Global: COP28 Deal Calls for Global Transition Away from Fossil Fuels
On December 13, 2023, COP28 concluded with a historic agreement to transition away from fossil fuels so as to achieve net zero by 2050. The agreement was reached in response to findings that countries were failing to reach the goals of the Paris Agreement, particularly the commitment to limit global heating to 1.5˚C above pre-industrial levels. Over 100 COP28 participants – including the U.S., UK, EU, and the Alliance of Small Island States – had lobbied for an agreement to phase out coal and gas use. However, pushback from oil-producing nations, as well as developing nations reliant on fossil-fuel exports, softened the commitments. Many participants lobbied for binding language to eliminate fossil fuels by a fixed date. Ultimately, to achieve wider buy-in, the final agreement sets no specific deadline for the completion of the transition away from fossil fuels; it merely notes the need for accelerating action toward this goal this decade.
The signatories recognized that reaching the 1.5˚C Paris Agreement goal would require a 43% reduction in emissions by 2030 and a 60% reduction in emissions by 2035, relative to 2019 levels. As such, the signatories agreed to transition “away from fossil fuels in energy systems, in a just, orderly and equitable manner ... so as to achieve net zero by 2050 in keeping with the science.” The agreement also calls for global renewable energy production to be tripled, and the rate of energy efficiency improvements to be doubled, by 2030.
UN Press Release
Global Stocktake Decision
EU: The Council and Parliament Reach an Agreement on the Corporate Sustainability Due Diligence Directive
On December 14, 2023, the European Council and Parliament agreed to a deal on the Corporate Sustainability Due Diligence Directive (“CSDDD”). The CSDDD imposes an obligation on companies to identify, mitigate, and prevent actual and potential negative impacts on human rights and the environment caused by their own operations, operations of their subsidiaries, and operations carried out by business partners. Companies also have to integrate due diligence into their risk management policies and adopt a plan to ensure that their business models and strategies comply with the Paris Agreement.
The Council and Parliament agreed that CSDDD would apply to large EU companies with more than 500 employees and a net worldwide turnover of more than €150 million, and to non-EU companies with over €150 million net turnover generated in the EU. After contentious negotiations, the financial sector was not included in the scope of the CSDDD. However, CSDDD will include a review clause that allows for its inclusion in the future following a “sufficient impact assessment.”
CSDDD sets out a number of penalties for noncompliance, including fines of up to 5% of global turnover. Compliance with the CSDDD may also be considered a prerequisite for receiving public contracts and concessions. Additionally, parties affected by any adverse impacts, including trade unions and NGOs, will be able to bring a claim up to five years after the impact occurred.
Once endorsed and formally adopted by both institutions, the final text of the CSDDD will be made available.
European Council Press Release
European Parliament Press Release
Global: The ISSB Publishes Amendments to SASB Standards to Enhance International Applicability
On December 19, 2023, the International Sustainability Standards Board (“ISSB”) published amendments to the Sustainability Accounting Standards Board (“SASB”) Standards to enhance their international applicability. The SASB Standards consist of 77 industry-based sustainability-related disclosure standards containing approximately 1,000 metrics in total. The SASB Standards serve as guidance for the application of the ISSB climate and sustainability disclosure standards, including IFRS 1, which were released in June 2023 (see our Weekly Update on this topic here).
The amendments were designed so that organizations already using the SASB Standards can use most of the same data sources, processes, and reporting. In total, the ISSB amended 192 SASB Standard non-climate metrics, removed 17, and replaced seven.
Organizations will need to apply the amended ISSB Standards for their annual periods beginning on or after January 1, 2025.
Amended ISSB Standards