The Sillion Briefing 13.12.2024
In this Briefing...
Plastics treaty collapses – A survey for you
ETS consultation – Paid climate leave
Coke packaging target – Clean power pledge
EV demand flags – UK SDR in force
Santos fights case
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Policy and regulation
Global Plastics Treaty talks collapse
Negotiations to forge a historic global agreement on plastic pollution have ended without a final deal after more than two years of talks, as over 200 nations met in South Korea for what was intended to be the final round of discussions. A major divide has continued between nearly 100 "high-ambition" countries advocating for phasing out plastic production, and oil-producing nations warning such measures could hinder global development. The crux of the disagreement centred on Article 6 – whether to commit to reducing plastic production or focus solely on managing waste through enhanced recycling. While 95 nations, including the UK, EU, African Group, and several South American countries, pushed for a legally binding reduction in production, consensus remained just out of reach. Talks are set to continue next year, leaving the regulatory path toward global plastic regulation uncertain for businesses in the meantime.
Consultation on expanding UK Emissions Trading Scheme to maritime sector
The UK is considering expanding its Emissions Trading Scheme (ETS) to include the maritime sector by 2026 and has launched a consultation seeking input before January's end. The ETS, currently covering aviation, power, and industry through a cap-and-trade system, aims to limit emissions by requiring businesses to buy credits for excess output while rewarding faster decarbonisation. The proposed expansion initially targets domestic shipping but may extend to international voyages, including those involving EU neighbours. The consultation seeks views on the types and sizes of ships to be included and any possible exemptions, in a potentially significant step towards reducing emissions in the maritime sector.
Spain introduces ‘paid climate leave’
Spain has introduced groundbreaking legislation granting workers "paid climate leave" of up to four days during severe weather conditions. The new policy, designed to protect employees from traveling during weather emergencies, mandates that employers must accommodate these leave requests without penalty if climate-related stay-at-home orders are issued. This measure follows October’s devastating flash flood in Valencia, which killed over 200 people despite a red alert from Spain’s meteorological agency, Aemet, for torrential rains and potential flooding. The tragedy spurred criticism of several companies that required employees to continue working despite the warnings.
Corporate
Coca-cola quietly drops packaging target; people notice
In 2022, the drinks giant promised to have at least 25% of drinks sold in refillable or returnable containers by 2030. Now, its packaging targets are to use 35-40% recycled material in primary packaging, and to aim for the collection of 70-75% of containers introduced into the market – quite different, and somewhat less ambitious goals, with no mention of the previous 25% target. News outlets and environmental groups noticed – with VP of Oceana Inc. calling the move “short sighted, irresponsible and worthy of widespread condemnation”. While ambitions may sometimes have to be walked back, it’s a lesson that such moves will almost always be spotted – suggesting that openness around challenges and changing priorities may often be the best way for companies to go.
Government
Labour’s clean power pledge
Prime Minister Sir Keir Starmer has outlined further details on the Government’s strategy to achieve a clean power system by 2030, setting a definitive target for the UK to generate at least 95% of its electricity from clean sources by that year. This is the first time that Sir Keir has cited the 95% figure, with some questioning if this was truly in line with the manifesto pledge of “zero-carbon electricity by 2030”. The number is, however, in alignment with the UK National Energy Systems Operator’s (NESO) guidance on what would qualify as ‘clean power’. In last week’s speech, the PM also outlined a goal to fast track 150 decisions on major infrastructure projects by the end of the current Parliament, and reaffirmed the promise of retaining a strategic reserve of gas power for reliability.
Transportation
UK EV production hits the brakes as industry body calls for urgent intervention
Vehicle production in the UK has slowed, according to stats from industry body the Society of Motor Manufacturers and Traders (SMMT), with output of all cars dropping by more than 15% in October compared to a year earlier. The fall-off is driven primarily by waning European demand, as well as the re-tooling of factories to produce new models.
While the switch to EVs is essential for countries to meet their environmental targets, the transition has its fair share of road bumps, with Stellantis recently announcing the closure of its Luton EV van plant to consolidate production in Cheshire. Ford also said it would cut 800 UK jobs over the next three years due in part to dropping EV demand. The government has fast-tracked a consultation on its goal of ending internal-combustion engine vehicle sales by 2030, and while there are no plans to shift the target, Business Secretary Jonathan Reynolds has promised to explore “pragmatic” steps. Mike Hawes, chief executive at SMMT, has asked for an “urgent review”, and sensible incentives, to help address flagging EV demand, commenting: “Not because we want to water down any commitments, but because delivery matters more than notional targets.”
Finance
SDR’s naming and marketing rules now in force
The Financial Conduct Authority's (FCA) Sustainability Disclosure Requirements (SDR) naming and marketing rules, designed to create accurate labelling of green funds, have officially come into force, compelling authorised firms to adopt one of four sustainability labels or provide clear disclosures for marketed products. Since the regime's voluntary phase began on July 31, 2024, 29 funds and four investment trusts have embraced the labels, with 22 adopting "Sustainability Focus" and 11 choosing "Sustainability Impact." However, the "Sustainability Improvers" and "Sustainability Mixed Goals" labels remain unused, raising questions about the industry's readiness and appetite for comprehensive ESG commitments.
Litigation
Santos fights back, calls transition plan case a “biased retelling”
Australian fossil fuel company Santos, which is focused on gas and oil, was this year subject to the first case challenging the veracity of a company’s net zero plan. The case has questioned the accuracy of referring to natural gas as ‘clean energy’, and to the use of the term ‘zero emission hydrogen’ in the plan – while Santos’ lawyer has fired back by arguing that the case is a “biased retelling” which ignores years of work by the company in the build-up to its 2021 climate change report. While the case will set a precedent for similar legal challenges, the story is also a reminder of the high level of scrutiny now being paid to green claims and to the credibility of transition plans.
Calendar
2024
SBTi: Draft Corporate Net-Zero Standard (CNZS) V2.0 public consultation – Q4 2024
ESMA: ESMA Guidelines on fund names using ESG or sustainability-related terms to apply to funds – 21st November 2024
2025
CSRD: Undertakings previously subject to the EU's NFRD must report ESRS in their Annual Report this year (i.e. FY24 reporting) – 1st January 2025
UK SRS: UK Sustainability Reporting Standards (SRS) published – Q1 2025
UK SDR: UK Sustainability Disclosure Requirements (SDR) rules on labelling of sustainability-focused funds to come into force – April 2025
ESMA: ESMA Guidelines on fund names using ESG or sustainability-related terms to apply to funds which existed before the rule change – 21st May 2024
London Climate Action Week 2025 – 21st-29th June 2025
COP: COP30, Belém, Brazil – November 2025
SBTi: Corporate Net-Zero Standard (CNZS) V2.0 to come into force – by end of 2025
2026
CSRD: All large undertakings must report ESRS in their Annual Report this year (i.e. FY25 reporting). In CSRD parlance, a 'large undertaking' is a company exceeding two of the three following thresholds: Balance sheet total €25 million, net turnover €50 million, 250 employees – 1st January 2026
UK SRS: UK listed companies need to begin work on their IFRS Sustainability Standards (ISSB Standards) and transition plan reporting, in order to be ready for next year
2027
UK SRS: UK Sustainability Reporting Standards (SRS) to become mandatory for FY26 reporting, making the IFRS Sustainability Standards S1 and S2 (the ISSB Standards) and transition plan reporting mandatory – FY26 reporting
CSRD: Listed SMEs must report ESRS in their Annual Report this year (i.e. FY26 reporting). In CSRD parlance, an SME is a company which exceeds only one (or none) of the following thresholds: Balance sheet total €25 million, net turnover €50 million, 250 employees – 1st January 2027
CSDDD: The EU Corporate Sustainability Due Diligence Directive (CSDDD) will start applying to very large companies (over 5,000 employees and over €1.5 billion turnover) – 26th July 2027
2028
CSDDD: The EU Corporate Sustainability Due Diligence Directive (CSDDD) will start applying to large companies (over 3,000 employees and over €900 million turnover) – 26th July 2028
2029
CSRD: Non-EU undertakings with EU branches / subsidiaries must report ESRS for the previous business year. This applies if the non-EU undertaking has a net turnover generated within the EU above €150 million, and if it has either subsidiaries that are large undertakings or SMEs (CSRD definitions of these are given in the calendar above) with securities traded on an EU market; or if it has branches with net turnover generated in the EU above €40 million – 1st Jan 2029
CSDDD: The EU Corporate Sustainability Due Diligence Directive (CSDDD) will start applying to all remaining companies within its scope (over 1,000 employees and over €450 million turnover) – 26th July 2029
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