ESG Weekly Update – June 15, 2022

15 June 2022

EU: Provisional Political Agreement Reached on EU Adequate Minimum Wage Draft Directive

On June 7, the European Council and Parliament reached a provisional political agreement on the draft directive on adequate minimum wages in the EU. Minimum wage currently varies across the EU as each Member State sets their own standards: 21 out of 27 countries have a statutory minimum wage, while the rest have minimum wages determined by collective bargaining. This results in monthly minimum wages ranging from €332 in Bulgaria to €2,202 in Luxembourg.

The draft directive sets out a framework for adequate minimum wages but does not set a fixed minimum wage. The areas considered by the new law are the adequacy of minimum wages and effective access to minimum wage protection. The draft directive also requires Member States to monitor the coverage and adequacy of minimum wages and report data to the Commission on an annual basis.

i. Adequacy of minimum wages

Member States will be required to promote collective bargaining on the setting of a minimum wage. In Member States where the collective bargaining coverage is less than 70%, a framework of enabling conditions must be created either by law or by setting out an action plan; this action plan must be made public and provided to the Commission.

The draft directive requires Member States to take necessary measures to ensure that the setting and updating of statutory minimum wages are guided by “adequacy” criteria established with the goal of achieving “decent working and living conditions, social cohesion and upward convergence”. The adequacy criteria considered must include, at a minimum, the following considerations:

  • the purchasing power of statutory minimum wages, taking into account the cost of living and the contribution of taxes and social benefits;
  • the general level of gross wages and their distribution;
  • the growth rate of gross wages; and
  • labor productivity developments.
The draft directive allows different rates of statutory minimum wages for specific groups of workers, but these variations must be kept to a minimum and any such variation must be non-discriminatory, proportionate, limited in time if relevant and objectively and reasonably justified by a legitimate aim.

The draft directive also requires Member States to involve “social partners” (i.e., trade unions and employers’ organizations) in setting a minimum wage, particularly through the creation of consultative bodies. Furthermore, Member States should help strengthen the capacity of social partners—especially workers’ representatives—to engage in collective bargaining.

ii. Effective access to minimum wage protections

The draft directive also requires Member States to cooperate with social partners to take certain steps to enhance the access of workers to statutory minimum wage protections. These steps include:
  • strengthening the controls and field inspections conducted by labor inspectorates;
  • developing guidance for enforcement authorities to proactively target and pursue non-compliant businesses; and
  • ensuring that information on statutory minimum wages is made publicly available in a clear, comprehensive and easily accessible way.
  • Member States now have two years to transpose the directive into national law.
Draft directive
Press release

EU: European Parliament Votes on Key Climate Change Proposals

On June 8, the European Parliament voted on several key climate change proposals. The first vote was on a proposal to reform the EU Emissions Trading System (ETS) to curb pollution from power stations and factories. This proposal was intended to confirm Parliament’s negotiating position on the ETS reform and backed an approach that aimed to slash emissions in sectors covered by the ETS by 67% until 2030, up from last year’s European Commission proposal of a 61% reduction. As the proposal was tabled, Members of the European Parliament passed amendments to water down the ETS reform proposal: the emission reduction target was changed to 63%, and the reduction of carbon credits was slowed, meaning that more carbon credits would be available to purchase and carbon emissions would consequently increase. The entire proposal was rejected, with 340 votes against, 265 votes in favor and 34 abstentions.

Two related proposals were postponed as a result: namely, one related to the Social Climate Fund, which would be partially financed by revenues obtained from selling ETS permits, and the Carbon Border Adjustment Mechanism, which would impose a border tax on carbon.

All three proposals have now been referred back to the committee level.

A proposal to revise CO2 emissions standards for cars and vans—which would effectively result in banning the sale of combustion engines by 2035—was approved, with 339 votes in favor, 249 votes against and 24 abstentions. Intermediate emission reduction targets for 2030 would be set at 55% for cars and 50% for vans. The final text will now be negotiated in the European Council.

Parliament minutes
Parliament press release (emissions standards)
Parliament press release (ETS)

US: Biden Administration Seeks to Increase U.S. Solar Capacity

On June 6, the Biden administration announced measures to encourage the production and deployment of solar panels in the U.S. and to incentivize the development of domestic solar manufacturing capacity. In support of this effort, the Biden administration announced duty-free imports from Southeast Asia for two years and issued presidential determinations providing the Department of Energy (DoE) with authority to rely on the Defense Production Act (DPA) to reduce reliance on foreign manufacturers.

The move allows duty-free imports of solar modules and cells from Cambodia, Malaysia, Thailand and Vietnam, which account for roughly three quarters of imported solar modules and the majority of solar module installations in the U.S. The tariff exemption will serve as a “bridge” while U.S. manufacturing ramps up. The administration is authorizing the DoE to use the DPA to accelerate domestic production of solar panel parts as well as other clean energy technologies.

In a memo released by the White House on the invocation of the DPA, President Biden stated: “I find that action to expand the domestic production capability for solar … is necessary to avert an industrial resource or critical technology item shortfall that would severely impair national defense capability.”

Biden waives solar panel tariffs for four countries, invokes defense law


Global: Launch of the Voluntary Carbon Markets Integrity Initiative

The Voluntary Carbon Markets Integrity (VCMI) Initiative is a multistakeholder Initiative co-funded by the Children’s Investment Fund Foundation (CIFF) and the UK Department for Business, Energy and Industrial Strategy. The Initiative was established to develop guidance on how companies can transparently use voluntary carbon markets (including the use of carbon credits) to contribute to climate mitigation commitments.

The VCMI Initiative Claims Code of Practice is supported by the British government and assists companies in developing science-aligned claims relating to the use of carbon offsets, including by providing guidance on the use of carbon credits as part of commitments to achieve net zero emissions. To increase transparency around corporate climate commitment claims, before a company makes an announcement relating to the purchase of carbon credits, short-term science-based targets to reduce emissions must also be developed. Per VCMI guidance, companies must rely on credible organizations in formulating and executing these science-aligned purchases and commitments.

The VCMI Initiative also assists investors in ensuring credibility in corporate carbon offset claims. A company can be named VCMI Gold, Silver or Bronze, depending on the company’s progress toward meeting interim targets and its effective coverage of any emissions remaining through carbon credits.

The VCMI Initiative is accepting comments on its Claims Code of Practice until August 12, 2022.

VCMI Provisional Claims Code of Practice