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6 Sustainability Takeaways in EU Antitrust & Regulatory — December 2023

December 20, 2023
Latham lawyers highlight key takeaways and developments in the sustainability space from the second half of the year.


European Commission | December 2023

On 14 December 2023, the European Council (Council) and European Parliament (Parliament) reached a political agreement on the Corporate Sustainability Due Diligence Directive (CSDDD).

The CSDDD’s key aim is to enhance the protection of the environment and human rights globally. The CSDDD as proposed would set obligations for companies regarding the actual and potential adverse impacts of their own operations, those of their subsidiaries, and those carried out by business partners. The CSDDD would also establish a requirement for large EU companies to adopt a plan to ensure that their business model and strategy are compatible with the Paris Agreement, i.e., including concrete targets and measures in line with limiting global warming to 1.5°C.

A number of key areas were finalised in the negotiation process including in relation to the scope of application, approach to financial institutions, and the process for supervision and enforcement.

The provisional agreement now needs to be translated into actual legislative text, which will then be formally adopted by the Council and Parliament. Following adoption, Member States will have two years to implement the CSDDD into national legislation.

See Latham’s blog post for more detail.


European Commission | August 2023

On 17 August 2023, the European Commission (Commission) adopted rules governing the implementation of the Carbon Border Adjustment Mechanism (CBAM) during its transitional phase, which began on 1 October 2023 and runs until 31 December 2025.

The CBAM effectively operates as an import tax on certain carbon-intensive products, such as electricity, cement, steel, iron, and aluminium (and their derivatives). It was developed to prevent “carbon leakage”, i.e., companies that move carbon-intensive production to non-EU countries with less stringent climate policies or that replace EU products by more carbon-intensive imported products. The latter situation has been observed as the EU makes its rule more stringent to support the EU’s climate goals and phases out the free allocation of allowances under its Emission Trading System.

During the transitional phase, the CBAM will initially apply to goods and precursors whose production is carbon-intensive and determined to be at most significant risk of carbon leakage. Per the Commission, this phase aims to serve as a pilot period for all stakeholders, and to refine the methodology for the subsequent phase (i.e., after 31 December 2025).

See Latham’s blog post for more detail.


European Commission | September 2023

In September 2023, the Commission published a merger brief focusing on sustainability aspects in merger control. The brief outlines the Commission’s approach to sustainability in EU merger control and explains how the current legal framework and case practice can and do support the European Green Deal. The Commission identified the following merger control enforcement issues that would enhance merger control’s contribution to sustainability goals:

  • The need to consider consumer preferences, such as for “green products”, as a differentiating factor in general and in market definition in particular
  • The importance of enforcing and pursuing innovation theories of harm as a means of preventing the loss of “green innovation”
  • The significance of considering social and environmental benefits and thus accepting those as efficiencies resulting from a merger
  • The need to remain vigilant against “green” killer acquisitions, especially given that “green” innovation is often carried out by smaller players who pose a threat to incumbent companies, and that such concentrations may well fall below the notification thresholds at both EU and national levels

Sustainability considerations are becoming increasingly important in merger control. While the brief does not definitively determine the future influence of sustainability issues on the Commission’s competition policy, it is noteworthy as the Commission seldom addresses the subject. The brief outlines how the Commission considers sustainability factors in its merger investigations when defining relevant markets, assessing the competitive impact of a merger, and evaluating the appropriateness of remedies to address the anticompetitive harm. It also explains how the Commission stays vigilant against “green” killer acquisitions.


European Commission | July 2023

On 31 July 2023, the Commission adopted the proposal for the European Sustainability Reporting Standards (ESRS).The ESRS represent the standards which set out the specific disclosure requirements for companies that will be required to report on sustainability-related impacts, risks, and opportunities under the EU’s Corporate Sustainability Reporting Directive (CSRD).

The ESRS are set to be formally approved by the EU in Q4 2023, and further ESRS are expected to follow for small- and medium-sized enterprises (SMEs) by 30 June 2024.

In October 2023, the Commission announced plans to delay aspects of the CSRD (including the adoption of sector-specific ESRS) and sustainability reporting for companies outside the EU. The Commission is aiming to postpone the adoption date for the sector-specific ESRS by two years, to June 2026. The full Commission Work Programme includes the announcements relevant to CSRD.

See Latham’s blog post for more detail on the ESRS and CSRD.


European Commission | September 2023

On 14 September 2023, the Commission initiated a consultation on its sustainable financial disclosure practices, seeking feedback on Regulation (EU) 2019/2088 — the Sustainable Finance Disclosure Regulation (SFDR). The consultation surveys stakeholders’ experiences during the implementation of the SFDR and, in particular, solicits feedback on its interactions with the broader EU sustainable finance framework.

The SFDR came into effect in March 2021 and sets out how financial market participants should communicate information to investors and make sustainability-related disclosures. Since the introduction of the SFDR, firms have faced implementation issues and difficulties in relation to the legal certainty and useability of the regulation’s framework.

Two linked consultations have been launched that will take place over three months, closing on 15 December 2023. The consultations focus on key areas including:

  • Labelling
  • Greenwashing
  • Principal Adverse Impact indicators
  • Cost
  • Commonality with UK Sustainability Disclosure Requirements

See Latham’s blog post for more detail.


CMA and ACM | October 2023

On 12 October 2023, the UK Competition and Market Authority (CMA) published the Green Agreements Guidance to assist businesses operating at the same level of the supply chain in cooperating on environmental goals. The guidance clarifies how competition law applies to environmental sustainability agreements and provides businesses with greater clarity about agreements addressing environmental sustainability, including climate change. The CMA invites businesses (and representative bodies such as trade associations), non-governmental organisations, and charities to seek informal guidance on proposed environmental sustainability initiatives.

On 4 October 2023, the Netherlands Authority for Consumers and Markets (ACM) published a policy rule explaining how businesses can collaborate to achieve sustainability goals, providing them with more opportunities to collaborate on sustainability agreements. The policy rule follows the approach to sustainability agreements that the EC explains in its guidelines on horizontal cooperation agreements. The policy rule also further explains under which circumstances the ACM will not impose fines.

Businesses that have questions about sustainability agreements may contact the ACM. This policy rule replaces the ACM’s previous draft guidelines on sustainability agreements between businesses.


European Commission Approves Regulation on the Restriction of Microplastics

European Commission | October 2023

On 25 September 2023, the Commission adopted Commission Regulation (EU) 2023/2055 (Regulation 2023/2055), limiting the distribution of synthetic polymer microparticles in general and the intentional addition to mixtures in a concentration ≥ 0,01% by weight.

Regulation 2023/2055 aims to replace plastic glitter made of non-biodegradable, insoluble plastic with sustainable, non-polluting glitter. Therefore, biodegradable, soluble, natural, or inorganic glitter can continue to be sold, as it is not considered microplastics.

Regulation 2023/2055 entered into force on 17 October 2023 and provides for specific transitional periods for the use of certain synthetic polymers. Plastic glitter does not benefit of such extension, and can continue to be sold only if placed on the EU market before 17 October 2023.

Agreement on Regulation Proposal to Further Restrict the Use of Fluorinated Greenhouse Gases

European Parliament, Council of the European Union | October 2023

On 19 October 2023, the Parliament and Council have reached an agreement on a Regulation Proposal (Proposal) to significantly reduce greenhouse gas emissions from fluorinated gases (F-Gases) and ozone-depleting substances (ODS).

The Proposal aims to ensure that the EU effectively implements the commitment to reduce hydrofluorocarbons (HFC) production and consumption by 80% in 30 years, which was agreed in 2017 under the Kigali Amendment to the Montreal Protocol on substances that deplete the ozone layer.

Among other measures, the Proposal provides for a phase-down of 48% of the overall F-Gases placed on the EU market within 2026, and for a ban on certain categories of products and equipment starting on 1 January 2025.

Parliament will likely approve the Proposal in January 2024.

TCFD Transfers Climate Monitoring Activities to IFRS Foundation

IFRS | July 2023

On 10 July 2023, the International Sustainability Standards Board (ISSB) and Financial Stability Board (FSB) announced that the IFRS Foundation (the organisation that founded the ISSB) would take over the monitoring of the progress on companies’ climate-related disclosures relating to the Task Force on Climate-related Financial Disclosures (TCFD). This announcement follows the ISSB’s publication of its inaugural sustainability standards IFRS S1 and IFRS S2 in June 2023.

Standards IFRS S1 and IFRS S2 fully incorporate the TCFD recommendations, and the FSB has therefore noted the standards mark “a culmination of work of the TCFD”.

Following publication of the international sustainability standards, the leading international policy forum and standards setter for securities regulators (IOSCO), announced in July its official endorsement of the new IFRS sustainability and climate-related disclosure standards, in a move it called a “major step towards consistent, comparable and reliable sustainability information”.

See Latham’s blog post for more detail, and our Client Alert for a discussion of the ISSB standards.

TNFD Publishes Finalised Recommendations for Nature-Related Disclosures

TNFD | September 2023

On 18 September 2023, the Taskforce on Nature-related Financial Disclosures (TNFD) published recommendations for organisations’ assessment, management, and disclosure of nature-related issues (the Recommendations). These recommendations were the result of a two-year engagement process, featuring several beta versions to receive and process commentary from a range of stakeholders.

The Recommendations draw heavily from the TCFD framework, although they were recontextualised for nature. They incorporate many of the same foundational concepts — such as a taxonomy of risks, varying time horizons, and the need to capture not only direct operations but also upstream and downstream value chain impacts — as well as recommended disclosure organised around the now ubiquitous pillars of governance, strategy, risk [and impact] management, and metrics and targets.

See Latham’s Client Alert for more detail.


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