A veritable wave of new directives is making climate-related disclosures mandatory for a large part of the global economy. This requires a transparent inventory of greenhouse gas (GHG) emissions, an analysis of climate risks and disclosure of the measures taken. We tell you what the development means for companies in the packaging industry, take a look at the rules for you and provide a global overview. A little spoiler in advance: the topic of climate reporting should be on every company’s agenda in 2025.
The initial situation
On 26 September 2024, the European Commission initiated infringement proceedings against Germany for failing to transpose the Corporate Sustainability Reporting Directive (CSRD) into national law on time. But regardless of whether you are required to report under the CSRD or not, there is a series of mandatory homework that every company should have done. If not, then this should be on the to-do list for 2025:
- climate data such as a Company Carbon Footprint (CCF) and Product Carbon Footprints (PCF) for the main products
- climate targets and a plan to reduce emissions
- consideration of climate risks for the company and its supply chain
We already gave you 10 tips for dealing with the CSRD in May 2024. We will inform you about the possible postponements of the reporting obligation and sector-specific changes in the last article of this newsletter. Information on the definition of the CCF and examples of Scope 1, 2 and 3 emissions can be found here: GHG Protocol Standards and Guidance.
Background
The landscape of climate-related disclosure by companies is changing rapidly. It includes reporting on greenhouse gas (GHG) emissions, climate risks and actions taken.
A few years ago, companies could still decide for themselves whether and how to disclose information on climate-related risks and GHG emissions. Some took action, mostly because of pressure from consumers and/or customers.
Now, a wave of new guidelines is making climate-related disclosures mandatory for a large part of the global economy. Financial regulators have introduced mandatory climate-related disclosure rules in markets around the world – not only in the United States and the European Union, but also in New Zealand, China, Singapore, Hong Kong, Nigeria, the United Kingdom and elsewhere. Of the jurisdictions where climate-related information disclosure requirements have been introduced, eleven have been enshrined in law by 2024.
Overview of the global occurrence of climate-related disclosure obligations:
Source: https://www.iatp.org/corporate-climate-disclosure-rules-global-overview
The trend is obvious. Over the past three years, we have seen the impact of stricter disclosure requirements in the EU, California and other jurisdictions that are in line with the International Sustainability Standards Board (ISSB). They are also encouraging regulators in other countries to adopt stricter regulations; for example, draft legislation is being discussed in Malaysia and Indonesia.
The consequences
The global scope of the new climate-related disclosure rules may mean that public and private multinational companies will soon have to fulfil stricter disclosure requirements in more areas.
The new regulations will apply to many of the world’s largest food and agribusiness companies. Many of these companies operate in multiple countries, have a significant carbon footprint and have reported misleadingly in their voluntary reporting in the past.
At the same time, a larger number of smaller companies will also be obligated to disclose for the first time. You don’t need a crystal ball to make this prediction, as some disclosure requirements are aimed at including small and medium-sized enterprises (SMEs) over longer periods of time.
The details of the new disclosure requirements vary, but one thing seems clear: the first phase of the era of mandatory global reporting on sustainability issues has begun.
What does this mean for companies in the packaging industry?
Companies in the packaging industry will not be able to escape this development. Three consequences stand out.
- Emissions reporting becomes unavoidable
As mandatory climate-related disclosure requirements become binding in more and more jurisdictions, emissions reporting will soon be unavoidable for many larger companies. According to an article published in May 2024 by the World Resources Institute (WRI), 40% of the global economy will soon be affected by climate-related disclosure requirements. This figure is likely to be even higher when all jurisdictions are taken into account. (Currently, the WRI calculation includes the following countries: Brazil, Hong Kong, Canada, New Zealand, Singapore, UK and the US, as well as the EU. This leaves out Australia, China, Nigeria, Switzerland, Turkey and other jurisdictions).
- Reports for several jurisdictions
Given the global scope of climate-related disclosure requirements, many large companies will soon have to report in multiple jurisdictions.
- Commitment by customers
Even if the threshold for CSRD reporting is not reached by the company itself, constraints arise as part of the supply chain. This is because more and more companies required to report will demand specific emissions figures from their partners and suppliers.
Conclusion
If your company has already completed all three of the tasks mentioned in the introduction, then sit back, relax and have a coffee – you are now well equipped to meet both legal and customer requirements. If that is not the case, then give us a call.
Epilogue: Climate saved?
Even the most stringent disclosure requirements analysed in this article do not prescribe emission reductions that would be necessary to achieve climate targets. The new rules are merely the first step in informing investors and the public about companies’ climate-related risks. Only time will tell whether mandatory climate-related disclosure requirements will encourage meaningful climate action by companies.
