Europe to Slash Emissions 90%

Weekend Update:

After sharing on Friday that the Corporate Sustainability Due Diligence Directive (CS3D) was in jeopardy, by the end of the day, it became clear the bill was not going to get the support needed to pass, postponing the vote till the 14th of February .

The CS3D requires the approval of 15 out of 27 nations or member states representing 65% of the EU population. But with two of the most populous countries (Germany and Italy), plus others saying they will abstain, it is currently unlikely to pass.?

The German Finance Minister, Christian Lindner , said that “it would put a massive burden on companies ” and that “Germany is obviously anything but alone with its concerns.” Supporters of the law called the postponement “outrageous,” Steve Trent , CEO of the Environmental Justice Foundation, said, "Protections for consumers, human rights and a sustainable planet for future generations are at stake ."

It is hoped further discussions will yield an agreement to get approval over the line for this far-reaching rule.

Europe to Slash Emissions 90%

Europe announced a sweeping new proposal to cut greenhouse gas emissions by 90% by 2040 , ahead of their 2050 carbon-neutral goal. The European Commission made the announcement on Tuesday ahead of the EU elections in June.

While 90% is dramatic, it's at the bottom end of the cuts recommended by the EU's scientific watchdog. Bottom end or not, meeting the 90% target will be a momentous undertaking. To put the gargantuan task into perspective, the EU cut just 30% of emissions between 1990 and 2021. The new target doubles the work in half the time.?

Accomplishing the world-leading proposal requires the bloc to establish an emissions-free power system in 16 years and reduce fossil fuel use by 80%. The rest of the emissions reductions would have to come from carbon removal technologies.

EU Backlash

A pacifying omission was made to the final agreement, namely the removal of any mention of agricultural emissions aimed at quelling unrest from EU farmers . This concession and others made by the EU toward farmers seem to be working with the European farmers’ lobby group, saying, “The EU Commission is finally acknowledging that the approach was not the right one .”

While EU climate commissioner Wopke Hoekstra said the target shows that Europe “continues to lead the way ” on climate action, not everyone is happy with the specifics of the EU’s new target.?

Climate scientists claim the bill’s omission of agricultural emissions and its over-reliance on unproven carbon capture technology make the goal unlikely to be met. Climate researcher Richard Klein said, “Carbon capture and storage is great if it works… But it simply hasn’t been shown to work at the scale that would be needed — it remains a pipe dream .”

CS3D in Danger

Adding fuel to the EU backlash, last week’s agreement on finalizing the text of the Corporate Sustainability Due Diligence Directive (CS3D) looks to be in danger .?

The final version was set to be voted on today (Friday, 9th February) in the EU Council. However, with Italy, Germany, and others saying they would abstain , which could kill the directive, the vote has been rearranged until 14th February. The bill needs approval from over 50% of EU member states (15 of 27) or member states representing 65% of the EU population to get over the line.?It is hoped the additional time and discussion will be enough to sway the countries against the law.

The current final draft cannot be amended. It can only be approved or rejected in its current state, so if the Council rejects it, the CS3D will be delayed for a while.

German MEP Axel Vos, a supporter of the CS3D, said the issue came from German internal politics, stating, “It was foreseeable from the start that the EU directive was primarily a German problem .”

The bill also received some criticism from Robert Eccles and Richard Crowley in a Responsible Investor piece , arguing that applying the CSDDD to US companies oversteps the mark.

EU to Regulate ESG Rating Providers

The EU continued to dominate ESG and Climate News with an agreement this week to regulate ESG Rating Agencies .?

The proposal aims to improve the reliability and comparability of ESG ratings and boost investor confidence in sustainable investing . It will require ESG rating agencies based in the EU to be authorized by the European Securities and Markets Authority (ESMA) and non-EU rating agencies to be endorsed by an EU-authorized provider. The centerpiece of the proposal is transparency regarding rating methodologies and data sources.?

The provisional agreement will now go to the EU Parliament and Council to be finalized and will come into effect 18 months after that.

SBTi Doubles Down

The Science Based Targets Initiative (SBTi) - often held up as the “gold standard” of climate targets - has come under some criticism of late, with high-profile companies like Amazon and Intel rejecting the standard. Despite the critics, the initiative doubled the number of validated climate targets over the past year from 2,079 in 2022 to 4,204 at the end of 2023 .

Because of the criticisms, SBTi has established an independent technical council and will update their Net Zero standard in 2025, release a Net Zero standard for financial institutions, create more sector-specific standards, and integrate with other standard-setting bodies .

SBTi CEO Luiz Amaral said, “We promised to prepare the SBTi for the next phase of growth and are delivering on that, once again doubling the number of companies validated in a single year while establishing our independence and strengthening our governance .”

Who’s Who on the A-List

The CDP released its 2023 A-list this week. In 2023, over 23,000 companies reported their climate, deforestation, and water impacts through the CDP, representing a 140% increase since 2020. Of those, only 400 companies - just under 2% - got A-ratings on their environmental performance for water, deforestation, and climate. You can check out the full list of A-listed companies here .

What’s in a Name?

With ESG becoming passé in some circles, companies are trying some other terms for size . ESG has been mentioned only nine times in S&P 500 earning calls this year (down from 156 mentions in 2021). Instead, terms like “green transition,” "sustainable investing," "responsible business," "transition investing," and others have become the new way companies describe their sustainability.?

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Other Notable News:

• Over the last 12 months, for the first time, global average temperatures were above 1.5°C . With global ocean temperatures also at record highs, it looks like it will be another grim year for the global climate.
• After receiving criticism for including all men on their 28-person COP 29 panel , AKA “a Manel,” COP29 host Azerbaijan has added 12 women to their now 40-person committee.?
• The Biden Administration tightens limits on deadly emissions . The new rule will reduce the amount of particulate matter industries can emit from 12 micrograms per cubic meter of air to 9. The move is expected to save 4,500 lives per year.
• The Global Reporting Initiative (GRI) released a new sector-specific sustainability reporting standard for the mining sector.
• Some of the world’s biggest banks are investing in new talent and resources in biodiversity and nature . This new investment is another marker that nature will be the next big sustainability focus for companies.?
• The coveted B Corp certification has recently lost its sheen . With some high-profile cases of B Corp companies not being as sustainable as the B Corp label would indicate, the B Certification process has been called into question.
• Google founder Sergey Brin is investing in a company that uses waste heat energy from industrial processes and data centers to power carbon capture technology .?
• The UK’s Advertising Standards Authority banned two ads from MG and BMW claiming their electric cars had zero emissions for greenwashing as the ads did not specify that the vehicles had only zero emissions from the tailpipe.?

Notable Podcasts:?

• In their first episode back in the new year, the Outrage and Optimism team , Christiana Figueres , Tom Rivett-Carnac , and Paul Dickinson , are back with an episode about the role climate will play in the biggest election year ever. Plus, Christian discusses a new three-part mini-series about ecological collapse she hosts called? ‘Our Story of Nature.’
• Check out this new climate podcast for dads who care about the future of their kids, “Climate Dads ,” from ERM climate expert Ryan Hamilton . In their most recent episode, Ryan and his co-host speak to Australian comedian and home renovation show host Andy Saunders to discuss everything you can do around the house for the climate.?

Notable Events

• I am excited to reconnect with old friends and make new ones at GreenBiz24 next week In Phoenix. BCG is sponsoring with our partner Quantis. I look forward to speaking on a panel with Mandi McReynolds from our new sponsor, Workiva, on 12th February from 12:15 PM - 1:15 PM, Grand Canyon Ballroom 13. I look forward to seeing you there.