ESG Regulations: Global Update January 2024
As ESG regulations rapidly develop, FTI Consulting is providing a quick summary of need to know updates across the globe.
Product Labelling
Consequences of Non-Compliance
Climate Change Disclosures
As ESG regulations rapidly develop, FTI Consulting is providing a quick summary of need-to-know updates from around the globe. This month we cover updates to climate disclosure regulations in the U.S. and the UAE, as well as covering sustainability disclosures in the UK. Read more on our ESG regulations page.
1. Anti-Greenwashing law approved by EU Parliament
What do I need to know?
- The EU Parliament voted to pass a law to outlaw greenwashing practices in product labelling, banning generic and misleading environmental claims and only allowing the use of approved sustainability labels.
- The legislation focuses on fighting greenwashing and ‘throw-away culture’ by clarifying claims of eco-friendly practices and highlighting the actual durability of goods in marketing and advertising.
What’s next:
- The EU Council must grant final approval.
- Once approved by the EU Council and published in the Official Journal, EU member states have a 2-year period to incorporate the legislation into their own national law.
2. Provisional deal on corporate sustainability due diligence directive (CSDDD)
What do I need to know?
- The EU Parliament and Council struck a provisional deal on the CSDDD, which would create obligations for large companies on actual and potential adverse impacts on human rights and the environment by direct, subsidiary and business partner operations.
- Companies with over 500 employees and a net global turnover above €150 million will be mandated to create business models and strategies consistent with the Paris agreement on climate change or face penalties.
What’s next?
- Financial services will temporarily be outside of the scope of the directive, but a review clause will be included for review following an impact assessment.
- European Parliament and the Council need to endorse and formally adopt the provisional agreement.
Proposal for ESG ratings providers to be regulated under European Securities and Markets Authority (ESMA)
What do I need to know?
- The EU Council came to an agreement on a proposal to regulate ESG ratings to increase transparency and confidence for investors.
- The legislation proposes that ESG rating providers be approved and overseen by ESMA, which would have requirements to increase transparency around methodology, information sourcing, and conflicts of interest.
What’s next?
- Interinstitutional negotiations are expected to start in January 2024.
3. French Transposition of the EU Corporate Sustainability Reporting Directive (CSRD)
What do I need to know?
- France is the first member state to apply the EU’s CSRD to its national law, and it has included possible penalties of imprisonment and fines for non-compliant corporate directors.
- If corporate directors do not provide necessary information or impede external auditors in their CSRD reports, they could face up to five years of jail time and fines of up to €75,000.
- If corporate directors do not audit their CSRD report with a certified external auditor, the consequence could be two years in jail and fines of up to €30,000.
What’s next?
- All EU member states will be required to transpose the CSRD into national law by July 6, 2024. Each member state can determine their own individual penalties for infringements.
4. Climate-related financial disclosure: Exposure draft legislation open for consultation
What do I need to know?
- The Treasury of Australia is looking to introduce mandatory requirements for large businesses and financial institutions to disclose climate-related risks and opportunities by updating sections of the Australian Securities and Investment Commission Act 2001 and the Corporations Act 2001.
- After two rounds of consultation, the draft legislation has been released and is open for consultation until 9 February 2024.
- In parallel, the Australian Accounting Standards Board (AASB) published sustainability reporting standards which the draft legislation will give effect to, once passed. The ASSB standards have been developed based on the ISSB’s two sustainability disclosure standards (IFRS S1 and S2). The current ASSB standards adapt the ISSB standards, largely limiting the scope to climate-related financial disclosures, although there may be plans to expand the standards to sustainability matters beyond climate change in the future.
What’s next?
- Interested parties can submit responses to consultation until February 9, 2024.
- Once the period of consultation ends, the law will need to be passed by Parliament before coming into effect.
- If enacted, all impacted companies would be required to integrate a sustainability report into their annual reports complying with Australian Sustainability Reporting Standards (ASRS). Currently, the first tier of large companies in the phased implementation will need to report on financial years beginning in July 2024 or later.
Contact us: For further information on how your business can better navigate emerging ESG regulations, please contact Ben Herskowitz, Senior Managing Director, U.S. at [email protected]
The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.
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