The first quarter of 2024 saw quite some activity in the sustainability realm. As many new standards move into their first year of reporting, countries globally witnessed climate action agendas on the line. Elections are taking centre stage, influencing climate policies in favour of the voter class. Some industries have been in the lime light for sustainability-linked developments – both good and bad – including automobile, energy, and real estate. Here’s a snapshot of some of the key developments:
SOME HITS – SOME MISSES
EU Council finally approves the Corporate Sustainability Due Diligence Directive (CSDDD)
After weeks of closed-door negotiations and delays, the European Council has approved the CSDDD which seeks to create a legal liability on large companies regarding actual and potential adverse impacts on human rights and the environment, with respect to their own operations, those of their subsidiaries, and those carried out by their business partners. However, to reach an agreement, the final CSDDD had to be significantly watered down from the initial proposal, a move that frustrated sustainability advocates. The directive will now go to the European Parliament for approval.
US SEC passes its first federal law on climate reporting but finds itself entangled in litigation
The US Securities and Exchange Commission on March 06, 2024 adopted rules to enhance and standardize climate-related disclosures by public companies and in public offerings. The final rule excluded many requirements of the original draft including mandatory reporting of Scope 3 emissions. However, just days after its adoption, the rules have been put on hold amidst a slew of litigations from Republicans, energy companies and business groups challenging SEC’s authority to require disclosures of such nature. The SEC clarified that it continues to defend the regulation and that a stay would allow for orderly judicial resolution. On the other hand, environmental groups including the Sierra Club and Natural Resources Defense Council contest that the rule is significantly diluted vis-à -vis the proposed draft and does not go far enough to protect investors.
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Singapore, Canada introduce sustainability reporting requirements
Singapore and Canada have adopted International Sustainability Standards Board’s (ISSB) sustainability standards (IFRS S1 and S2) with country-specific modifications, mostly for phased implementation and gradual transition.
Singapore’s regulators the Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation (SGX RegCo) announced in February 2024 that the new climate reporting obligations will be implemented in a phased approach, beginning with listed companies in 2025, followed by large, non-listed companies, defined as those with at least S$1 billion in revenue and S$500 million in assets in 2027.
The Canadian Sustainability Standards Board (CSSB)Â proposed CSDS 1 and CSDS 2 in alignment with IFRS S1 and S2 on March 14, 2024. The CSSB launched a consultation alongside the new proposed standards, with key focus areas for feedback including the alignment of the timing of sustainability reporting with financial reporting, requirements, such as scenario analysis, for climate resilience reporting, and the extended relief proposals.
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New Climate Disclosures for Financial Institutions in India
The Reserve Bank of India released the Draft Disclosure Framework on Climate-related Financial Risks, 2024 on 28th February, inviting comments and feedback till April 30. The Framework is aligned with the popular TCFD Framework which has been adopted by a lot of financial regulators around the world.
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WHAT’S NEW?
Fate of climate change in people’s hands?
Half the world's population in more than 40 countries will elect new leaders in 2024. Almost a billion of them will vote in the 2024 Lok Sabha elections in India. While no one can predict the future, the outcome of these elections could tip the balance in the global fight against climate change. A Mongabay India analysis noted that the number and range of environment-related promises by Indian politicians has increased substantially since 2014. In the US, the Republican presidential nomination, Donald Trump, has pledged to reverse many of the current US climate policies - national and international. According to a study commissioned by the European Council on Foreign Relations think-tank, the EU Parliament election in June this year is expected to yield more seats for populist, right-wing parties, and losses for centre-left and green parties, producing an "anti-climate policy action" coalition in the Parliament.
But the masses hold the power to influence the fate of the world – it is not a person that we shall vote for, but the underlying agenda that would shape our world.
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US makes strong moves to limit transport-led pollution
The Environmental Protection Agency issued one of the most significant climate regulations in the nation’s history, a rule designed to ensure that the majority of new passenger cars and light trucks sold in the United States are all-electric or hybrids by 2032. The new Tailpipe Pollution Limits restrict the amount of pollution allowed from tailpipes over time so that, by 2032, more than half the new cars sold in the United States would most likely be zero-emissions vehicles in order for carmakers to meet the standards. According to the Agency, the regulation would provide nearly US$ 100 billion in annual net benefits to society, including US$ 13 billion of annual public health benefits due to improved air quality.
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New greenwashing guidelines find the light of day
The Central Consumer Protection Authority of India issued draft guidelines for Prevention and Regulation of Greenwashing. The draft defines what constitutes greenwashing and environmental claims; and requires adequate substance and proof behind all environment-related disclosures and claims. The draft was open for comments till March 21, 2024.
Conversely, the European Parliament too in January 2024 passed a directive to improve product labelling and ban the use of misleading environmental claims.
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SECTOR-SPECIFIC NEWS (INDIA)
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The government on March 15, 2024, announced reduced import duty of 15% for electric vehicles (EVs) imported as a completely built unit (CBU), from the present 70% to 100% applicable for vehicles imported in CBU form. The incentive comes with terms and conditions including a requirement to start a local manufacturing plant in a period of three years. The benefit is only applicable for EVs priced above US$ 35,000 and is unlikely to significantly impact Indian manufacturers. The move is likely to appease brands like Tesla to set foot in the country.
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India ranked third in the US Green Building Council's (USGBC) annual list of top 10 countries and regions in the world for LEED (Leadership in Energy and Environmental Design) certification in 2023. LEED is a green building rating system and the certification is a globally recognised symbol of sustainability achievement and leadership. As per USGBC, 7.23 million Gross Square Metres (GSM) of space in India is LEED-certified. China topped the top 10 rankings for 2023 with over 24 million certified GSM followed by Canada with 7.9 million GSM.
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