EU Sustainability Legislation in 2023: A Complete Year Recap and Our Forecast of What’s Coming

As 2023 draws to a close, it’s time to reflect on a year that has been pivotal for EU sustainability legislation. Just as we did in 2021 and 2022, the Ohana team has prepared a comprehensive recap of this year’s developments and a detailed assessment of what’s likely to come next. So get ready to dive into a complete analysis of 2023’s events, enriched with expert insights about the trends for 2024 and the upcoming EU elections.

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An Overview of 2023’s Trends

As we are closing in on the end of the 2019-2024 EU parliament mandate, 2023 has been a crucial year for policymakers to finalise legislation. This urgency was amplified by predictions regarding the outcomes of the 2024 EU elections, prompting a rush to complete legislative processes, particularly those related to the EU Green Deal. This push was also driven by the demands of various industries, which called on the Parliament to focus more on the implementation aspects of sustainability policy. Despite these efforts, a number of processes remain open, as we will explore later in this article.

Throughout the year, we have observed a significant shift in several industries and businesses as they transition towards implementation mode. This shift raised two major questions: how to implement several new policies at once, and which initial steps to take to ensure compliance within the next two to three years.

However, the implications of these legislative changes are not limited to European organisations. Non-EU suppliers, including product and material manufacturers, are also under pressure. Although EU legislation doesn’t directly cover non-EU players, they will also need to comply with new requirements, and possibly before the official deadlines due to production lead times.

What also became evident was the need for support, at least within the textile industry, to help suppliers understand and implement the required changes. This support is expected to come not only from their business partners but also from EU authorities and national governments.

The Policies Finalised in 2023

EU Deforestation Regulation

The EU Deforestation Regulation (EUDR) is a pivotal piece of legislation that imposes due diligence obligations on companies involved in trading commodities and products that pose a risk of contributing to global deforestation. These comprehensive obligations include requirements such as geo-localization, to trace the origin of a given commodity, and risk assessment statements.

The regulation encompasses a range of commodities like wood, rubber, beef, coffee, cocoa, palm oil, and soy, as well as certain products derived from them. This was a strategic initial selection given that these goods represent the largest share of deforestation driven by EU consumption and that the block is responsible for about 10% of the issue worldwide.

While the policy went into force last June (final text available here) the EUDR’s core obligations will only become applicable from December 2024.

EU Corporate Sustainability Reporting Directive

In January 2023, the EU Corporate Sustainability Reporting Directive (CSRD) came into force, signifying a major advancement in sustainability reporting standards across the European Union. Building upon the foundation of the existing Non-financial Reporting Directive, the CSRD expands its scope to include a broader range of companies and reporting obligations.

This updated directive encompasses not only large listed companies but also non-listed ones, as well as listed SMEs. Moreover, the directive extends its reach beyond EU borders, establishing new rules for non-EU companies as well. By broadening the corporate sustainability reporting obligations to cover governance, social, and environmental matters, the CSRD significantly enhances transparency, ensuring a more comprehensive and uniform approach to sustainability reporting across various sectors and regions.

Empowering Consumers to Green Transition Directive

The Empowering Consumers to Green Transition Directive (ECGT) is a key component of the EU Communications Framework, designed to tackle misleading claims and greenwashing. This directive updates the Unfair Commercial Practices Directive (UCPD), which sets out criteria for what constitutes a misleading generic claim.

Under the revised UCPD, generic statements such as ‘environmentally friendly’ or ‘sustainable’ will be prohibited unless they are substantiated by officially proven excellent environmental performance. Furthermore, the UCPD will ban private sustainability labels that are not based on robust certification schemes, as well as generic claims solely based on carbon offsetting.

This revision reflects a stricter stance on various types of vague and misleading claims, signalling a significant shift in how companies can communicate about the performance and impacts of their products.

The provisional agreement (provisional in this sense meaning that parliament, council and commission have agreed on the final text, but there are still some details to be ironed out at a technical level) on the ECGT was reached last month. The final text, to be officially adopted by the institutions in Q1 2024, is available here. The new requirements should start being applied around the third quarter of 2026.

Eco-design Regulation for Sustainable Products

Originally proposed in March 2022, the Eco-design Regulation for Sustainable Products (ESPR) aims to establish a comprehensive legislative framework ensuring that all products sold in the EU market are suitable for a climate-neutral, resource-efficient, and circular economy.

Textile products have been identified as the first group to be addressed under the ESPR. The minimum eco-design criteria being considered for each product group covers a wide range of aspects including durability, reusability, upgradability, reparability, the presence of substances that inhibit circularity, recycled content, and many others. Additionally, the regulation should introduce information requirements and the establishment of a Digital Product Passport for the regulated product groups.

Economic operators that destroy unsold goods would have to report annually the quantities of products they discarded as well as their reasons why. Ban of the destruction of unsold apparel, clothing accessories and footwear, two years after the entry into force of the law (six years for medium-sized enterprises) has been explicitly added to the legal text.

The political negotiations for the ESPR were concluded on December 5th 2023, with formal adoption anticipated by the coming spring. The EU Commission is set to develop a work plan to identify which product groups will be subject to the criteria, which should be released towards the end of 2024. This initiative will likely build upon the preparatory report for product prioritisation by the European Commission’s Joint Research Centre (JRC), published earlier this year. Detailed eco-design measures for the textile industry are under development by the EU Commission as we speak.

Corporate Sustainability Due Diligence Directive

With a focus on making businesses more accountable for the social and environmental impacts of their operations, the corporate sustainability due diligence directive is one of the EU’s main strategies to accelerate corporate commitments to the Union’s sustainability goals.

EU institutions found a political agreement on 14th December 2023, with technical meetings now due to take place to finalise the legislation. We expect the official adoption of the directive in Q1 2024.

In summary, the following points have been provisionally agreed:

• Scope
  • Companies with 500+ employees and 150+ million worldwide annual turnover
  • Companies with 250+ employees and 40 + million turnover in the “high-risk” sectors of textiles, food and minerals
  • Addition of the construction sector (although this part has not been closed yet)
  • Parent companies of large groups
  • Non-EU companies if they generate the turnover thresholds in the EU
  • The financial sector not fully included: only has to fulfil “upstream” due diligence and fulfil climate related obligations
• Transposition starting from 2027
• Definition of the chain of activities
  • downstream limited to transport, storage and disposal if these areas are taken over by another company
• Risk-based approach
  • Companies must identify risks where they are most severe or most likely to occur based on risk factors
  • Companies can also prioritise the order in which they mitigate these risks based on severity and likelihood
  • When identifying risks beyond Tier 1, companies should contact the companies at risk directly
  • An obligation to take measures only exists where a company has caused the risk itself; everything beyond this is subject to a duty of care
• Climate Plan
  • Companies should adopt a climate plan (target and measures) in line with Paris agreement
  • Compliance with the CSRD leads to compliance with the adoption of CS3D climate plans
  • Companies with more than 1000 employees can link additional financial incentives such as variable remuneration to the fulfilment of the plan
• Sanctions
  • Agreement that the maximum possible penalty is at least 5%
• Civil liability arises for damage caused by a company through intent or negligence. The limitation period is at least 5 years
• Directors Duties deleted

Delays and Changes: Legislation Pieces That Didn’t Go as Planned

REACH Regulation Revision

The revision of the REACH regulation, initially slated to begin with a Commission proposal at the end of 2022, faced a delay due to significant pushback from the chemical industry and far-/centre-right groups in the European Parliament. As a consequence, the review was postponed until after the European elections.

This revision aims to modernise the EU’s chemical legislation, with a primary goal of reducing the overall exposure of EU citizens and the environment to hazardous chemicals, as well as boosting research and commercialisation of safe and sustainable chemicals.

EU Microplastics Regulation

The EU Microplastics Regulation, a long-awaited proposal published by the Commission in October, represents a significant step in addressing the growing concern of microplastic pollution. Initially intended to encompass the release of microplastics from textiles, the scope of the legislation has since been narrowed to focus on regulating the release of plastic pellets.

The issue of microplastic release from textiles is now to be addressed under the Eco-design Regulation for Sustainable Products (ESPR), although the specifics will only be known with the publishing of the ESPR delegated acts in 2024-2025.

As it stands, the current EU Microplastics Regulation mandates companies that handle plastic pellets to actively monitor and minimise pellet losses. Additionally, it imposes reporting obligations on these organisations, ensuring a more controlled and transparent approach to managing microplastic pollution.

What Should Be Finalised by April 2024

Packaging and Packaging Waste Regulation

As a key element of the Circular Economy Action Plan, the European Commission embarked on a significant revision of its Packaging and Packaging Waste Directive, turning it into a regulation.

The revision is driven by three core objectives:

1. Reducing the current generation of packaging waste;
2. Promoting cost-effective circular economy principles across the industry;
3. Increasing the use of recycled materials in packaging.

Last November, the EU Parliament adopted its position on the Packaging and Packaging Waste Regulation (PPWR), with significant changes being proposed to the original text.

The Parliament’s proposal saw many of the PPWR’s ambitious requirements being toned down, largely due to pressure from conservative MEPs. Notable changes included the removal of measures aimed at reducing packaging and banning certain unnecessary packaging formats. Additionally, the targets for packaging reuse were made less environmentally ambitious.

The legislative works on this file are ongoing and are expected to be completed by the end of the current Commission’s mandate in April 2024. Meanwhile, the EU Council’s position on the matter is anticipated to be made available before the end of 2023, setting the stage for further developments in this crucial area of environmental policy.

EU Forced Labour Product Ban Proposal

True to its name, the EU Forced Labour Product Ban proposal establishes a comprehensive ban on goods produced with forced labour within the EU market. This proposal sets up a framework for investigating forced labour practices in companies’ supply chains, prohibiting the placement, importation, and exportation of such goods and their components within the EU’s borders. The ban extends to products manufactured within the EU and applies to economic operators of all sizes, including SMEs, representing a significant step in the block’s commitment to ethical labour practices.

In October 2023, the European Parliament reached an agreement on the file, and the Council is expected to adopt its position in January 2024. NGOs are now urging member countries to align with this stance before the end of the Spanish Council presidency in 2023.

The legislation is anticipated to be enforced starting in 2026, and the Commission is tasked with developing guidelines for implementation and operator compliance, which should be released six months before the regulation comes into effect.

Right to Repair Directive

The Right to Repair Directive proposal, adopted by the European Commission in March 2023, introduces a right to repair for products that are technically repairable under EU law. This initiative aims to foster affordable repair options for consumers, both within and beyond the legal guarantee period. It promotes sustainable consumption, combats waste, and supports the repair industry, complementing existing legislation against the issue of planned obsolescence.

The proposal includes the introduction of a European Repair Information Form, which will provide transparent details and pricing for repairs, fostering a competitive landscape particularly beneficial for repair SMEs. Moreover, the proposal seeks to establish a European quality standard for repair services, helping consumers across the EU to identify reputable service providers. However, it’s notable that textiles are currently excluded from the scope of this proposal.

Following its adoption, the European Parliament and Council established their negotiating stances in November, leading to the commencement of trilogue negotiations in December 2023. This collaborative process is a crucial step towards finalising the directive, with its implementation expected between late 2026 and early 2027.

Legislation Awaiting the Parliament’s Position in 2024

EU Green Claims Directive

The EU Green Claims Directive (GCD) is a piece of legislation designed to complement the Empowering Consumers Directive, with the goal of eliminating greenwashing. This is achieved by setting detailed rules for how companies should substantiate and communicate their environmental impacts and performance.

The GCD regulates and standardises ‘green claims’, establishing that any specific environmental claim must be supported by evidence of outstanding sustainable practices throughout a company’s entire value chain. Each claim must undergo pre-verification by a national competent authority, which will assess whether the substantiation is robust enough for the claim to be used in marketing. The GCD proposal also introduces stricter criteria for environmental labelling schemes.

Published by the European Commission last March, the GCD proposal is currently navigating through the legislative process, and the works are expected to continue beyond the EU elections.

Waste Framework Directive

In July 2023, the European Commission proposed a targeted amendment to the Waste Framework Directive (WFD), with a specific emphasis on addressing textile waste. This proposal is aligned with the EU Strategy for Sustainable and Circular Textiles seeking to advance a more circular and sustainable approach to managing textile waste.

Key aspects of the Waste Framework Directive include:

• A waste hierarchy that prioritises waste prevention, followed by preparation for reuse and recycling;
• Extended Producer Responsibility (EPR) schemes, where producers are responsible for the environmental impact of their products throughout their lifecycle;
• Circular economy principles that promote waste prevention, resource efficiency, and the use of waste as a valuable resource.

Under the directive, the scope of the EPR schemes will cover consumer clothing, bed, table & household linen, footwear, and bags. Under these schemes, textile producers and fashion brands will be required to pay fees to support the waste collection and management conducted by local authorities. Such fees would be ‘eco-modulated’ on the basis of the environmental performance of the textiles, in line with the Ecodesign Sustainable Products Regulation (ESPR). These requirements should be further clarified by the European Commission via the secondary legislation. Modulation of fees should be uniformly, consistently and easily applied across all EU Member States. The WFD should prevent a situation where, for example, a product with recycled content is eligible for a discount in one Member State and penalised in another.

However, the current proposal leaves some aspects, such as reporting requirements for companies, unclear, and further clarification is needed during the co-decision process. These requirements should be harmonised at the EU level and accompanied by comprehensive and clear guidelines. Moreover, given that textile producers operate in several Member States, it is imperative that companies can efficiently handle registration of the products across the EU by registering once in a unified system for the whole of the EU. This approach would allow producers to register in one Member State and manage their registration obligations in all Member States.

The ENVI committee will vote on 14 February 2024 on the compromise amendments.

Afterwards, the Members of the European Parliament will vote on 11 March 2024 on Parliament’s Position. We will be following closely if the discussions between the European Commission, Parliament, and Council will still start under the current mandate.

Waste Shipment Regulation

The Waste Shipment Regulation, which controls the transportation of waste within, into, and out of the EU, is expected to be finalised in early January 2024.

The Waste Shipment Regulation implements the provisions of the Basel Convention on the control of transboundary movements of hazardous wastes and their disposal and the correlated OECD decision into EU law.

The regulation covers the export and import of waste from the EU to third countries, as well as shipments between EU member states of hazardous and non-hazardous waste. It prohibits the export of hazardous waste from OECD and EU countries to non-EU and non-OECD countries.

The regulation also sets out notification and consent procedures for waste shipments. Shipment procedures are different depending on if hazardous or non-hazardous waste is shipped. Textile waste is defined as non-hazardous.

The Commission adopted its proposal to update the waste shipment regulation on 17 November 2021, and the European Parliament reached its position in January 2023, while the Council adopted its negotiating mandate in March 2023.The provisional agreement was reached at the beginning of December, and the Ohana team will be closely monitoring for updates and provide an in-depth analysis in the new year.

What to Expect From 2024 and the Upcoming EU Elections

The 2024 EU elections are set to be a pivotal moment for the future of the Union, with far-reaching impacts not only for politicians but also for European businesses and citizens.

This period is anticipated to bring about significant changes in the composition of the EU Parliament and the European Commission. Despite these movements, the European People’s Party (EPP) is expected to maintain its dominance, and Ursula von der Leyen is a likely candidate for reappointment as the Commission president.

Notably, the elections are projected to result in a rightward shift in the Parliament, a development that holds the potential to disrupt the progress of the block’s green initiatives.

Prospects for 2024

2024 is set to be a year of transition, particularly from a legislative perspective, as the focus shifts from developing legislation to its implementation phase. Starting in April, a significant amount of the final legislation will be officially published, providing businesses with clearer guidance on how to proceed and adapt.

While much of the legislative process typically slows down as elections approach, not all activities will come to a halt. Technical discussions for some laws will continue, and there is still work to be done on guidelines and secondary legislation, known as “delegated acts.” These include developments such as the ESPR’s product performance criteria for textiles and due diligence guidelines. Moreover, the revision of the Textile Labelling Regulation will progress via online consultations and stakeholder workshops.

How EU Businesses Should Prepare for What’s on the Horizon

Early in 2024, we can expect a flurry of manifestos to be published, containing recommendations from industries, NGOs, and other stakeholders. These documents will highlight the key issues that they believe the EU should focus on from October onwards.

In addition to engaging with policymakers early in the year to communicate their views and priorities, EU businesses should be ready to participate in public consultations in the second half of 2024 regarding the mandate.

This is a key moment to get your voice heard, and if your organisation is unsure about how to join the conversation, Ohana’s experts can guide you in navigating the EU landscape and influencing the outcomes of the next 5 years.

European citizens should also not overlook the importance of casting their votes during EU elections. Voting is our opportunity to state what matters to us and shape our own future.

Finally, we would like to wish everyone a Happy New Year and invite you to get in touch to discuss how we can help you advance your organisation’s sustainability ambitions in 2024 and beyond!

Want someone with deep experience and connections in the EU to help guide your sustainability strategy? Get in touch!

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