The November 2024 issue of Wilson Sonsini's Sustainability and ESG Advisory Practice Update, shared by JD Supra, presents an overview of significant recent developments related to sustainability, environmental, social, and governance (ESG) matters on both national and international fronts.
Key regulatory updates from the United States include the introduction of new compliance requirements under California Assembly Bill 3234, set to take effect on January 1, 2025. This legislation mandates that businesses conducting voluntary audits for child labour compliance must disclose the results publicly on their websites. Reports must detail specifics such as the audit date, any exposure of children to unsafe working conditions, incidences of work during school hours, and copies of child labour policies maintained by the employer. California Governor Gavin Newsom signed this bill into law in September 2024.
In the realm of clean energy, the U.S. Department of Treasury and the Internal Revenue Service (IRS) announced final regulations concerning the advanced manufacturing production tax credit under Section 45X of the Internal Revenue Code on October 24, 2024. These regulations aim to clarify the obligations for manufacturers of essential clean energy supply chain products—including solar panels, inverters, and battery energy storage components—providing much-needed guidance as these technologies gain traction in the market.
Additionally, the U.S. Treasury unveiled new national security rules on October 28, 2024, concerning outbound investments, as directed by President Biden’s Executive Order 14105. Taking effect on January 2, 2025, these Outbound Rules impose new diligence requirements on U.S. parties investing in specific technology sectors, particularly when connections to the People's Republic of China (PRC) are involved.
In Europe, the European Council agreed to a proposal on October 16, 2024, to extend the deadline for compliance with the Deforestation Regulation by one year, giving large companies until December 30, 2025, and small to medium-sized enterprises until June 30, 2026. This regulation targets commodities linked to deforestation and requires substantial due diligence to ensure compliance with environmental standards.
Germany's Federal Office for Economic Affairs and Export Control (BAFA) provided insights into its operations under the Supply Chain Act through its accountability report for 2023, stating that it had not imposed any sanctions during its first year of implementation. The office intends to focus on audits and compliance without penalising companies that submit their annual reports by the end of 2025, even if submitted later than required.
The European Financial Reporting Advisory Group (EFRAG) has commenced discussions surrounding the draft Implementation Guidance on Transition Plans for Climate Change Mitigation, intending to have the document available for public consultation by early 2025. This initiative aligns with the European Sustainability Reporting Standards established under the Corporate Sustainability Reporting Directive.
On the global front, the United Nations’ COP29 conference from November 11 to November 22, 2024, in Baku, Azerbaijan, resulted in notable agreements, including the establishment of a framework for trading carbon emissions credits. Moreover, developed countries have pledged a minimum of $300 billion annually by 2035 to aid developing nations in addressing climate impacts, a significant increase from previous commitments.
In legal developments, the U.S. District Court for the Central District of California rejected a motion challenging the constitutionality of California’s climate disclosure laws, allowing laws SB 253 and SB 261 to move forward. Meanwhile, the D.C. Circuit court stripped the White House Council on Environmental Quality of rulemaking authority under the National Environmental Policy Act.
In summary, these updates reflect the evolving regulatory landscape that businesses must navigate as they align their practices with sustainability and governance goals. The implications of these regulatory changes could have far-reaching effects on business compliance, operational practices, and investment strategies moving into 2025 and beyond.
Source: Noah Wire Services