The world is changing at an unprecedented pace, with sustainability and environmental issues at the forefront of global concerns. April has been a pivotal month for the European Union (EU), with significant developments and legislation proposed that will have far-reaching consequences for businesses and individuals alike.
Moreover, the EU’s actions are expected to influence other countries worldwide. As we move forward, it is clear that sustainability is no longer an afterthought, but a critical component of our collective future.
Human Rights and Environmental Due Diligence: EU Forcing Companies to Take Responsibility
With the CSRD around the corner, all eyes are on the next piece of legislation, the CSDDD (Corporate Sustainability Due Diligence Directive), obliging companies to identify, prevent and mitigate the negative impact of their activities, and that of their business partners, on human rights and the environment.
On April 25th, the Legal Committee of the EU Parliament (EP JURI Committee) voted its position on the CSDDD. The plenary vote is expected for June 1st, to be followed by negotiations with the Council on the final text of the legislation. It will then take 3 to 4 years for the obligations to apply.
Tackling Climate Change at the Border: EU Bans Deforestation-Linked Products
On April 19th, the EU Parliament adopted the EU Deforestation Regulation (EUDR) aimed at prohibiting the sale of products in the EU market that are linked to deforestation or forest degradation. The updated legislation now includes more commodities and derived products, and highlights the need to respect the human rights and rights of affected indigenous people. The targeted commodities include cattle, cocoa, coffee, palm oil, soy, wood, and rubber, along with products that are made using or have been fed with these commodities. The EUDR still requires negotiation and adoption by the Council before becoming effective. Operators and traders will then have 18 months to implement the new rules, with exceptions for micro and small enterprises.
As part of the EU’s “Fit for 55” package, the Council adopted two carbon tax laws on April 25th. These laws will revise the EU Emissions Trading System (ETS) by increasing the emission reduction ambition, including the maritime sector, and phasing out free allowances. The Carbon Border Adjustment Mechanism (CBAM) will also be introduced to prevent “carbon leakage,” which is the practice of moving carbon-intensive production out of the EU to countries with less strict climate policies. Companies that import goods into the EU will need to purchase CBAM certificates, which will incentivize cleaner production in non-EU countries and balance the carbon price of domestic production. The CBAM certificates to be purchased are linked to the embedded emissions in the imported goods, which will encourage importers to have accurate calculations of the carbon product footprint and lower it over time.
US and UK on High Alert: EU Leads the Way in ESG Standards
Currently, the US and the UK are closely monitoring the EU’s leadership in Environmental, Social, and Governance (ESG) standards. The US Securities and Exchange Commission (SEC) is waiting for the final Climate Ruling, which was expected in April but may be delayed. In the UK, concerns have been raised about falling behind the EU in ESG standards. Meanwhile, the Federal Trade Commission (FTC) in the US is in the process of reviewing its Green Guides.
Compliance is Key: Companies Must Prepare for Future Legislation
As the world faces the consequences of decades of environmental neglect, businesses must take the necessary steps to ensure compliance with upcoming regulations. From mapping relevant requirements to assessing material topics, the time for preparation is now. Failure to comply with sustainability measures will not only result in regulatory penalties but also have a severe impact on the future of our planet. Companies must act with urgency to prioritize sustainability and prepare for the challenges that lie ahead.
Read QIMA’s whitepaper Mandatory Human Rights & Environmental Due Diligence: How to Get Prepared to get a full picture of what is in place or coming in or check out QIMA Blog for more supply chain insights.
QIMA is a global provider of quality control and supply chain compliance solutions that combine on-the-ground experts for quality inspections, supplier audits, certification, and lab testing, with a digital platform that brings accuracy, visibility, and intelligence for quality and compliance data. The company currently operates in over 100 countries and help more than 30,000 global brands, retailers, manufacturers, and food growers achieve quality excellence.