The EU wants to strip CSRD sustainability reporting requirements, British airports are getting bigger and BP is ‘back on’ fossil fuels. Then there’s the White House. The new world order looks a lot like the old one, but is environmental policy partly to blame?
The European Union’s Corporate Sustainability Due Diligence Directive and Corporate Sustainability Reporting Directive both came into effect last year. Far-reaching legislation, they set minimum environmental and human rights standards for all organisations doing business within the bloc. This stretches right through the supply chain, from partners to third party subsidiaries.
Framework was welcomed by environmentalists and progressives, but blasted by some businesses due to the extent of reach and requirements. And the lack of readily available guidance for compliance. In a bid to help, an ‘omnibus package’ of reforms was tabled before Christmas, a predictable recognition of potential overstretch and typical bureaucratic errors in understanding the reality of implementation.
Then last week, an amendment to those amendments was leaked through Politico, triggering furore over a perceived watering down of the new environmental responsibilities. And it’s not hard to see why. For one thing, the number of companies mandated under CSRD would fall by 85% if the proposed changes happen – so only organisations with 1000 employees or more would need to report their impact on the planet and its people.
‘Overall, this would probably leave around 10% of the largest firms – maybe 5,000 or so – within the scope [of the directive],’ Maximilian Müller, a professor of financial accounting at the University of Cologne, posted to LinkedIn following the leak.
It has also been suggested that many firms left out of the scope are likely to be U.S.-based multinationals with relatively limited EU staff but globally significant operations. Furthermore, for those that still need to comply, implementation of the rules would be delayed by half a year, giving more time for companies to get their numbers and audits in order.
And updated regulations would only apply to direct stakeholders, leaving subsidiaries free to do as they please, with company climate transition plans potentially scrapped too, although some argue any firm with a long term strategy would already have such a roadmap, with or without Europe telling them to produce one.
‘Europe’s leading stance on ESG has caused short term pain- but a lot of today’s legal requirements were written in the stars years ago,’ said Katie Fensome, Associate Director at private, public and third party environmental consultancy, Biodiversify. ‘Companies who have forward looking plans for traceability, efficient production, and investment in the landscapes we depend on for our goods and services are finding compliance much easier.
‘They’ve also innovated, sparked new industries, and found efficiencies along the way,’ she continued. ‘Don’t get caught out by pulling back now- plan for the future that your company, and the planet, can thrive in.’
But casting a wider spotlight reveals the omnibus amendment as the latest in a long line of major environmental roll backs that have dominated our news pages in recent months. We could start with last year’s COP29 climate summit, seen by many as a disaster that failed to deliver on promises of adequate financing, particularly for those on the crisis frontline, and refused to host talks about how to actually move away from fossil fuels, agreed in principle 12 months earlier.
But opening the timeline there ignores companies such as Volvo, Shell and Air New Zealand which had already started throwing caution to the wind by ‘decommissioning’ many climate and net zero aligned policies, long before world leaders gathered in Azerbaijan. Let alone such steps being legitimised, and sceptics emboldened, by Donald Trump’s return to the White House.
Labour’s chancellor Rachel Reeves has always been clear that growth is the single biggest policy priority for the current administration, and at times sounds like she means ‘at any cost’. Recent support shown for expanding British airports, including the third runway at Heathrow, is a case in point. Even the Climate Change Committee’s 7th carbon budget, published yesterday, refused to rule out much in terms of development-first. The mantra now seems to be ‘we will not prescribe’ while doubling down on hopes of humanity technology-ing itself out of this emergency.
Beyond our borders, US President Donald Trump’s election campaign was partly focused on pushing back against climate commitments, if not denying there was a problem altogether. Following inauguration, he has taken steps to exit the Paris Agreement and set about deleting climate references from government websites. The impact on relevant research at American universities and scientific organisations will likely be catastrophic, but we’ll only see this in the long-term. Which is time we don’t have.
Perhaps more worryingly, Trump’s arrival in the Oval Office has expectedly triggered an acceleration of far-reaching, anti-planet decisions at major corporations. Just before he was sworn in as the 47th US President, the country’s six biggest banks – JP Morgan, Citigroup, Bank of America, Morgan Stanley, Goldman Sachs, and Wells Fargo – all exited the UN-sponsored net zero banking alliance [NZBA].
Then yesterday, BP made the ‘shock’ announcement it would refocus its business on the pursuit of fossil fuels amid a massive reorganisation due to weak financial performance. To clarify, it never really abandoned the quest for oil and gas and made $7.2billion in profit last year. Significantly down on the previous 12 months, nevertheless the figure is enough to prove wealth is in the eye of the beholder.
Quite what will be left of BP’s promised 50GW in renewable power generation capacity by 2050 – a goal announced five years ago – is anyone’s guess. Not least given the company posted record net income for 2022 before watering down commitments on reducing emissions, blaming windfall taxes introduced during the energy crisis. This is particularly worrying, because back the Trump was considered a political has-been awaiting federal prosecution charges. There’s no simple explanation that the man in the red hat inspired a u-turn. It’s more complicated and insidious than that.
Of course, in comparison to corporates and MAGA America, the EU has promised there will be no abandonment of the plan – 90% of carbon equivalent emissions will be gone by 2040. And while debate waged over the omnibus amendment, the European Commission published a ‘clean industrial deal’ pledging to support high polluting sectors transition to greener futures, and help clean industries expand.
Yet the disconnect between regulatory intention, practicability, appetite and commitment is plain to see, reflecting not just a determined pushback from environmental sceptics and pollution profiteers, but a failure to develop workable policy and deliver coherent, effective messaging. And in the long term, we’re not sure which is going to prove more destructive.
Image: Ozark Drones
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