The Sillion Briefing 06.09.2024
Need-to-know corporate sustainability and ESG news, delivered fortnightly
In this edition...
Record clean energy auction
EU climate lawsuits
Reporting pressure grows
Lego recycled plastic switch
SBTi Building sector guidance
SEC Climate Rule
Energy
Record UK auction for 130 clean energy projects
The latest Contract for Difference (CfD) auction in the UK secured 131 green energy projects, marking a significant achievement after last year’s auction failed to deliver any offshore wind awards. This round allocated 5.34GW of capacity, including 3.36GW for fixed-bottom offshore wind, 400MW for the world’s largest floating wind project (GreenVolt), and 28MW for tidal stream. Renewable developers and green business groups have reacted positively to the latest clean energy auction, anticipating that the newly awarded government contracts will drive increased investment, strengthen energy security, and reduce emissions. However, concerns have been raised that the new Labour government must act swiftly to hold more auctions, expedite grid infrastructure development, and reform planning regulations to meet its 2030 goal for a clean power system. Useful analysis by ORE Catapult here.
Government
Two climate lawsuits against EU
Environmental campaigners have launched two legal cases against the European Commission. One action is seeking an upgrade to EU emissions rules for 2030. The other questions the green labelling of certain aviation and shipping investments in the EU Taxonomy as ‘climate-friendly’. The first case by NGOs Climate Action Network and the Global Legal Action Network argues that national limits on GHG emissions for sectors like transport and agriculture are unlawful as they would fail to cut emissions in line with Paris Agreement goals. Priority status has been applied to the case, meaning it could be heard in 2025. The second case from five campaign groups has called on the EU to review ‘flawed’ sustainable finance criteria for aviation and shipping investments. Currently, investments in newer, fuel-efficient airplanes are classified green on the grounds they push older models into retirement. Similarly, a green label can be applied to ships running on liquefied natural gas, a fossil fuel considered less CO2-intensive than oil.
Regulation
SEC garners investor support for climate rule
The SEC’s Climate Rule has gained notable support from institutional investors, state pension funds, and environmental groups. Designed to enhance transparency on climate risks for investors, the SEC has faced significant opposition on the rule and a court ordered a temporary stay in March – covered in the Sillion briefing in April – arguing that the rule's requirements could be overly burdensome for companies. Considering its aims to provide investors with critical information on climate risks, strong support for the Climate Rule from investors in the latest update to court proceedings are likely to carry significant weight for the outcome, managing over $2 trillion in assets.
SBTi unveils building sector framework
The Science Based Targets initiative (SBTi) has introduced its Building Sector Science-Based Target Setting Criteria, containing new guidelines to help the building sector align its climate goals with the 1.5°C target of the Paris Agreement. These rules call for companies to phase out fossil fuel-based equipment installations, retrofitting existing inefficient buildings, and reduce both operational and upfront embodied emissions. The standards emphasise a ‘whole-building approach’ for developers, property owners, property managers and real estate investors to set emission reduction targets. The new guidance comes as fresh research from built-environment platform NBS and the Royal Institute of British Architects (RIBA) found that the number of climate-related targets and projects in the construction sector is growing. 70% of construction projects surveyed now incorporate sustainability targets, with a 13% increase in net-zero projects compared to the previous year.
Reporting pressure mounts for sustainability teams
A recent survey of 180 business and sustainability leaders across major UK sectors has found companies are struggling to keep up with the growing demands of corporate disclosure requests and new reporting frameworks. Despite over half of the companies surveyed actively working on Climate Transition Plans and the Corporate Sustainability Reporting Directive (CSRD), 55% do not feel their sustainability team is ‘adequately resourced’ to deliver on requirements. The 155% increase in reporting and disclosure requirementsover the past decade has left many teams feeling overwhelmed and under-prepared. Sillion specialises in sustainability reporting requirements and disclosures – if you happen to be feeling under pressure, please get in touch.
Corporate
Lego bears cost brunt of sustainable materials
Lego is paying up to 60% more for plastic resin made primarily from renewable or recycled materials to support its aim to replace oil-based plastics with renewable alternatives by 2032. Chief executive Niels Christiansen told the FT that the move has been made possible by rising sales and profitability, and the company was hoping to stimulate demand among plastics producers to increase the supply of greener raw materials by buying significant volumes of the resin made from mass-balance sources. Practice makes perfect for the world’s largest toymaker – last year, the company abandoned its attempt to use a prototype Lego brick made from recycled plastic bottles as an alternative to the current oil-based ABS after finding that the new material would lead to higher emissions due to the need to retool all its factories. This latest effort sets a market-leading example for the consumer products industry, as Lego absorbs the additional costs associated with transitioning to sustainable materials.
Calendar
Q4 2024 | SBTi: Draft Corporate Net-Zero Standard V2 Public Consultation
December 2024 | EU Deforestation Law: Due diligence obligations imposed
Q1 2025 | UK SRS: UK Sustainability Reporting Standards (SRS) published
FY24 reporting | CSRD: EU firms already subject to NFRD (and large non-EU subsidiaries) to report ESRS
FY25 reporting | CSRD: Large private companies to report ESRS
FY25 reporting | CSRD: Non-EU companies (incl. UK) to report ESRS for large subsidiaries
FY26 reporting | ISSB: S1 and S2 standards become effective in the UK
FY26 reporting | Transition planning, likely through TPT framework, to potentially become mandatory through UK SRS
Any questions, comments, or feedback?