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The European Green Deal and the circular economy

The European Green Deal, adopted in 2020, is a set of policy initiatives with the aim of making the European Union climate neutral by 2050.

To this end, the Commission is working on a plan to increase the EU’s greenhouse gas emission reduction target for 2030 to at least 50% and towards 55% compared to 1990 levels.

The European Green Deal (Pacto Verde Europeo)includes a number of key objectives such as:

  • Achieve climate neutrality by 2050.
  • Promote the circular economy.
  • Promote sustainable mobility.
  • Promote the use of renewable energies.
  • Preserve and restore biodiversity.
  • Social justice.

Within the European Green Deal, specific action plans are being put in place to contribute to the achievement of these goals, and companies in the industry will have an obligation to upgrade and be part of the sustainable transformation and be prepared for the changes ahead.

The Digital Product Passport (DPP)

In March 2022, the European Commission proposed a package of measures in the framework of the European Green Pact and the Circular Economy Action Plan. The legislative package aims to make the majority of EU goods more sustainable. Part of the proposed Ecodesign Sustainable Product Regulation, or ESPR, is the introduction of a ‘digital product passport’ (DPP). This is an interactive digital profile that collects detailed information about a product and its supply chain. The objective of the DPP is to improve transparency, material traceability, data exchange and sustainability throughout the entire life cycle of products.

Digital passports are designed to document the environmental impact and sustainability credentials of a product from inception to end-of-life and communicate this information to stakeholders, including the consumer, so that they can make informed purchasing decisions.

The Corporate Sustainability Reporting Directive (CSRD)

The CSRD or Corporate Sustainability Reporting Directive is the new EU-wide regulation that will govern sustainability reporting by EU companies from 2024 onwards.

This directive changes the traditional name for this reporting exercise from ‘non-financial information’ to ‘sustainability information’ and puts it on a par with financial reporting. In addition, the CSRD multiplies its scope, as it is estimated that it will affect some 50,000 companies, compared to the 12,000 companies that were involved under the old CSRD.

Another of its key points is the double materiality it imposes, financial and impact, which Spanish companies are already working on.

The CSDR will apply to companies according to this timetable:

  • Financial year 2024. Companies affected by the previous regulation, large listed companies, financial institutions and insurances, with more than 500 employees.
  • Financial year 2025. Other big companies (other listed and unlisted).
  • Financial year 2026. Listed SMEs (less than 250 employees)
  • Financial year 2028. Companies outside the European Union, with specific requirements

Companies outside the European Union, with specific requirements In the same direction, it provides key information to inform the technical criteria established by the European Sustainable Investment Taxonomy, which seeks to direct investment towards economic activities aligned with the objectives of the Green Deal.

The aim of Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 (CSRD) is to improving sustainability information at the lowest possible costwith the aim of making the most of the potential of the European single market to contribute to the transition towards a fully sustainable and inclusive economic and financial system, in line with the European Green Pact and the UN Sustainable Development Goals.

Conclusion

Today, transparency of companies is essential to determine their economic impact, prevent and mitigate it.

Hoy en día la transparencia de las empresas es fundamental para determinar su impacto económico, prevenirlo y mitigarlo. In this respect, environmental certifications will play a key role and will be a very useful tool for companies to align themselves with the sustainable objectives set by the European Union and to make progress in regulatory compliance.