ESG Weekly Update – September 7, 2022 – Environmental Law

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US: EPA proposes to designate two “eternal chemicals” as hazardous substances under CERCLA

The United States Environmental Protection Agency (“EPA”) has proposed to designate two per- and polyfluoroalkyl (“PFAS”) substances as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act. The proposed rule is based on evidence that perfluorooctanoic acid (“PFOA”) and perfluorooctane sulfonic acid (“PFOSA”) pose a substantial hazard to human well-being and the environment.

Studies show that these PFAS can remain in the human body for years, potentially leading to cancer and developmental effects, as well as damage to the reproductive, cardiovascular, and immunological systems. If finalized, this proposal would require reporting of PFOA and PFOSA releases to the EPA, thereby providing the EPA with improved data on these substances and enabling it to promote better waste management. In addition, EPA may, under certain circumstances, require cleanup of such releases and use its enforcement discretion to seek recovery of related costs from responsible parties.

Commenting on the proposal, EPA Administrator Michael S. Regan noted that “[c]Communities have suffered too long from exposure to these chemicals forever” and that this decision “will improve transparency and advance the EPA’s aggressive efforts to address this pollution. The EPA will soon post a Notice of Proposed Rulemaking in the Federal Register, after which comments will be accepted for 60 days.

EPA press release

United States: California Passes Climate Package

On August 31, 2022, the State of California passed legislation and released a number of new climate policies, codifying a goal of net zero emissions and approving record climate spending of $54 billion. The three key developments are:

  • California climate crisis law passed – which, among other things, provides for:
    • achieve net zero greenhouse gas (“GHG”) emissions in California as soon as possible, but no later than 2045, and achieve and maintain net negative GHG emissions thereafter; and

    • reduce anthropogenic GHG emissions to at least 85% below 1990 levels by 2045.

  • Establishing the Carbon Capture, Removal, Utilization and Storage Program – which obliges the State to set up a program for:
    • assess the effectiveness, safety and viability of carbon capture, utilization and storage technologies and carbon dioxide removal technologies, and facilitate the capture and sequestration of carbon dioxide from such technologies, if applicable;

    • develop monitoring and reporting schedules to state regulators for such projects to ensure their effectiveness, safety and viability; and

    • ensure that all these projects meet certain standards.

  • Establishment of community protections against oil and gas wells – which, among other things:
    • introduce new compliance standards for oil or gas production and wells in certain protected areas from January 1, 2025;

    • require all operators with a production facility or well in protected areas to develop a leak detection and response plan no later than January 1, 2025 and to fully implement implement this plan by January 1, 2027; and

    • require operators with a production facility or well in protected areas to report publicly on certain parameters (including failures of emission detection systems and leaks) on an annual basis from 1 January 2027.

All but one of California Governor Gavin Newsom’s climate proposals have passed. In addition to California’s Climate Crisis Act, a separate bill to strengthen the state’s 2030 GHG emissions target was narrowly defeated.

Environmental Defense Fund

UK: Investor group calls on government to introduce mandatory human rights and environmental due diligence legislation

Thirty-nine institutional investors, including Abrdn, Brunel Pension Partnership, Legal and General Investment Management and Storebrand Asset Management, issued a statement to the UK government in support of a Business, Human Rights and environment that would require all companies to carry out environmental rights and due diligence actions in its supply chain. This statement was coordinated by the Corporate Justice Coalition.

Specifically, the statement sets out the following recommendations:

  • Due diligence process: In line with the recommendations of the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, companies should have an obligation to identify, prevent, mitigate and report on how they address their potential and actual impacts on human rights and the environment through an ongoing due diligence process. Through this due diligence process, companies should meaningfully engage with actual and potential affected stakeholders or their designated representatives. The form of this commitment is not specified in the declaration.

  • Scope: Mandatory due diligence should be cross-sector and apply to all public and private companies and financial institutions domiciled or operating in the UK. To this end, the due diligence framework should ensure the proportionality of its application; although the responsibility to respect human rights and the environment applies to all companies, the means by which a company meets this standard will vary depending on its size and the severity of its impacts, among other factors .

  • Remedies and Liability: Companies should plan, cooperate or use leverage to ensure the remediation of negative impacts in their global value chains and within their operations. In addition, companies should be held liable for harm, loss and damage resulting from their failure to prevent adverse human rights and environmental impacts within their operations and throughout their global value chain. and be required to adequately compensate victims of abuse. The forum for this accountability mechanism is not defined in the statement.

  • Governance : Company boards should oversee and report on the implementation of rigorous human rights and environmental due diligence processes; monitor, discuss and report on their development; and ensure that their results are reflected in relevant forward-looking objectives for the prevention and mitigation of risks and impacts on human rights and the environment and are duly taken into account and integrated into the overall strategy of the company.

The proposed mandatory Human Rights and Environmental Due Diligence Act is not new. In October 2021, companies such as Microsoft, Nestlé, Unilever and others signed a statement calling for such a law. In February 2022, the European Commission adopted a proposal for a Corporate Sustainability Due Diligence Directive which would impose similar due diligence requirements, although this proposal has not yet been presented to the European Parliament and Council. (see our note on the directive proposal here).


Global: Key financial market players call for better alignment of regulatory and standard-setting efforts around sustainability disclosure

On August 30, 2022, a joint statement was released by the World Business Council for Sustainable Development, the Principles for Responsible Investment and the International Federation of Accountants. The group called for major standardization efforts to more closely align and support a global baseline for reporting sustainability-related information. The statement was signed by 65 investors, companies and professional accounting firms, including Deloitte, Ernst & Young, PwC, KPMG, Nestlé, Shell and Hewlett Packard Enterprise.

The statement acknowledges recent efforts by the International Sustainability Standards Board (“ISSB”), the United States Securities and Exchange Commission and the European Commission, as well as the European Financial Reporting Group, to address sustainability reporting. durability, but note that the issue of compatibility persisted.

To address inconsistencies between different sustainability reporting standards, the statement offers a coordinated approach that includes a global foundation of sustainability disclosures for capital markets and a consistent corporate reporting system across world. This requires aligning key concepts, terminologies and parameters on which disclosure requirements are based.

The statement calls on policy makers to engage with the ISSB working group to ensure alignment at the global level.


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