Insights

There is currently a deluge of new EU law being finalized and adopted – particularly on environmental and sustainability issues. At times it may seem overwhelming – with certain new EU laws being overlooked.  However, when serious environmental problems come to light within companies – the first major concern is normally criminal liability. That includes potential criminal liability of the company itself, but also of the CEO, Board Members and other persons leading it. With that in mind – top of a company’s ‘to-do’ list should be ensuring compliance with the new EU Environmental Crime Directive.

Cattle, cocoa, coffee, oil palm, soya, wood, rubber?  Do you sell any of these commodities? Do you sell any products derived, containing or using any of these commodities? Are there any companies in your supply chain which sell or use these commodities, or derivative products?  Do you (or others in your supply chain) sell products in the EU/EEA, or export products from the EU/EEA?  If so, you – and your supply chain – must likely comply with the Deforestation Regulation.[1] And getting ready is no easy feat – even despite the recent actions to postpone some of the application deadlines of concern. 

The EU Institutions are currently adding the finishing touches to the new Packaging & Packaging Waste Regulation (“PPWR”) which is expected to be adopted in Q4 2024 or Q1 2025. While many companies are fully preoccupied with preparing for other EU legislation (e.g. the Deforestation Regulation) – companies will ignore the PPWR at their peril. The PPWR contains a host of ambitious legal targets and requirements – which industry will find it difficult to achieve in practice. And the deadlines to comply – are perhaps even more challenging. Companies will need to start preparing for the EU PPWR now, to avoid serious problems – including supply-chain disruption, penalties and litigation – in the future.

The amount of litigation regarding environmental and climate change issues is, perhaps unsurprisingly, growing worldwide.[1] A significant portion of that litigation relates to so-called ‘greenwashing’, ‘climate-washing’ or ‘social-washing’ disputes. In other words, legal cases where people or organisations (often NGOs and consumer groups) accuse companies, banks, financial institutions or others, of making untrue statements. They argue these companies or financial institutions are pretending their products, services or operations are more environmentally-friendly, sustainable, or ethically ‘good’ for society – than is really the case. Perhaps more interestingly, of all the litigation in the environmental and climate change space – complainants bringing greenwashing and social washing cases have, according to some of these reports, statistically the most chance of winning. So, in a nutshell, not only is greenwashing and social washing litigation on the rise, companies and financial institutions are most likely to lose cases in this area.

Investors pursuing environmental, social, and governance (ESG) programs or applying sustainability standards have recently faced high-profile antitrust accusations, leading some to reconsider their participation in certain sustainable investment groups. On August 9, 2024, Climate Action 100+ confirmed the withdrawal of a major investor from the initiative, less than two weeks after the Judiciary Committee of the U.S. House of Representatives had sent information requests to more than 130 of the group’s members as part of an investigation into ESG programs. This follows numerous similar requests by the Committee since December 2022, as well as similar requests and threats of legal action against asset managers by some State Attorneys General since August 2022.

More than a year ago, the EU Batteries Regulation (Regulation (EU) 2023/1542) entered into force.  In approximately one year’s time, the EU Batteries Regulation is set to repeal the 2006 Batteries Directive (Directive 2006/66/EC), with some exceptions. During the 2024 summer, a number of the new requirements under the EU Batteries Regulation have begun to apply.  With these points in mind, it is an opportune time to take stock of the new requirements being phased-in under the EU Batteries Regulation, consider the most recent requirements which begun to apply last month (August 2024), and assess the significant, and growing, impact the EU Batteries Regulation is having more generally.

Over the 2024 summer, new EU rules entered into force regarding unsold consumer products under the new ESPR (i.e. the Ecodesign for Sustainable Products Regulation – Regulation (EU) 2024/1781).  The legal obligations themselves are relatively concise and short in number and therefore perhaps easy to overlook.  However, companies selling or supplying consumer products in the EU/EEA – particularly companies in the clothing, footwear, apparel, textile and retail sectors – should beware and not underestimate their importance or impact.

After a somewhat turbulent adoption process, on 25 July 2024 the Corporate Sustainability Due Diligence Directive (“CS3D”)[1] finally entered into force.  The CS3D requires certain companies operating in the EU/EEA, to identify and address adverse impacts on human rights and the environment as regards their actions both inside and outside of Europe. This includes obligations for companies to issue publicly available annual statements on human rights and environmental issues, and to adopt and put into effect transition plans for climate change mitigation.

The EU Institutions are in the process of agreeing new rules to further prevent greenwashing.  On 17 June 2024, the Council adopted its general approach to the proposed Green Claims Directive (“GCD”). The GCD is focused primarily on how companies would need to substantiate and verify green claims which are potentially permissible in the EU.  It complements the Directive on Empowering Consumers of the Green Transition (“ECGT Directive”) which entered into force in March 2024.  That Directive focuses primarily on blacklisting and prohibiting certain greenwashing practices. Together these two Directives will create a single regulatory framework concerning environmental, and to some extent, social claims.       

Making claims about carbon reductions or “carbon neutrality” may seem an attractive way to distinguish a company for its sustainability work, but such claims are becoming riskier to make. The last several years have seen a significant increase in litigation and regulatory requirements regarding such claims in the European Union, United Kingdom, United States and beyond.  Continuing that trend, on 27 June 2024, the German Federal Court of Justice handed down a Judgment in a case concerning environmental claims.  It is likely to have significant ramifications – particularly for companies making climate-related or carbon/greenhouse gas/emission – related claims in Germany.  This German case is just one example of why any company considering such claims should carefully examine the regulatory, enforcement and litigation landscape in all relevant jurisdictions, while also being sure to carefully construct and substantiate the claims.  

New EU legislation is about to be adopted which will require pharmaceutical and cosmetics companies to pay water pollution costs. More specifically, it will oblige those companies to pay for the clean-up and removal of micropollutants from effluent water. In addition, it will increase the risk of pharmaceutical and other companies facing legal damage-to-health claims. The new EU legislation – called the (Recast) Urban Wastewater Treatment Directive (“New UWWTD”) – is expected to be formally adopted in Q3/4 of this year.