CORPORATE SUSTAINABILITY DUE DILIGENCE DIRECTIVE (CSDDD)
The CSDDD entered into force in July 2024. Member States are required to transpose the CSDDD into national law by 26 July 2026 and it will apply on a phased basis, commencing for the first group of in-scope companies from 26 July 2027.
For in-scope companies, the CSDDD will:
- impose due diligence obligations covering adverse human rights and environmental impacts with respect to companies' own operations, those of their subsidiaries and their "chains of activities"; and
- require the adoption and implementation of a climate transition plan in line with the Paris Agreement.
For more information on the CSDDD, including the scope, timing of application, climate transition plans and the due diligence process, see our Briefing: New Due Diligence Obligations for Corporates Enter into Force.
The European Commission also recently published guidance in the form of FAQ on the CSDDD which address topics such as: the timing of application; scope; obligations on companies in terms of preventing, mitigating and bringing to an end adverse impacts; obligations concerning the climate transition plan; and enforcement.
EU DEFORESTATION REGULATION (EUDR)
Obligations under the EUDR were due to come into effect from 30 December 2024. The European Commission has now proposed a 12-month delay in order to allow a 12-month phasing-in period to ensure effective implementation. Subject to approval of the proposed delay by the European Parliament and Council, the EUDR obligations would come into force from 30 December 2025 (and from 30 June 2026 for SMEs).
The EUDR applies to seven relevant commodities (cattle, cocoa, coffee, palm oil, rubber, soy and wood) and specified derived products including leather, chocolate, tyres and printed paper. A full list of the relevant EU customs codes and individual product descriptions is set out in the Annex to the EUDR. The EUDR applies to relevant products that are produced within the EU as well as imports into and exports out of the EU.
Operators and traders will be required to file a due diligence statement, confirming that relevant products are deforestation-free and have been produced in accordance with the relevant legislation of the county of production, prior to placing/making the products available on the EU market or exporting them from the EU.
The Department of Agriculture, Food and the Marine (DAFM), the competent authority for the purposes of the EUDR, recently published resources on the operation of the EUDR in Ireland, including a list of commodity specific contact points within the DAFM.
The Commission published new Guidance on the EUDR together with updated FAQ on implementation of the EUDR. The Commission also intends to publish the principles of the methodology it will apply to the EUDR benchmarking exercise, serving to classify countries as "low", "standard", or "high" risk with regard to deforestation and forestation. It confirmed that, following the methodology applied, a large majority of countries worldwide will be classified as "low risk". The Commission proposes to adopt the final country benchmarking system by 30 June 2025.
For more, see our Insights: EUDR: New Supply Chain Obligations for Relevant Commodities and Products and EU Deforestation Regulation: Proposed Delay.
GREENWASHING
The EU Directive on Empowering Consumers for the Green Transition (ECGT) entered into force on 26 March 2024. Member States must transpose the ECGT into national law by 27 March 2026 and apply it from 27 September 2026.
The ECGT aims to promote sustainable consumption by tackling unfair commercial practices that mislead consumers and includes prohibitions on making generic environmental claims that are not substantiated, making environmental claims based on offsetting green-house gas emissions outside of a product's value chain, displaying a sustainability label which is not based on a certification scheme or not established by public authorities and it requires traders to provide information to consumers on the durability and repairability of products up front.
The Council of the EU has adopted its position on the proposed green claims directive which will form the basis for negotiations with the European Parliament during the new legislative cycle. The proposed directive will set out specific rules for companies on substantiation, verification and communication of claims to consumers in the EU regarding the environmental benefits of their products, together with criteria for environmental labelling. It is expected that the directive will be adopted later this year and Member States will have two years to transpose it into national law.
EU FORCED LABOUR REGULATION
The proposed EU forced labour regulation is expected to be formally approved in the coming weeks. Once the regulation enters into force, Member States will have three years within which to implement it. The regulation will prohibit products made with forced labour from being placed, made available on, or exported from, the EU market.
The prohibition is broad in scope and applies to all products, including their components regardless of industry or geographical location, where forced or child labour is used at any stage in the supply chain. While the regulation is intended as a "product ban" and does not impose additional due diligence or reporting requirements, companies will need to examine their supply chains to assess and manage potential risks.
NATURE RESTORATION LAW
The regulation on nature restoration has been published in the Official Journal and entered into force on 18 August 2024. The regulation is directly applicable in all Member States.
For more, see our recent Briefing: Where Nature Restoration meets Infrastructure Development: Council approves new Regulation.
EU CARBON BORDER ADJUSTMENT MECHANISM (CBAM)
The CBAM is aimed at reducing carbon leakage within the EU. The objective of the CBAM is to place a price on carbon by pricing certain goods imported into the EU to reflect more accurately their carbon content. The price of carbon will be based on the prices set in auctions under the EU Emissions Trading Scheme.
In its transitional period (from 1 October 2023 to 31 December 2025), CBAM applies to imports of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. Importers of in-scope goods from non-EU countries are required to report on a quarterly basis to the European Commission on the volume of their imports and their embedded greenhouse gas emissions, but no financial adjustment is payable for embedded emissions during the transitional period.
From 1 January 2026, importers will be required to purchase CBAM certificates in respect of in-scope goods, the price of which will be calculated based on weekly auction prices of EU ETS allowances. Goods can only be imported into the EU by an authorised CBAM declarant, who will be required to file an annual declaration in respect of the preceding calendar year, with the first declarations due by 31 May 2027.
For more information read our update: The Carbon Border Adjustment Mechanism – Reporting Period Begins.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.