Sustainability reporting in 2024: What businesses need to know 

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Sustainability legislation is ever more common in today’s world. From mandatory to voluntary ones, the sustainability question can decide the future of a business. Some are better known, others less so. For instance, everyone in the sustainability reporting realm knows the Corporate Sustainability Reporting Directive (CSRD), which requires all large companies and listed SMEs to publish reports on their ESG (environmental, social, and governance) activities according to the European Sustainability Reporting Standards (ESRS). Apart from the CSRD, many other pieces of legislation are relevant for companies. Depending on various criteria, some companies need to comply with several new such pieces and standards from this year onwards. This article will break them down in simple terms to help businesses understand the changing landscape of sustainability legislation. 

Legislation that has already been and will be implemented in 2024:

Corporate Sustainability Reporting Directive (CSRD): 

What: The CSRD requires all big businesses and listed small and medium-sized enterprises (SMEs) to provide reports on their environmental, social, and governance (ESG) activities. The CSRD follows a double materiality approach in which assessing the company’s impact on the outside world and vice versa is mandatory.  
Who: Large public-interest companies with more than 500 employees. This includes listed companies, banks, insurance companies, and other companies designated by national authorities as public interest entities. 
When: The CSRD report for the financial year 2024 should be submitted in 2025.  

EU Battery Regulation: 

What: The Battery Regulation aims to make batteries more sustainable at every stage of their life cycle, from the procurement of raw materials to collecting, recycling, and repurposing them. 
Who: Manufacturers, distributors, and retailers of batteries and battery-operated products.  
When: The regulation will apply from 18th February 2024. 

Sustainable Finance Disclosure Regulation (SFDR): 

What: The SFDR mandates the disclosure of sustainability-related information for financial market actors.  
Who: It applies to financial market participants managing finances on behalf of end investors: asset managers, insurance undertakings, occupational and other pension providers, as well as investment firms. 
When: Those covered by the regulation should submit a Second Financial Market Participant (FMP) Principal Adverse Statement (PAI) by 30th June 2024. 

Regulation on Deforestation-free products (EUDR): 

What: The regulation seeks to ensure that products purchased and consumed by Europeans are free from global and EU-level deforestation and forest degradation. Due diligence statements are mandatory that verify the goods manufactured by suppliers must comply with labour, land-use, and human rights laws, especially the rights of local Indigenous groups of the supplier country. 
Who: Any company or dealer that exports from or places commodities on the EU market must be able to demonstrate that the goods are not sourced from recently deforested areas or have otherwise contributed to the degradation of forest areas. 
When: The regulation will start to apply on 30th December 2024. 

Carbon Border Adjustment Mechanism (CBAM): 

What: The CBAM is intended to set a fair price on the carbon released during the manufacture of carbon-intensive commodities entering the EU and promote cleaner industrial production in non-EU countries.  
Who: CBAM is initially applicable to imports of a limited number of goods, including cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen, whose manufacture is carbon-intensive and most at risk of carbon leakage. 
When: Until the end of 2024, companies will have the choice of reporting in three ways:   (a) full reporting according to the new methodology (EU method)  (b) reporting based on an equivalent method (three options)  (c) reporting based on default reference values (only until July 2024).  As of 1 January 2025, only the EU method will be accepted. 

EU Taxonomy: 

What: The EU taxonomy is a categorization scheme that establishes standards for economic operations in line with a 2050 trajectory towards net zero emissions and more general environmental objectives beyond climate change. 
Who: Businesses covered by the CSRD are required to disclose in their annual reports the degree to which their operations are governed by the EU Taxonomy (Taxonomy-eligibility) and meet the requirements outlined in the Taxonomy delegated acts (Taxonomy-alignment). Companies that are not covered by the CSRD may choose to voluntarily disclose this information. 
When: Large financial institutions should disclose taxonomy-eligible and aligned activities in 2024 for activities related to climate objectives. 

Legislation that is expected to be implemented in 2024:

Corporate Sustainability Due Diligence Directive (CSDDD): 

What: Under the CSDDD, businesses must identify, stop, or lessen any real or possible negative effects of their operations on the environment and human rights. Their obligation would be to perform due diligence not only on their operations but also on their subsidiaries and other companies within their value chains. 
Who: Large companies with a net global turnover of more than €150 million and more than 500 employees, companies with €40 million turnover and 250 employees. Three years following the directive’s enactment, it will become applicable to non-EU businesses if they have a net turnover of more than €150 million within the EU. 
When: Provisional deal reached in December 2023, anticipated to be formally adopted in 2024. Member states will then have to transpose it into national legislation within two years. 

Green Claims Directive:  

What: The Green Claims Directive seeks to protect customers from deceptive or inaccurate statements made by businesses about the environmental impacts of their products or services.  
Who: All industries and companies operating in the EU or that sell their products in the EU are subject to the Green Claims Directive. However, microenterprises with less than ten employees and two million euros annual turnover are exempt from it.  
When: The directive will enter into force on the 20th day following its publication in the official journal of the European Union, which is anticipated to happen in February 2024. 

EU Green Bond Standard: 

What: The standard seeks to promote uniformity and comparability in the green bond market. Though voluntary, by complying with the standard, issuers will be able to provide proof that the green projects they are supporting are genuine and in line with the EU taxonomy. 
Who: For bond issuers that want to make their environmentally friendly bonds “European green bonds.”  
When: The regulation was adopted in October 2023, anticipated to come into effect in 2024.  

Ecodesign for Sustainable Products Regulation (ESPR): 

What: The regulation will establish new standards for products to make them more durable, recyclable, repairable, and easier to maintain. Digital product passports providing information about a product’s sustainability will be made available. Large companies will have to reveal annually the amount of unsold consumer goods it discarded and provide reasons for doing so.  
Who: Manufacturers of products that are sold in the EU, regardless of whether they are produced inside or outside the EU will be subject to the regulation.  
When: Provisional agreement reached in 2023, anticipated to be adopted by 2024.  

EU Nature Restoration law: 

What: It seeks to restore ecosystems, habitats, and species throughout the land and coastal regions of the EU by 2050. The member states must submit their national restoration plans two years after its implementation.  
Who: Landowners, foresters, farmers, fishermen and businesses that depend on them.  
When: Provisional agreement reached in 2023, anticipated to be adopted by 2024.  

Legislation outside the EU:

Global Plastics Treaty:  

What: A landmark resolution to create a globally binding legislative framework on plastic pollution, including in the marine environment, was adopted at the UN Environment Assembly in 2022. The Global Plastics Treaty aims to reduce greenhouse gas emissions associated with the plastic economy and stop plastic pollution by the year 2040 by implementing a circular economy that allows for the responsible reuse, recycling, and management of all plastic applications both during and after use.  
Who: 175 countries have agreed to develop a legally binding agreement to end plastic pollution.  
When: The agreement is expected to be formed by the end of 2024. 

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Interested to learn more about sustainability-related topics? Follow MorrowX on our social media pages.