) will apply in its transitional phase from 1 October 2023, with the first reporting period for importers ending 31 January 2024. CBAM will require importers of certain goods to the EU to purchase digital certificates for each ton of carbon emissions embedded in their goods. The price of each certificate will be based on the average weekly price of the EU’s Emissions Trading System (ETS) carbon permits. The EU aims to use this tax to prevent so-called “carbon leakage”, whereby carbon-intensive producers move their operations outside of the EU to avoid carbon regulation. In its initial form, the CBAM will cover imports of aluminium, iron, steel, electricity, cement, and some fertilisers.

The reporting obligations and information sought from EU importers of CBAM goods, as well as the provisional methodology for calculating embedded emissions released during the production process of CBAM goods will be further specified in an Implementing Regulation. On 13 June 2023, the European Commission initiated a public consultation for feedback on the draft Implementing Regulation.

5. European Parliament adopts position on CSDDD

European Parliament | June 2023

On 1 June 2023, the European Parliament voted to adopt its initial negotiating position on the EU’s proposed Corporate Sustainability Due Diligence Directive (CSDDD), marking the next step in the legislative process. The vote sets out Parliament’s mandate to enter trialogue discussions with the Member State governments in the Council of the EU and the Commission.

Parliament’s position includes a number of notable proposals, including on the scope of the directive, “duty of care” for directors, and the approach to the inclusion of financial undertakings. These will likely be topics of negotiation, with differing positions from the Council and Commission.

See Latham’s blog post for more detail.

6. European Commission publishes electric vehicle charging market study

European Commission | April 2023

The European Commission has published an extensive study into the market for electric vehicle charging which provides an overview of market developments in all EU countries. The study takes a deep dive into four of the markets in the EU Member States, looks at how infrastructure is funded, and the stakes for competition enforcement and the protection of incentives to invest. See extended executive summary here.

Additional News

European Parliament adopts new law to fight global deforestation

European Parliament | April 2023

The European Parliament has adopted a new law that will ban imports deemed to be driving deforestation. Companies will only be able to sell products in the EU (or export them) if the supplier has issued a “due-diligence statement” confirming that their products sold in or exported to the EU do not originate from deforested land or cause forest degradation.

Companies will have 18 months to implement the new rules following the regulation entering into force on 29 June 2023. Obligations for companies will therefore become applicable from 30 December 2024.

European Commission releases guidance on SFDR

European Commission | April 2023

In April 2023, the European Commission published a series of answers to questions that the European Supervisory Agencies (ESAs) had raised in September 2022 on the legal interpretation of certain aspects of the Sustainable Finance Disclosure Regulation (SFDR). The answers seek to clarify outstanding questions from stakeholders, including in relation to the definition of “sustainable investment” under the SFDR. Previous uncertainty with respect to this definition contributed to considerable market movement in the form of product re-classifications in the latter half of 2022.

See Latham’s blog post for more detail.

EU consults on regulatory regime for ESG ratings providers

European Commission | June 2023

The European Commission released a consultation on 13 June 2023 including the proposal to create a new regulatory regime for ESG ratings providers. This consultation follows a Call for Evidence that the European Securities and Markets Authority (ESMA) issued on 4 April 2022. The proposed regulation would improve the reliability and transparency of ESG ratings activities, enabling investors to make better informed decisions by ensuring the quality and reliability of ESG ratings providers services.

See Latham’s blog post for more detail.

European Commission proposes the Green Deal Industrial Plan

European Commission | February 2023

In February 2023, the Commission presented a proposal for a “Green Deal Industrial Plan for the Net-Zero Age” (The Plan). This proposal forms part of the European Green Deal, which sets out the EU’s green transition ambitions and climate targets towards reaching net zero by 2050. The Plan is designed to support the scaling up of the EU’s net zero manufacturing capacities, whilst also enhancing the competitiveness of Europe’s net zero industry.

The European Commission has also adopted a new Temporary Crisis and Transition Framework to foster support measures in sectors which are key for the transition to a net zero economy, in line with the Green Deal Industrial Plan.

See Latham’s blog post for more detail.

ReFuelEU Aviation: Parliament and Council reach deal on greener aviation fuels

European Parliament | April and June 2023

On 25 April 2023, the European Parliament and Council negotiators reached a provisional agreement on the “ReFuelEU Aviation” proposal, aimed at decarbonising the aviation sector. On 27 June, the European Parliament Transport and Tourism Committee approved the agreed text. The next step will be a vote by full Parliament, likely in September. The initiative is part of the “Fit for 55” package, along with other transport proposals such as the agreements already reached on emission trading schemes in the aviation and maritime sectors and the use of renewable and low-carbon fuels in maritime transport.

State aid — Commission amends General Block Exemption rules to facilitate green and digital transition

European Commission | March 2023

The European Commission has endorsed a targeted amendment to the General Block Exemption Regulation (GBER) to further facilitate, simplify, and speed up support for the EU’s green and digital transitions. The GBER declares specific categories of State aid compatible with the Treaty on the Functioning of the European Union, provided that they fulfil certain conditions. It therefore exempts these categories from the requirement of prior notification to and approval by the Commission, enabling Member States to grant the aid directly and informing the Commission only ex-post. This amendment grants Member States more flexibility to design and implement support measures in sectors that are key for the transition to climate neutrality and to a net zero industry. It will help speed up investment and financing for clean tech production in Europe, in line with the Green Deal Industrial Plan.

Dutch Competition Authority (ACM) issues revised guidelines on sustainability

ACM | June 2023

The ACM has published a revised version of its 2021 guidelines on sustainability. Consumers are entitled to clear, complete, and concrete information about the sustainability aspects of products and services. Terms such as “climate-neutral”, “sustainable”, or “environmentally-conscious” are too vague and therefore easily misleading. Consumers must be able to make more sustainable choices with correct information, which is why the ACM has updated its “Guidelines regarding sustainability claims”. The revised guidelines contain five rules of thumb that businesses must follow when selling products and services: 

1. Use correct, clear, specific, and complete sustainability claims
2. Substantiate sustainability claims with facts, and keep them up to date
3. Make fair comparisons with other products or competitors
4. Describe future sustainability ambitions in concrete and verifiable terms
5. Ensure that visual claims and labels are useful to consumers and not confusing