Dr Dorothy Maxwell FICRS Head of Sustainability and ESG Advisory
26th May, 2022
Davy Horizons’ Senior Sustainability Director Dr Dorothy Maxwell was guest speaker at the Smurfit Kappa Better Planet Packaging event explaining the Opportunity the EU Green Deal presents for business large and small.
The EU Green Deal is the umbrella framework driving the sustainable market transformation across EU economies and society. It covers major environmental and social priorities – including shifts to becoming a climate neutral continent, preserving our natural capital, transitioning to a circular economy, driving the innovation and financing required, and all with a just transition giving the scale of the changes. This impacts all businesses large, small, public and private. The pressure is on to be part of the solution, not the problem as the EU transitions to a low/zero carbon future. The “need to know” facts for business include:
Climate change - The Green Deal provides the framework for achieving “Net-zero Greenhouse gas (GHG) emissions by 2050”. Within the Green Deal, the EU’s ”Fit for 55” programme focuses on a 55% GHG reduction by 2030 as the near term target.
Business Action on Climate - The Green Deal and Fit for 55 impacts all sectors from agriculture/food, forestry, transport, built environment, Fast Moving Consumer Goods (FMCG) and wider. The pressure is on business to measure GHG emissions across Scope 1, 2 and 3, set targets aligned to the best practice Science Based Targets initiative with a credible plan to achieve these.
Carbon Pricing - Increased Carbon pricing and market instruments to incentivize are part of the framework. For example, EU carbon pricing has the potential to go from the current circa €70/tonne to over €100 per tonne by 2030 which will incentivise more efficient use of energy and make low and zero carbon solutions more profitable.
Supply Chains and Procurement - Whether you own a business or are a small supplier into one, there is growing pressure from suppliers in procurement and tenders to decarbonize. Human Rights, Modern Slavery and Equality also are under the spotlight. The incoming Corporate Sustainability Due Diligence Directive will make this a legal obligation for business with supply chain traceability a requirement.
Natural Capital - Keeping carbon in the soil and forests is a key Green Deal strategy in the fight against climate change and preventing biodiversity loss. This brings nature positive benefits to maintain the natural capital assets business and society depend on. This is key for land using sectors like food, commodity-based products and the bioeconomy.
Circular Economy - The Green Deal’s “Circular Economy Action Plan” focuses on the shift to a circular economy to reduce resource use, waste and problematic materials like Single Use Plastics. By 2030, this shift is expected to save EU businesses €600 billion /annum (8% of their annual turnover), create 580,000 new jobs and save 450 million fewer tonnes of carbon emissions (EU Green Deal Strategy). For Fast Moving Consumer Goods sectors new circular business models like rental, reuse and the “Right to Repair” enshrined in law are bringing disruption, risk and opportunity. Digital product “passports” in supply chains are a gamechanger to support traceability and avoid greenwash.
Sustainable Finance and Non-Financial Disclosure - The Green Deal’s “Sustainable Finance Action Plan” defines the legal requirements for reorienting capital flows towards a more sustainable economy. The Sustainable Finance Disclosure Regulation (SFDR) defines the ESG requirements investors must meet to distribute sustainable financial products. This translates into the Non- Financial disclosures investors require from corporations under the new Corporate Sustainability Reporting Directive (CSRD). This impacts both PLCs and large private corporations from 2023, as well as SMEs in about three years.
Access to capital - The SFDR is driving capital allocation to high ESG performers. The Net Zero Target is now the cornerstone of both the business and global Asset Management (AM) low carbon pathway. As an example, circa $57 trillion of Assets Under Management globally from 220 AMs are committed under the Net Zero AMs initiative to aligning their investment to net zero emissions by 2050 or sooner.
Governance - On a cross cutting basis across all Green Deal thematics is the need for strong governance – with legal requirements on what ESG is, accountability and disclosure requirements. This aims to tackle greenwash and define clear criteria that both corporates and investors must meet.
Opportunity - From a market perspective, the green economy is where opportunity lies. The EU is investing €1.8 trillion and expect to create 2.3 million jobs as part of “Green Deal” policies to achieve net zero by 2050.
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