Article by Leonie Hirschmann
With 2023 just starting, it is a good time to take stock of recent and upcoming regulatory changes that are expected to impact your business planning, operations and reporting in the coming months. The list focuses on changes in regulations for supply chains, CO2 emissions reductions and business-related nature conservation. Many of these changes also incorporate human rights and labor conditions.
What made the cut?
Transparency and accountability are two key areas you need to incorporate into your business model in order to adhere to regulatory changes that aim to foster environmental sustainability while helping to protect and support society‘s most vulnerable members.
Transparency and sustainable management
In June of last year, the EU announced the Corporate Sustainability Reporting Directive (CSRD), a set of new rules for corporate sustainability reporting. These rules were adopted in November and published 14 December 2022, providing a four-stage timeline for implementation: depending on company size and whether or not companies are already required to report non-financial disclosures. These rules aim to promote transparency and structure regarding sustainability in businesses.
The German Act on Corporate Due Diligence in Supply Chains came into force on 1 January 2023. This law establishes stronger rules on human rights in supply chains in Germany. These regulations aim for greater transparency to protect workers’ human rights. Furthermore, this transparency is expected to foster more sustainable workplaces and industries.
The EU Council formalized its negotiating position for the Corporate Sustainability Due Diligence Directive (CSDDD), a set of supply chain rules proposed by the European Commission in February 2022. The Directive aims to enhance protections for the environment and human rights in the EU and elsewhere, requiring businesses both within and outside of the EU to monitor their supply chains for environmental and human rights risks. As with CSRD, step-wise implementation would impact businesses based on size and other key criteria.
Reduction of Emissions
As part of the European Green Deal, Fit for 55 – a legislative package to reduce emissions by 55% by 2030 – seeks to reduce emissions while simultaneously protecting vulnerable members of society and small businesses during these changes. This package centers on the EU Emissions Trading System (EU ETS) – a system of cap-and-trade reporting on emission allowances. The aim is to regulate and monitor businesses and industries that are energy-intensive. Fit for 55 is designed to significantly reduce CO2 emissions in the EU with recently proposed ETS additions to cover the road transport and building sectors and a Social Climate Fund to reduce transition costs for vulnerable households, micro-enterprises and transport users.
At the end of 2022, the EU reached a political agreement on implementing the Carbon Border Adjustment Mechanism, aka carbon tax, on the import of products with a higher carbon footprint and therefore higher risk of pollution, such as steel and cement. Through this taxation, the EU aims to assist decarbonization in industries and businesses in Europe. The new rules are expected to begin 1 October 2023, with a period of transition before taxes start. Businesses are encouraged to begin the transition to more sustainable materials as soon as possible.
Beginning in 2023, businesses in Germany, including restaurants, are obligated to utilize only reusable containers and bottles. This change aims to reduce waste as well as CO2 emissions.
Also in December 2022, the EU reached a provisional political agreement on regulations for deforestation-free supply chains. Through these rules, the EU seeks to inhibit deforestation by banning illegally produced goods from its market. Illegally produced goods in this context relate back to products which have through their manufacturing processes increased deforestation and/or forest degradation. Going forward, businesses need to conform to the regional law (depending on their location), for instance, by providing farmers with positive rewards for responsible production or enforcing new measures for nature conservation.
By supporting transparency in reporting, the GRI Biodiversity Standard centers on halting the alarming steady decline of the world’s biodiversity. The Standard is currently under discussion with public comments accepted until 28 February 2023. The Standard should enhance the accountability of individual businesses by providing a best-in-practice standard for companies to assess their own impacts.
Momentum Novum has got you covered
Momentum Novum has a proven approach for incorporating these regulatory and rules changes into your business model: sustainable Leadership, Innovation, Strategy development, and Transformation (LIST). Beginning with the individual people in your business and community, sustainable leadership empowers all levels of an organization to lead so that businesses can make the most of the opportunities and decrease the risks associated with regulatory changes. Innovation, whether through new ideas or improvements to existing practices, supports flexibility to face and address change. Dynamic, resilient organizations actively approach strategy development as part of their business models and look to transform by being proactive in terms of the required changes rather than reactive once changes have been enacted.
Transparency and accountability are more than buzz words — they are fundamental to the regulatory changes that are going into effect in 2023 as well as those we anticipate will be negotiated. LIST provides solid ground for the steps you’ll take this year and beyond.
For help navigating these regulatory changes and figuring out your sustainability strategy, please reach out and see what LIST can do for you.