Key highlights from December 2023 in the sustainability space.
COP 28 : takeaways from a controversial conference
The 2023 United Nations Climate Change Conference (COP 28) took place between the 30th of November and the 12th of December in Dubai, UAE. Under the looming threat of the 1.5°C target being breached in the next five years, and 2023 breaking heat records, tensions were high. The choice of location, given the Gulf Countries’ ties with the fossil fuel industry, and the attendance of more than 2000 fossil fuel executives was controversial. A remark by conference Sultan Al Jaber, that “there is ‘no science’” behind phasing out fossil fuel to stay below 1.5ºC alarmed scientists.
Despite this, a “transition away from fossil fuels” was mentioned for the first time in a final COP agreement, although it was a diluted version of the proposed “phasing-out.” Countries also committed to tripling the global renewable energy capacity by 2030. Importantly, the “Loss and Damage fund” that was first agreed in COP 27 was operationalized. Emphasis was placed on investing in climate-tech start-ups for the energy transition. However, the operationalization of Article 6.2 and 6.4 of the Paris Agreement was rejected after significant debate.
The conference highlighted the private sector’s role in the energy transition and while it didn’t meet all expectations, it marked a valuable step toward progress in tackling climate change and its economic impacts.
Provisional Agreement on the CSDDD
On the 14th of December the EU Parliament and Council reached a provisional political agreement on the “Corporate Sustainability Due Diligence Directive.” The provisional agreement frames the scope of the directive, clarifies the liabilities for non-compliant companies, better defines the different penalties, and completes the list of rights and obligations that companies must comply with. As such, the CSDDD (or CS3D) will require many companies in the EU and beyond to conduct environmental and human rights due diligence on their global operations and value chain, and compel them to adopt a transition plan for climate change mitigation.
Some of the more contested aspects of the agreement have included the definition of the value chain in scope; application of obligations to the financial sector; and penalties and civil liability for non-compliance. The final text of the agreement has not been published yet, as it needs to be adopted by both the Council and the Parliament.
New Anti-Greenwashing Guidance published in Australia
On the 12th of December 2023, the Australian Competition and Consumer Commission released its final guidance on “making environmental claims” for businesses. The guidance follows the results of a “greenwashing internet sweep” released in March of this year where the Commission found that more than 50% of companies reviewed made “concerning” environmental and sustainability related claims.
The guidance contains 8 principles to ensure that environmental marketing and advertising claims made by businesses do not mislead consumers as to the accuracy of their “greenness.” This final version incorporates feedback from over 150 stakeholders across consumer, business and environmental organizations. The guidance provides robust penalties for false or misleading claims. The maximum penalty for each contravention is the greater of either $50 million, 3 times the value of the benefit attributable to the contravention, or 30% of the corporation’s adjusted turnover during the relevant period. It remains to be seen whether the guidance will actually achieve its aim of reducing greenwashing to encourage fair competition.
SEC announces new deadline for climate related disclosure rules
The US Securities and Exchange Commission (SEC) has set an April 2024 deadline for several new ESG and climate-related rules following the Biden administration’s rulemaking agenda. These include proposed changes to rule 14a-8, easing filing requirements for shareholder proposals, and new ESG-disclosure rules for investment firms. The most notable are the climate-related disclosure rules, which have faced significant pushback from business groups, Republicans and some Democrats. These rules would require companies to disclose climate risks likely to impact their business and report on greenhouse gas emissions and certain climate-related financial metrics.
If adopted, these rules could be at risk. A Republican-controlled Congress could revoke them under the Congressional Review Act, unless blocked by a presidential veto.
- Content prepared with the help of Defne Fresko Tasci.