New EU green initiatives to have massive impact on businesses, supply chains

The European Union in recent years has launched a number of broad and overarching green initiatives toward climate neutrality, all of which entail various specific regulatory initiatives and will inevitably result in major trade impacts for developing economies trading with the EU, including the Philippines.

Tobias Dolle, an expert with the International Trade Centre, in an online presentation touched on three of these new initiatives, which are comprehensive, interconnected but separate: European Green Deal, Farm to Fork Strategy, and Fit for 55 Package.

The European Green Deal, presented by the EU in December 2019, includes a set of policy initiatives with the overall aim of making the EU’s economy sustainable, more circular and climate neutral by 2050.

“It has massive implications for businesses, leading to both changes in production and supply chain strategies around the world,” said Dolle.

Examples of specific legislative initiatives under the European Green Deal are the EU Directive on Single-Use Plastics, EU strategy for sustainable textiles, legislative proposal for substantiating green claims made by companies, and a sustainable products policy initiative including a revision of the EcodesignDirective.

Meanwhile, the EU’s Farm to Fork (F2F) Strategy, which is part of the EU Green Deal, aims to redesign current food systems to become fair, healthy and environmentally friendly. It will emphasize good agricultural practices, food security, and food safety.

Under the F2F Strategy is a long list of specific legislative initiatives, from those on a sustainable food system framework, animal welfare, and food labeling revisions, to sustainable use of pesticides, animal nutrition, and revision of rules on food contact materials and revision of agricultural marketing standards, said Dolle.

As for the Fit for 55 Strategy, the measure seeks to deliver the EU’s 2030 climate target by reducing emissions by at least 55% by 2030 from 1990 levels on the way to climate neutrality by 2050.

This strategy encompasses a wide range of proposed legislative initiatives such as revising the EU regulation on land use, revising the energy efficiency directive, and revising the renewable energy directive, among others. It also presents a number of proposals, including regulation of the use of renewable and low-carbon fuels in maritime transport.

Particular initiatives under the Fit for 55 that will have a major impact on trade for businesses in developing countries in the future were highlighted by Dolle.

One of these is the EU Proposal for a Sustainable Products Regulation (EcodesignDirective), which foresees rules to make almost all physical goods on the EU market friendlier to the environment, circular, and energy efficient throughout their whole lifecycle, from the design phase through to daily use, repurposing, and end-of-life.

Here, all regulated products will have Digital Product Passports, which are intended to make it easier to repair or recycle products and facilitate tracking of substances of concern along the supply chain. The regulation will allow the EU to set new labeling requirements, for instance, on reparability.

The Fit for 55 Strategy was published in March 2022, and a public consultation will be launched as legislative process is now ongoing, Dolle said.

Other specific regulations under the green initiatives are the EU legislative initiative on minimizing the risk of deforestation and forest degradation associated with products placed on the EU market as well as the EU legislative initiative for an EU Directive on Corporate Due Diligence and Corporate Accountability.

The two proposals will see due diligence obligations and administrative and cost burdens for covered businesses and risk of inadvertent discrimination. Further, these will lead to the loss of comparative advantage/competitiveness for imported products, but will also confer potential advantage for countries/sectors that already implement stringent rules.

The proposals were published in November 2021 and February 2022, respectively, and public consultation for the initiative on Corporate Due Diligence is currently being held as legislative processes are now ongoing, Dolle said.

As many of these initiatives are currently being tackled, he is urging developing countries to take action early to prepare their domestic business environments and micro, small and medium enterprises (MSMEs) for the anticipated trade impacts.

He stressed that it is critical that developing countries consult and coordinate with the EU over these green initiatives in order to enhance their respective domestic business environments to be conducive to sustainable economic development, gender and diversity inclusion, and the effective participation in trade by MSMEs.

Consultation and coordination is also vital as it will serve to attract investment and support economic recovery after the Covid-19 pandemic, Dolle continued.

He further noted that the ability of developing countries’ policymakers and private sector operators to timely, effectively, and successfully engage in the relevant fora can be improved through dedicated capacity building and technical support from development partners.

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