Carbon news roundup for July 2024

Our monthly carbon news roundup summarizes the latest updates in sustainability legislation, net-zero news, and decarbonization success stories – and explains what they mean for your business.

EU member states will begin implementing CSDDD

On July 5th, the European Union published the Corporate Sustainability Due Diligence Directive (CSDDD) in its Official Journal. Member States now have two years to transpose the CSDDD into their national laws – the results of which will have important implications for many businesses operating within the EU.

Starting from July 2027, larger EU and non-EU companies will be required to report on their sustainability efforts, with smaller businesses having until July 2029 to comply. These reports will be public: companies will need to make their sustainability reports accessible to all.

The CSDDD’s ultimate aim is to ensure that companies are taking responsibility for protecting human rights and the environment. It requires businesses to thoroughly examine their operations and supply chains to identify and address potential issues. By making CSDDD reporting public, the EU is promoting transparency in corporate sustainability efforts.

What does this mean for my business?

With the public nature of CSDDD reporting, your business may face increased scrutiny in its ESG performance throughout its operations and value chain. The required disclosures are wide-ranging, so to ensure compliance your business should begin setting up reporting and data collection workflows now – even if reporting deadlines may still be years away. 

EFRAG releases new ESRS explanations in Q&A format

The European Financial Reporting Advisory Group (EFRAG) has issued new explanations for the European Sustainability Reporting Standards (ESRS). Released on July 26th, these explanations aim to assist companies in their ESRS reporting under the Corporate Sustainability Reporting Directive (CSRD).

Key updates include:

1. Clarifications on “shall” and “may” reporting requirements
2. Guidance on climate risk analysis and scenario considerations
3. Requirements for annual updates of GHG emissions disclosures
4. Definitions of revenue terms in relation to financial statements
5. Explanations of net-zero targets and GHG removals
6. Information on carbon credit quality standards
7. Clarification on the role of general meetings in governance
8. Guidance on assessing risks and opportunities for financial materiality

These explanations are non-authoritative but still provide valuable guidance for compliance with ESRS requirements. They are considered final and are not subject to public feedback.

What does this mean for my business?

These explanations provide important reference points for interpreting and implementing the CSRD’s standards. If your company falls under the CSRD’s scope, you’ll want to review and potentially adjust your CSRD reporting practices in areas such as climate risk assessments, GHG emissions disclosures, and net-zero target definitions.

California may delay implementation of climate disclosure laws

The administration of California Governor Gavin Newsom has proposed amendments to delay the state’s implementation of climate emissions disclosure and financial risk reporting laws.

Key proposed revisions include:

1. A two-year delay in implementation:
   • The California Air Resources Board (CARB) now has until January 1st, 2027 to adopt new regulations.
   • Scope 1 and 2 emissions reporting to begin in 2028, scope 3 in 2029.
2. Flexibility in scope 3 emissions reporting:
   • CARB may further specify the schedule and details for scope 3 emissions disclosure to, for example, allow for industry-specific requirements and phase-in periods.
3. Consolidated reporting at the parent company level:
   • Allows emissions disclosure reporting to be consolidated, even if subsidiaries independently qualify.
4. Optional contracting with nonprofit reporting organizations:
   • CARB now has discretion to contract with emissions reporting or climate reporting organizations, rather than being required to do so.

These amendments are still subject to negotiation and have faced opposition from some legislators. Discussions are expected to continue through the summer.

What does this mean for my business?

These proposed amendments signal ongoing uncertainty in U.S. climate disclosure regulations. Despite this potential delay, the trend towards mandatory climate disclosures is likely to continue, making proactive preparation a prudent strategy for businesses operating in California – or anywhere in the U.S., because legislations that first pass in California may be echoed in other states.

That’s it for July 2024! Stay tuned for next month’s roundup. To have insights like these delivered straight to your inbox, subscribe to the Normative newsletter.