Arrivals: New green legislation inbound

As the drive towards carbon reduction continues across industry, Rob Biddlecombe, partner and environmental specialist at leading independent law firm Brabners, outlines how new sustainability legislation could impact the full aerospace value chain.

 

The transition to net zero represents one of the most important, and demanding, challenges of our time, with the UK Government aiming for all domestic flights and airport operations to achieve net zero by 2040 – 10 years ahead of the UK’s broader net zero deadline.

While we’re already seeing the North’s aerospace sector putting its best foot forward, hitting these deadlines will require all parts of the industry to work in harmony.

Legal changes

Indeed, larger operators like BAE Systems and Airbus have already made significant commitments in relation to their carbon emissions – both setting 2030 targets for their Scope 1 and 2 emissions. However, Scope 3 emissions – those generated by suppliers and partners that fall outside of an organisation’s direct control – will become increasingly important, with influential new EU legislation on the issue set to be introduced in the coming months.

Having reached provisional deal stage at the European Council at the end of last year, the new EU Corporate Sustainability Due Diligence Directive (CSDDD) may potentially require businesses to end relationships with partners who are adversely impacting the environment or human rights in a way that can’t be stopped or prevented^[1]. Failure to comply is expected to result in financial penalties, with early indications suggesting this could be upwards of 5% of net worldwide turnover.

The obligations under CSDDD will apply to large EU companies (i.e. with a turnover of EUR 150 million and over 500 employees) and also smaller companies (i.e. with a turnover of EUR 40 million and over 250 employees) based in the EU provided at least 50% of their turnover is derived from activities where there is high impact to the environment and/or human rights.

The obligations will also apply to non-EU businesses that are both active and have equivalent turnover in the bloc.  However, even those businesses that are not directly obligated under CSDDD can expect to be affected if they are within the value chain of a business which is directly obligated. This may, for example, take the form of more stringent terms and conditions, more extensive onboarding requirements and more frequent relationship reviews.

Closer to home, UK legislation could follow suit. A recent YouGov poll showed that 80% of the British public would support a law that prevents businesses harming human rights and the environment. More tangibly, a Private Members Bill has been introduced to the House of Lords which, if passed, would become the UK’s first law imposing a general duty on businesses to carry out environmental and human rights due diligence.

Although still in its early stages, the Bill represents the growing trend towards embedding sustainable practices in legislation, and further indicates that what is considered good practice now will soon become a regulatory requirement and the market norm.

Preparing for change

For OEMs and other SME suppliers in the sector, it’s important that they remain aligned with the sustainability objectives of the sector’s linchpin operators in preparation for these changes. Instilling sustainable practices throughout their day-to-day operations will not only ensure the continuation of contracts with major purchasers but also provide a pathway for sustainable growth.

Recently, we canvassed our ever-growing True North network – which comprises more than 150 leading businesses and educational institutions from across the North – to determine what the key priorities are for those looking to deliver positive change.

Our findings identified that the businesses best equipped for growth in the future will be those that have sustainable and ethical practices built into their business models.

We’ve seen this already within our own business, with our commitment to B Corp certification and initiatives like the Better Business Act contributing to positive commercial outcomes while equally benefitting people and planet.

However, for firms at the start of their sustainability journey or simply looking to prepare for the impact of CSDDD, it’s important to get an overview of their performance and readiness. As a first step, this will require them to assess the extent to which environmental and/or human rights harms may affect or be associated with their businesses (including their value chain).

Our specialist Planning and Environmental team is well-versed in the dynamic landscape of supply chain legislation. We offer advice to companies that are looking to proactively examine their whole carbon output, as well as support for supply chain operators looking to remain compliant with the changing policy landscape.

This shift in priorities will require a serious commitment. All businesses face challenges unique to their value chains and must therefore acknowledge that a “one size fits all” approach will not be appropriate. Instead, the key to success will be to develop an approach proportionate to the level of risk and communicate this commitment to upholding environmental protection and human rights both within the business and throughout the supply chain to ensure that expectations are met. Regular monitoring and review will help to confirm that arrangements are being properly implemented and can adapt as required.

As the EU directive progresses through approval and we await similar developments in the UK, we are on hand to help firms prepare and to ensure the sector can continue at pace on its drive towards net zero

For more information, visit: https://www.brabners.com/