The CS3D Digest #26

Welcome to the 26th edition of The CS3D Digest, a dedicated newsletter by Ripple Research and your weekly compass for navigating conversations that matter in the corporate sustainability landscape. Our goal is simple—to keep you informed about the latest developments in the Corporate Sustainability Due Diligence Directive (#CSDDD) space as we further our understanding of it.

Read our previous editions to catch up, and subscribe for future updates!

Today's focus: EU's new law to reduce truck emissions, S&P report on the key trends in sustainability initiatives among leading US companies, Hong Kong Taxonomy for Sustainable Finance initiative, new EU guidelines to prevent greenwashing in finance, SBTi revision to Corporate Net-Zero Standard.

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What are we reading?

We've employed our proprietary AI tools to curate the most engaging news about CS3D and related regulations. Our focus extends beyond what's trending at the moment to showcase headlines that are fueling meaningful conversations around the world.

1. EU countries approve law mandating emissions-free trucks by 2040

The European Union countries have given their final approval to a law to reduce carbon dioxide emissions from trucks. This law mandates that most new heavy-duty vehicles sold in the EU from 2040 onwards must be emissions-free. It enforces a 90% reduction in CO2 emissions from new heavy-duty vehicles by 2040, requiring manufacturers to sell a significant portion of fully CO2-free trucks to offset any remaining sales of CO2-emitting vehicles. Additionally, truck manufacturers must decrease the CO2 emissions of their fleets by 45% by 2030 and 65% by 2035. However, recent complaints from Germany and center-right EU lawmakers were raised regarding the allowance of combustion engine trucks beyond 2040 if they ran on CO2-neutral fuels. As a result, a preamble was added to the law stating that the European Commission would consider developing rules in the future to count trucks running on CO2-neutral fuels towards the targets.

2. 45% of U.S. companies have net-zero emissions targets, S&P report finds

A recent S&P report shedding light on the key trends in sustainability initiatives among leading US companies has revealed that only 45% of companies have committed to net-zero emissions targets. Additionally, while progress has been made in reducing direct operational emissions (Scope 1) and purchased electricity emissions (Scope 2), there remains a significant gap in addressing emissions throughout the value chain (Scope 3), with an average reduction target of just 11%. The report emphasizes the importance of setting ambitious near-term targets as stepping stones toward achieving long-term net-zero goals. However, it finds that only a third of emissions are covered by net-zero commitments, with interim targets aiming for 2035 or sooner, leaving a substantial portion without clear plans for near-term reduction. On a positive note, there's a growing trend of companies linking executive compensation to emissions reductions, particularly in high-emitting sectors like energy, materials, and utilities. This incentivization aligns corporate leadership with decarbonization objectives. Lastly, the report suggests that increasing demand for climate-related transparency from investors and regulators is likely to drive companies towards developing robust transition plans with clear decarbonization goals, ultimately leading to greater adoption of net-zero targets and heightened accountability for emissions reduction efforts.

3. HKMA launches Hong Kong Taxonomy for green and sustainable finance

The Hong Kong Monetary Authority (HKMA) has launched the Hong Kong Taxonomy for Sustainable Finance, a comprehensive framework designed to guide decision-making in green and sustainable finance while stimulating the flow of relevant funds. This initiative follows a thorough development process, including the release of a discussion paper in May 2023 to gather stakeholder feedback on a prototype framework that provides clearer definitions of green products, enhances interoperability, and mitigates the risks of greenwashing. It covers 12 economic activities across four sectors (power generation, transportation, construction, and water and waste management). The development of the Hong Kong Taxonomy has been guided by principles of interoperability, comparability, and inclusiveness, ensuring alignment with other relevant frameworks such as the Common Ground Taxonomy, China’s Green Bond Endorsed Projects Catalogue, and the European Union’s Taxonomy for Sustainable Activities.

4. ESMA releases guidelines to prevent greenwashing in sustainable finance

The European Securities and Markets Authority (ESMA) has issued finalized guidelines to safeguard investors against misleading claims and provide asset managers with clear and measurable criteria for using ESG or sustainability-related terms in fund names. The guidelines specify that any fund claiming to be 'green' must ensure that at least 80% of its assets align with ESG objectives. In addition, a new category has been established for transition-related terms to support investments in companies transitioning to greener practices, including those with revenue streams from fossil fuels, without penalizing them. Existing funds have a grace period of approximately nine months to adjust their investment strategies and comply with the new guidelines, while new funds are expected to adhere to the requirements sooner.

5. SBTi announces revision of Corporate Net-Zero Standard

The Science Based Targets Initiative (SBTi) has announced a major revision to its Corporate Net-Zero Standard, aiming to align with the latest scientific insights and best practices, particularly from sources like the Intergovernmental Panel on Climate Change (IPCC) and the UN Secretary General’s High-Level Expert Group (HLEG) on net zero emissions. This revision will also address challenges related to scope 3 target setting, integrate continuous improvement, and enhance interoperability with other standards. The standard changes will be implemented following research, consultation, pilot testing, approval by the Technical Council, and adoption by the SBTi Board of Trustees.

Voices from this week

??Mathieu Vervynckt, Head of Unit Value Chains at Swedwatch , highlights the significant progress made with the approval of CS3D, emphasizing the shift in support, notably from Sweden, previously a strong opponent, which now endorses the directive.

??Auret Van Heerden, Founder & CEO at Equiception Business and Human Rights , discusses the potential for Bangladesh's export garment industry to transition to renewable energy sources, particularly solar.

??Vali Marszalek, ESG Director at 玛泽咨询 , underscores the importance of organizations recognizing and addressing human rights risks within their supply chains and advocates for a comprehensive due diligence process.

?? Susanne Pedersen, Director of the IUCN, Science & Knowledge Centre, highlights the positive impact of the EU Green Deal, despite the pushback, on driving ambitious climate and sustainability targets.

??Richard Boyd, Senior Programme Manager at Laudes Foundation , discusses how CS3D and CSRD will affect the real estate sector, urging more dialogue and preparedness within the industry.

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