EU Climate Initiatives Impacting Non-EU Companies: Stringent ESG Disclosures, Carbon Taxes, Reporting Obligations

The EU has recently adopted two climate initiatives, CSRD and CBAM, that will begin affecting covered companies--including non-EU and U.S. companies--in the near future. Given the breadth of scope and complexity of each of these initiatives, counsel should take steps now to understand what effect these initiatives may have on their non-EU client companies and how they can best prepare for compliance with the extensive procedural and reporting obligations.

While the CSRD is a European directive, the CSRD is wide reaching and has the potential to affect at least 10,000 non-EU headquartered companies, of which more than 3,000 are U.S. companies. The CSRD's new reporting requirements are voluminous and complex and will require the disclosure of a broader set of ESG topics than the SEC's proposed climate-disclosure rule. The first reporting period begins on Jan. 1, 2024.

Additionally, the CBAM imposes a reporting obligation and carbon tax on the import of certain goods into the EU. The CBAM transition phase and first reporting period are effective Oct. 1, 2023. Companies must report for the first time by Jan. 31, 2024. Exporters into the EU will pay the CBAM based on the embedded emissions of the products they are selling, with a rebate for any carbon price that has already been paid in the country of origin. Exporters to the EU must report the emissions embedded in their products or face hefty fines.

Listen as our expert panel provides a detailed discussion of the CSRD and CBAM and how they will affect non-EU companies. The panel will address what companies may be affected and when and best practices to prepare for and comply with these new climate initiatives.