ESG - Sustainable Management

New European Ecodesign Regulation finally accepted

May 28, 2024 On May 27, 2024, the Council of the European Union finally adopted the new Ecodesign Regulation (Regulation of the European Parliament and of the Council establishing a framework for setting eco-design requirements for sustainable products and repealing Directive 2009/125/EC). It will therefore enter into force 20 days after the forthcoming publication of the Regulation in the Official Journal of the EU.

The new Ecodesign Regulation replaces the current Ecodesign Directive (2009/125/EC) and significantly extends the previous scope of application to almost all types of goods (with a few exceptions: e.g. cars and defense and security products) placed on the Union market.

In particular, the regulation introduces a digital product passport and new environmental sustainability-related product aspects (such as durability, upgradability, reparability, carbon footprint, etc.), which are intended to increase the sustainability of a product.

However, the Ecodesign Regulation as such only provides a legal framework and (like the previous Ecodesign Directive) will not contain any specific product requirements. The latter will be set successively along a certain product group prioritization by filling legal acts (regularly delegated regulations of the EU Commission).

The new regulation also prohibits the destruction of unsold textiles and shoes (with a temporary exception for SMEs). The Commission is authorized to introduce similar bans for other products in the future.

Further information can be found at: https://www.consilium.europa.eu/de/press/press-releases/2024/05/27/green-transition-council-gives-its-final-approval-to-the-ecodesign-regulation/

Dr. Thomas Sikorski, Lawyer and Salaried Partner

Germany implements obligation for uniform EU-wide sustainability reporting

March 26, 2024 The Corporate Sustainability Reporting Directive ("CSRD", Directive (EU) 2022/2464) aims to oblige a gradually growing number of companies to prepare a sustainability report in accordance with uniform EU-wide standards by 2028. For large capital market-oriented companies, the corresponding reporting obligation already applies to the current 2024 financial year. According to current estimates, around 13,000 German companies will be affected by the new sustainability reporting obligation. The EU member states have until July 6, 2024 to transpose the CSRD into national law. In contrast, the European Sustainability Reporting Standards ("ESRS"), which are relevant for reporting, do not need to be transposed into national law as delegated acts, but apply directly. To date, however, only the final version of "ESRS Set 1" exists.

On March 22, 2024, the Federal Ministry of Justice ("BMJ") published the long-awaited draft bill for a law to implement the CSRD in Germany. Comments from federal states, municipal umbrella organizations, certain specialist groups and affected associations can be submitted to the BMJ until April 19, 2024.

The German Accounting Standards Committee e.V. provides an easy-to-read summary of the draft bill on its website.

Reporting takes place in the (group) management report. In terms of content, sustainability aspects of the company's own business activities and the value chain should be covered. Employee representatives should be involved in the preparation of the report. The assurance of the legal representatives on the annual financial statements and the management report should be combined and also extend to the sustainability report. The sustainability report is to be audited by the Supervisory Board and by an auditor, the latter initially only on the basis of an audit review for a transitional period. The auditor must be elected by the general meeting or shareholders' meeting. If this does not happen, the elected auditor will be the auditor of the sustainability report for financial years beginning before January 1, 2025.

Meike Dresler-Lenz, Senior Associate and Attorney-at-law

The US Securities and Exchange Commission (SEC) has adopted standards for climate-related disclosures by listed companies and in public offerings.

March 13, 2024 The SEC has announced new rules to improve and standardize climate-related disclosures by listed companies and in public offerings. The rules include disclosure of climate-related risks by business segment, risk management strategies and reporting on material climate risk mitigation activities.

In addition, certain companies will be required to report on greenhouse gas emissions. This means that there are now also requirements for sustainability reporting for US companies.

Further information can be found here: SEC.gov | SEC Adopts Rules to Enhance and Standardize Climate-Related Disclosures for Investors

Dr. Christoph Schork, Attorney at Law and partner

EFRAG publishes draft standards on sustainability reporting by SMEs

February 28, 2024 On January 22, 2024, the European Financial Advisory Group ("EFRAG") published two drafts of new European Sustainability Reporting Standards ("ESRS") on sustainability reporting by small and medium-sized enterprises ("SMEs") for consultation. Comments are possible until May 21, 2024. Adoption as delegated acts by the EU Commission is planned by June 30, 2024.

1. Standard for mandatory reports of capital market-oriented SMEs

The first standard „LSME ESRS“ (LSME = listed small and medium-sized enterprises) is aimed at SMEs whose securities (e.g. shares or bonds) are admitted to trading on a regulated market in the EU. They must prepare a sustainability report for financial years beginning on or after January 1, 2028 at the latest. This also applies to small and non-complex institutions, captive insurance undertakings and captive reinsurance undertakings in accordance with Article 19a (6) of the Accounting Directive.

The draft is accompanied by an explanatory statement (Basis for Conclusions (LSME)) and a comparison with ESRS Set 1 for large companies (Addendum to the Basis for Conclusions).

2. Standard for voluntarily reporting SMEs

The second standard „VSME ESRS “ (VSME = voluntary sustainability reporting non-listed small- and medium-sized enterprises) s intended to help non-listed and non-reporting SMEs to respond efficiently to inquiries on sustainability issues from banks, investors or customers who have to report on their value chain themselves with a voluntary sustainability report. Based on the expected market acceptance, the presentation of the standardized report is intended to save them the otherwise time-consuming task of answering a large number of different ESG questionnaires.

The VSME is also accompanied by an explanatory statement. (Basis for Conclusions (VSME)).

3. Value Chain Cap

A document entitled „Approach to Value Chain Cap in LSME ESRS ED and VSME ED“ is also available for consultation. The background to this is as follows:

The LSME ESRS also determine the maximum amount of information that large companies may obtain from SMEs in their value chain (regardless of whether they use LSME or VSME) in order to prepare their own sustainability report. EFRAG calls this the "Value Chain Cap".

The document to be commented on now contains an analysis of the data points in ESRS Set 1 that have a value chain dimension and examines them to determine (1) which are the corresponding data points in LSME and VSME (2) whether and to what extent the stricter requirements of ESRS Set 1 could unintentionally "leak through" to SMEs,  It concludes that even SMEs that "only" apply the VSME ESRS will generally be able to meet the data requirements defined for the value chain, with the exception of special cases that are mainly sector-specific in nature.

Meike Dresler-Lenz Senior Associate and Attorney at Law

ESG ratings more transparent in future

This article was first published in the trade magazine Bondguide on February 23, 2024

February 23, 2024 At the beginning of February 2024, the EU Council and Parliament (provisionally) agreed on a draft regulation on ESG ratings. This draft is part of the EU's Sustainable Finance Strategy and is based on a proposal by the EU Commission from 2023. ESG ratings are to become more transparent, reliable and comparable. However, the rating methods will not be harmonized.

ESG ratings are increasing significantly, especially with green and sustainable finance. It is therefore important that they can provide a sound basis for decision-making.

Certain activities such as the mere publication or dissemination of data on environmental, social, human rights and governance factors as well as pure external reviews such as frameworks and allocation reports as well as impact reports in relation to EU green bonds and second-party opinions on green bonds or financing marketed as environmentally sustainable are not covered by the regulation.

ESG rating agencies established in the EU must be authorized and supervised by ESMA. ESG rating agencies established outside the EU must also meet certain requirements.

To avoid conflicts of interest, ESG rating activities must be separated from other activities such as consulting and auditing, but internal shielding is sufficient.

Significant transparency rules are defined: ESG rating agencies should ensure the independence of their ESG ratings and the implementation of all requirements of the EU regulation. They must ensure that the ESG ratings are based on a thorough analysis of all available information and in accordance with their rating methodologies. The ESG ratings should be systematic, independent and justifiable and the rating methodologies should be applied continuously and in a transparent manner. The rating methodologies should also be reviewed on an ongoing basis, at least annually.

The approved ESG rating agencies and certain transparency requirements must also be published on the European Single Access Point (ESAP) to be set up. The ESG rating agencies must provide an overview of the rating methods used, as well as whether their analyses are retrospective or forward-looking and what time horizon they cover. They must also provide an overview of the data sources.  ESG ratings could cover E, S and G in aggregate. However, their weighting must then be specified.

The draft still has to be approved by the EU Council and the EU Parliament. The regulation is to be applied 18 months after it comes into force, i.e. in 2026 at the earliest.

Dr. Anne de Boer, LL.M. (RSA) Partner and Attorney at Law

EU Parliament approves directive to restrict greenwashing

January 18, 2024 On 17.01.2024, the European Parliament approved a draft directive aimed at improving product labeling and preventing the use of misleading environmental claims ((2022/0092 (COD) - Proposal for a Directive of the European Parliament and of the Council amending Directives 2005/29/EC and 2011/83/EU).

This directive aims to ensure that traders do not mislead consumers about the environmental and social impact, durability or reparability of products. The proposal also contains an addition to the so-called "black list" of environmental claims that are misleading in any case and without further evaluation. In future, generic terms such as "eco", "green", "ecological" and "environmentally friendly" will be added to this list, which may only be used if the corresponding environmental properties can be proven. The countries must now formally approve the draft directive in the Council. The member states then have two years to transpose the directive into national law. At the same time, Brussels is still working on the so-called "Green Claims Directive".

Astrid Luedtke and Antje Münch, LL.M., both Salaried Partners and Attorneys at Law

European Green Bond Standard for green bonds adopted

All EU bodies have now adopted the European Green Bond Standard (EUGBS) for green bonds. The EU wants to create a gold standard for such European Green Bonds (EUGB) and counteract greenwashing. The new standard is also intended to contribute to coherence and comparability.

The use of the EUGBS is voluntary and therefore sits alongside well-established market standards such as the ICMA. This has led to much discussion, as some have called for mandatory application.

The EU taxonomy is used for the use of proceeds, thus further consolidating the uniform valuation standard for sustainability. The proceeds from an EUGB must be invested in taxonomy-compliant economic activities and, in addition to compliance with minimum labor and human rights standards, the do no significant harm principle must also be observed. Under certain conditions, up to 15% of the proceeds from emissions can be invested in economic activities for which there are no technical assessment criteria under the EU taxonomy or other specific activities. This flexibility framework is to be reassessed in the coming years and adjusted if necessary.

A factsheet and a securities prospectus are required for the issue of EUGBs. The securities prospectus must adequately present the sustainability aspects in accordance with the requirements of the Prospectus Regulation and ESMA of July 11, 2023. The corresponding bond must be designated as a European Green Bond or EUGB and the application of the EUGBS must be stated. The factsheet must also be reviewed by an auditor (second party opinion); the auditor must be registered with and supervised by ESMA. The reporting includes a regular report on the use of funds (allocation report), which must also be audited externally, as well as a one-off impact report.

In the event of changes to technical evaluation criteria under the EU taxonomy, there is limited protection for unused revenue and revenue contained in a CapEx plan.

The regulation will enter into force 20 days after publication in the Official Journal of the EU and will apply 12 months after entry into force, i.e. probably from the end of 2024.

Dr. Anne de Boer, partner and lawyer

Consultation on the Disclosure Regulation by the EU Commission

The European Commission has published a consultation document on the Disclosure Regulation (Regulation (EU) 2019/2088) on its website. The consultation period runs until December 15, 2023. The consultation will address the following four blocks of topics:

1. Current requirements of the Disclosure Regulation
2. Interaction with other sustainable finance legislation
3. Possible changes to disclosure requirements for financial market participants
4. Possible introduction of a categorization system for financial products.

Particularly against the background of the aforementioned topic blocks No. 3 and No. 4, it remains to be seen whether the Disclosure Regulation will undergo relevant changes in the short to medium term, which could, in particular, replace or supplement the categorization into so-called "Article 8" and "Article 9" products.

Sven Johannsen, Salaried Partner and Attorney at Law

First common understanding on greenwashing by the European Supervisory Authorities ESMA, EIOPA and EBA

What actually is greenwashing?

In first interim reports of May 2023, the three European supervisory authorities EIOPA (European Insurance and Occupational Pensions Authority ), ESMA (European Securities and Markets Authority) and EBA (European Banking Authority) have published a first common understanding and categorization of greenwashing case groups.

According to this, the supervisory authorities understand greenwashing as a practice in which sustainability-related statements, declarations, measures or communications do not present the underlying sustainability profile of a company, a financial product or a financial service in a transparent and appropriate manner - not clearly and fairly - and may be misleading for consumers, investors or other market participants.

The EU Commission had asked the three European Supervisory Authorities EIOPA, ESMA and EBA for input on greenwashing risks and the supervision of sustainable financial policies. This covers in particular

• Definition of greenwashing;
• Cases, incidents and complaints related to greenwashing;
• Oversight of greenwashing, including related challenges;
• The status of implementation of sustainable finance legislation;
• Gaps inconsistencies and problems in the current legal framework that could lead to greenwashing.

By May 31, 2024, the final reports of the supervisory authorities are to be published. These should then also provide concrete proposals for measures to prevent and prosecute greenwashing in the financial sector.

Dr. Anne de Boer, Partner and Attorney at Law

Sustainability issues in securities prospectuses

ESMA published guidelines on the disclosure of sustainability issues in securities prospectuses on July 11, 2023. These do not establish any further publication obligations, but are intended to enable the uniform presentation of sustainability topics in securities prospectuses in accordance with the current Prospectus Regulation (EU) 2017/1129). ESMA makes detailed specifications, including in which sections of a prospectus sustainability topics are to be elaborated, in particular for non-equity securities that explicitly have a sustainability aspect or pursue sustainability goals, i.e. in particular for bonds that are advertised with the fact that their issue proceeds are used for sustainable purposes (use of proceeds bonds), or whose conditions vary depending on whether the issuer achieves predefined sustainability goals or not (sustainability linked bonds).

For all securities prospectuses, information and specific risks must be included that are necessary and material for investors to make an informed judgment about the issuer and the investment. This naturally also applies to material environmental, social and corporate governance aspects. In this context, the significance of sustainability-related disclosures in the issuer's investor advertising is an important indicator of their materiality. In addition, issuers must map the basis for any sustainability claims relating to the issuer or security in the prospectus. For example, (i) by stating that the issuer or security meets a particular market standard or bears a seal of approval (while also including in the prospectus material information about the content and originator of that standard or seal), (ii) by referring to underlying data and assumptions, and/or (iii) by referring to third-party research or analysis. Risk disclosures may not be misused as disclaimers of non-compliance with sustainability requirements, compliance with which is influenced by the issuer itself.

Mandatory sustainability disclosures that an issuer is required to fulfill must be repeated in the prospectus, if applicable. This concerns, among other things, material disclosures under the current Non-Financial Reporting Directive and, in the future, the Corporate Sustainability Reporting Directive (CSRD).

Dr. Anne de Boer, Partner and Attorney at Law & Meike Dresler-Lenz, Senior Associate and Attorney at Law

Federal cabinet agrees on climate fund

The Climate and Transformation Fund (KTF) is to make a key contribution to achieving Germany's energy and climate policy goals. Accordingly, government funds totaling 211.8 billion euros will be made available from 2024 to 2027 to promote the energy turnaround, climate protection and transformation. Funding will be provided, among other things, through an increase in the CO2 price in national fuel emissions trading and through European emissions trading. Subsidies from the federal budget are not envisaged.

Dr. Tobias Woltering, Partner and Attorney at Law

Düsseldorf Higher Regional Court on advertising with the term "climate neutral"

Recently, courts have increasingly had to deal with the question of how the term "climate neutral" is to be interpreted when advertising products. There has not yet been any supreme court ruling on this matter by the Federal Court of Justice.

With the ruling of 06.07.2023 of the OLG Düsseldorf, there is again a new decision on the interpretation of the term "climate neutral". The OLG Düsseldorf has decided in two proceedings (Ref. I-20 U 72/22, I-20 U 152/22) that the advertising of products as "climate neutral" does not without further ado constitute a misleading of consumers.

In its reasoning, it argues that the average consumer does not understand the term "climate neutral" to mean that no CO2 was emitted in the manufacturing process. Rather, the average consumer understands the term "climate neutral" in the sense of a balanced CO2 balance, whereby he is aware that neutrality can be achieved both through avoidance and through compensation measures. This is true because the consumer is aware that goods and services are also advertised as being climate-neutral which - such as air travel - cannot be provided without emissions and for which climate neutrality is only possible through compensation payments. The OLG Düsseldorf thus shares the view of the OLG Frankfurt a.M., which interpreted the average consumer's understanding of the term "climate neutral" in the same way in its ruling of 10.11.2022 (Case No. 6 U 104/22).

According to the OLG Düsseldorf, it is irrelevant whether the term "climate neutral" refers to the specific product or the company as a whole.

However, the advertiser has a duty to provide information on how the climate neutrality of the advertised product is achieved. This constitutes essential information, since climate protection is an increasingly important topic for consumers, which also determines their everyday lives, and can thus significantly influence their purchasing decisions. In particular, due to the consumer's knowledge that climate neutrality can also be achieved through compensation payments, there is an interest in clarifying the basic circumstances of climate neutrality. The interest in clarification is satisfied if the information is available on an additional website.

The decision of the Düsseldorf Higher Regional Court was based on two proceedings in which the Wettbewerbszentrale filed a claim against a manufacturer of jams and a producer of fruit gums for an injunction against the advertising of their products as "climate-neutral".

In the case of the jam manufacturer, the court of first instance, LG Mönchengladbach (judgment of February 25, 2022, Case No. 8 O 17/21), affirmed the misleading nature of the claim within the meaning of Section 5 (1) of the German Unfair Competition Act (UWG) on the grounds that a reasonably attentive consumer would not understand the term "climate-neutral" to mean that climate neutrality was achieved through compensation measures. The Düsseldorf Higher Regional Court also considered the advertising to be unfair, but justified this on the grounds that there was no indication either on the product packaging or in a food magazine as to how the advertised climate neutrality was achieved.

In the second case, the OLG also confirmed the first-instance ruling. However, in this case the fruit gum manufacturer had sufficiently provided the necessary information in that a website containing the required information could be accessed via a QR code in its advertisement in the food magazine.

In the view of the OLG Düsseldorf, this was sufficient, as there was no space in a newspaper advertisement to provide more detailed information on the type and scope of any compensation measures beyond the mere information of "climate neutrality". The Düsseldorf Higher Regional Court therefore dismissed the action brought by the Wettbewerbszentrale against the fruit gum manufacturer.

The appeal was allowed due to the fundamental importance of the issues in dispute. It remains to be seen whether an appeal will be lodged and whether the BGH will rule on the interpretation of the term "climate-neutral".

Astrid Luedtke and Antje Münch, LL.M., both Salaried Partners and Attorneys at Law

BaFin publishes Sustainable Finance Strategy

On 5 July 2023, the German Federal Financial Supervisory Authority ("BaFin") published its Sustainable Finance Strategy and defined the focus of its supervisory activities in this regard.

In doing so, BaFin intends to focus on risk-oriented and practicable regulation, more reliable data on financial climate risks and appropriate management of environment-related risks. Furthermore, the fight against so-called "greenwashing" as well as the generation and sharing of knowledge in an open dialogue are in its focus.

BaFin understands greenwashing to mean in particular the case that the sustainability profile of a financial product is not clearly and honestly disclosed. Furthermore, BaFin also understands greenwashing as cases in which supervised companies underestimate the extent of transition and physical risks or do not transparently present the handling of these risks in their risk management.

In product and market supervision, BaFin examines compliance with transparency and disclosure obligations regarding ESG impact (especially the Disclosure Regulation and Articles 5 to 7 of the Taxonomy Regulation) with regard to greenwashing. With regard to conduct of business supervision, BaFin looks in particular at the implementation of the distribution requirements according to the Delegated Regulations on the Insurance Distribution Directive (IDD) and MiFiD II. BaFin's balance sheet control will monitor compliance with the CSRD transparency requirements. BaFin addresses the appropriate management of transition and physical risks and the related transparent disclosure within the scope of solvency supervision.

BaFin's complete Sustainable Finance Strategy can be found at www.bafin.de/DE/DieBaFin/Sustainable_Finance_Strategie/SF_Strategie_node.html.

Sven Johannsen, Salaried Partner and Lawyer

Final consultation on the first set of standards for the CSRD Sustainability Report

The Corporate Sustainability Reporting Directive ("CSRD") must be transposed into national law by EU member states by July 6, 2024. Through it, a growing group of companies will gradually be required to produce a sustainability report that follows certain uniform EU-wide standards.

In November 2022, a first set of these European Sustainability Reporting Standards ("ESRS") was submitted in draft form to the European Commission, which is to convert it into a delegated act in a timely manner. This ESRS set 1 consists of two overarching standards and ten topic-specific standards from the areas of environment, social affairs and governance. The overarching standard ESRS 1 explains the overall structure of the ESRS and defines the general requirements for the identification, measurement and presentation of sustainability information as well as the structure of the sustainability report. ESRS 2 governs the general, topic- and industry-independent duties to disclose material sustainability aspects, including in the context of governance structure, strategy and business model.

On June 9, 2023, the European Commission has now published the draft delegated regulation on ESRS Set 1. This includes an annex with a revised version of ESRS Set 1. The German Accounting Standards Committee e.V. ("GASC") published a comparative version to the November 2022 version on June 21, 2023. The public has the last opportunity to comment on ESRS Set 1 within a sporting deadline of July 7, 2023.

In particular, the following changes are intended to relieve reporting entities and ensure the proportionality of the ESRS:

• All topic-specific disclosure requirements of the ESRS only have to be fulfilled if the company classifies their subject matter as material, whereby the basic principle of dual materiality continues to apply. Only the "General Disclosures" of ESRS 2 continue to be mandatory at all times. Previously, significantly more disclosures were mandatory regardless of materiality.
• The options for postponing the fulfillment of certain reporting requirements by means of a "phasing in" have been extended. So has the flexibility in the presentation of some mandatory data points.
• The Commission has converted certain disclosures that were mandatory under the previous draft into voluntary disclosures.

The bottom line is that reporting companies must assume more personal responsibility in the design of their sustainability report. The materiality analysis takes on even greater importance than it already had. Although the reports are likely to become significantly shorter as a result of the new regulations, the internal effort required of companies to prepare them will not necessarily decrease to the same extent. After all, various data may already have to be collected in order to assess materiality.

Meike Dresler-Lenz, Senior Associate and Attorney at Law

New Commission Package of Measures on the Sustainable Finance Framework

On June 13, 2023, the European Commission presented a new comprehensive package of measures on the Sustainable Finance Framework to further promote private financing of sustainable transition projects and technologies.

In particular, the package includes the adoption of the proposals consulted in April 2023 on the Delegated Regulation on the EU Environmental Taxonomy with a total of seven annexes. This complements the Delegated Regulation (EU) 2021/2139 of June 4, 2021 (so-called Delegated Climate Change Regulation on the Taxonomy) and its technical assessment criteria on the so-called climate objectives (1) climate change mitigation and (2) climate change adaptation. Thus, the technical assessment criteria for the previously missing sustainability goals (so-called non-climate environmental goals):

•     the use and protection of water and marine resources (3),
•     the transition to a circular economy (4),
•     pollution prevention and control (5),
•     protection and restoration of biological and ecosystems (6).

set up. Furthermore, the package includes, among other things:

•     A proposal for an EU regulation to improve the reliability and transparency of ESG ratings,
•     an amendment to the Delegated Regulation on the Climate Change Taxonomy, which establishes assessment criteria for economic activities not previously covered.

Julia Cramer, Attorney at Law and Salaried Partner

Climate protection contracts - the preparatory procedure has started!

On June 6, 2023, the Federal Ministry of Economics and Climate Protection (BMWK) officially launched the preparatory procedure for the funding program "Climate Protection Contracts". Climate protection contracts are a new type of funding tool that is intended to pave the way towards climate neutrality in energy-intensive industries as part of the "Guideline for the promotion of climate-neutral production processes in industry through climate protection contracts (FRL KSV)". Funding sums in the mid double-digit billions are envisaged for the program and are to be distributed to bidders in a complex bidding process. Companies wishing to submit a bid must participate in the preparatory procedure.

Read more about this in our current Update Energy (in german language).

Susanne Christine Monsig, Partner and Attorney at Law, and Dr. Tobias Woltering, Partner and Attorney at Law

Levy obligation for single-use plastic products

On May 16, 2023, the Single-Use Plastics Fund Act (EWKFondsG) came into force. This will introduce a levy obligation for certain single-use plastic products, for example in the area of food packaging, as of January 1, 2024. The obligation primarily affects companies that are making products available on the German market for the first time.

The relevant levy rates are to be set by statutory order by the end of 2023. Stakeholders expect significant shifts in the profitability of certain forms of packaging. A fund is to be set up from the levies, which is intended in particular to compensate for collection and cleaning costs incurred by public waste management authorities.

The legislation serves to implement the Single-Use Plastics Directive (EU) 2019/904, as did the Single-Use Plastics Labeling Ordinance and the Single-Use Plastics Ban Ordinance previously. The overall aim is to reduce the impact of certain plastic products on the environment by reducing their volume and preventing them from entering the environment. In this way, the law and directive also aim to protect the oceans in particular. The current new legislation is thus closely linked to ongoing regulatory efforts at international level, such as the UN Conference on the Reduction of Plastic Pollution in Paris.

Draft legislation: Those who rely on single-use packaging should pay - an interview with Michael Below

Michael Below, Salaried Partner and Attorney at Law

EU Council takes action against global deforestation

As expected, the Council of the European Union today (Tuesday, May 16, 2023) adopted a regulation to combat deforestation and forest degradation, establishing new raw material and product-related due diligence obligations for companies.

The background to the measure is the continuing global destruction of forests. Between 1990 and 2020, an estimated 420 million hectares of forest were lost worldwide. European lawmakers want to do more to counteract this in the future.

Unlike the German Supply Chain Sourcing Obligations Act or the draft CS3D, the regulation is not primarily linked to companies of a specific size (or, like the CS3D, to specific sales figures), but opts for a "product-based" approach that applies in principle regardless of company size.

Specifically, the new regulation prohibits the placing on the Union market and provision of certain raw materials (cattle, cocoa, coffee, oil palm, rubber, soy and timber) and related products, as well as their export from the Union market, unless they have been produced without deforestation and in accordance with the relevant legislation of the producing country. In addition, market participants and traders will be required to submit a due diligence declaration in advance and to comply with certain due diligence requirements.

Violations of this can lead not only to corrective measures (such as product recalls), but also to sanctions (such as turnover-based fines, temporary bans on activities, etc.).

The regulation will now be published in the Official Journal of the EU and will then enter into force 20 days after publication. For companies, however, the regulations will only have to be implemented after a transition period of 18 months (or 24 months for certain micro and small enterprises).

Dr. Christoph Schork, LL.M. and Dr. Thomas Sikorski explain more about this regulation and other European measures in the area of corporate due diligence in their ESG Briefing webinar "New ESG requirements for purchasing in Europe - What's in store for companies?".

Dr. Thomas Sikorski, Salaried Partner and Attorney at Law

New EU Directive Proposal on Green Marketing

At the end of March, the EU Commission presented the draft Green Claims Directive. It contains special regulations and concrete specifications for the substantiation, communication and verification of explicitly environment-related claims made by traders to consumers for goods and services.

According to the Commission's intention, statements such as "30% plastic packaging", "bee-friendly juice", "climate-neutral shipping", "30% recycled plastic packaging" or "ocean-friendly sunscreen" will in future be subject to the requirements set out in the Green Claims Directive.

Companies will then have to comply with certain minimum standards relating both to how such claims are to be substantiated and to how they are communicated.

Read more about this in our latest update (currently only in german language)

Astrid Luedtke, Salaried Partner and Attorney at Law

Effective immediately: Sustainability preference query by independent intermediaries

The ordinance amending the Trade Notification Ordinance and the Financial Investment Intermediaries Ordinance came into force today - yesterday it was published in the Federal Law Gazette. This means that the obligation to make sustainability preference inquiries must be observed with immediate effect. There is no transition period. This closes a gap that previously applied in financial sales to financial investment intermediaries under Section 34f GewO and fee-based financial investment advisors under Section 34h GewO.

Background

As of August 2, 2022, regulated financial product distributors are required by the European regulation on MiFID II (Delegated Regulation on MiFID II, DelVO2017/565) to ask clients about their sustainability preferences before selling financial investment products (for more information: Sustainability preferences in investment advice (heuking.de)).

This obligation previously applied only to strictly regulated entities under the KAGB, the KWG or the WpIG (e.g. asset managers and liability umbrella intermediaries). Intermediaries under § 34f GewO and § 34h GewO were not previously subject to this regulation. For them, only the national regulations of the Financial Investment Brokerage Ordinance (FinVermV) apply, and this in turn did not refer to the corresponding European regulation on MiFID II.

Ordinance amending the Trade Notification Ordinance and the Financial Investment Intermediaries Ordinance

The Ordinance Amending the Trade Notification Ordinance and the Financial Investment Intermediaries Ordinance closes this gap. Now, financial investment intermediaries and fee-based financial investment advisors are also subject to the obligation to request information about clients' sustainability preferences as part of their investment advice.

Julia Cramer, Attorney at Law and Salaried Partner

EU Commission publishes new Q&As on the Disclosure Regulation (Regulation (EU) 2019/2088)

Regarding the Disclosure Regulation, the EU Commission has published new interpretative guidance in the form of Q&As in April 2023. With regard to the Disclosure Regulation, which must be observed by financial market participants, among others, as of March 10, 2021, there are still various questions of interpretation. In the current Q&As, the EU Commission has now clarified in particular that the Disclosure Regulation does not set any minimum requirements in Article 2 (17) with regard to "sustainable investment". Rather, financial market participants must make their own corresponding assessment for each investment and disclose the underlying assumptions (Q&A 2).

Sven Johannsen, Salaried Partner and Attorney at Law

New requirements in the area of ecodesign

On April 17, 2023, the European Commission issued a regulation setting new ecodesign requirements for the energy consumption of electrical and electronic household and office equipment in off-mode, standby mode and networked standby mode. This replaces existing regulations dating back to 2008. The new requirements will largely take effect after a transition period beginning May 09, 2025 (with some limits being updated incrementally).

Dr. Thomas Sikorski, Salaried Partner and Attorney at Law

Obligation to record working hours - first draft law of the German government is available

Since the rulings of the ECJ (so-called "time clock ruling" of May 14, 2019, C-55/18) and the subsequent landmark decision of the BAG in 2022 (decision of September 13, 2022, 1 ABR 22/21), it is clear that health protection requires employers in Germany to ensure that the daily working hours (start, end, duration) of their employees are documented. How this is to be done in detail, e.g. whether electronic recording is generally required or whether the recording can also be done manually by the employees themselves, has not yet been clarified. The question of whether and to what extent exceptions apply or can be agreed for certain groups of employees has also been left open by the court decisions to date. There is an urgent need for clear legal regulations in this area.

Now, according to reports, an initial government draft for a law on the recording of working hours is available and must now be analyzed. According to this draft, the recording of working hours is apparently to be carried out electronically on a daily basis "across the board" in the future, although it is not specified whether the recording is to be carried out automatically or personally (or, for example, by superiors). Exceptions for certain employees, such as the recording of times in paper form or a slightly delayed recording (within a week), should (only) be able to be agreed on the basis of collective agreements.

Read more about this in a recent update on labor law (only in german language).

Christoph Hexel, partner and attorney, specialist in labor law

Preliminary agreement for EU Green Bond Standard - EUGBS

EU Council and Parliament negotiators have agreed on a proposal for EU Green Bond Standards (EUGBS), according to a February 28, 2023 press release. This agreement still needs to be adopted by the bodies; the details are expected to be published soon. The EU's goal is to create a gold standard for green bonds with the EU Green Bond Standard. Through an established set of rules, greenwashing in particular is to be avoided and the EU is to be established as a leading market for sustainable financing.

In principle, all proceeds must be used in conformity with the EU taxonomy. For areas not yet covered by the EU taxonomy and for certain very specific activities, there will be a flexibility framework of 15%.

In addition, there will be strict disclosure and external valuation obligations. This will be combined with a registration system and a supervisory framework for such external valuers.

The national competent authorities of the respective home member state are to monitor that issuers comply with their obligations under the EU GBS, according to the press release.

The release is also understood to state that the EU Green Bond Standards will be voluntary and not mandatory as has been discussed in some quarters. Established guidelines such as ICMA can thus also continue to be used. This is particularly important as long as there are still a number of open questions and issues in the application of the EU taxonomy.

Dr. Anne de Boer, Partner and Attorney at Law

Tightening of CO2 emission standards for new heavy-duty vehicles

With a new proposed regulation dated Feb. 14, 2023, the EU Commission intends to revise existing regulations and, in particular, set more ambitious emission reduction targets for heavy-duty vehicles and new reporting requirements.

EU Commission unveils new Green Deal industrial plan

On February 1, 2023, the European Commission unveiled its new Industrial Plan for the Green Deal. With it, the Commission intends to make European industry more competitive in the global "cleantech race" and to accelerate the transformation to climate neutrality initiated by the Green Deal. The strategy is based on four pillars:

    Planning certainty and a simplified regulatory environment (various legislative initiatives will be proposed for this purpose, in particular on a CO2-neutral industry, critical raw materials and a reformed electricity market design),
    Acceleration of access to funding (in particular, the granting of subsidies is to be accelerated and simplified, and a European Sovereignty Fund is to be proposed as early as summer 2023),
    Skills development (such as through academies with continuing education and retraining programs for a carbon-neutral industry), and
    Open and fair trade for resilient supply chains (in particular, through the expansion of free trade agreements and increased international cooperation for CO2-neutral technologies, and by protecting the internal market from unfair trade in clean technologies).

The extent to which the individual projects in the plan will actually be implemented remains to be seen. The Czech government, for example, has already clearly spoken out against the announced European Sovereignty Fund at the beginning of March 2023.

Dr. Thomas Lukas Sikorski, Salaried Partner and Attorney at Law