The European Green Deal is a comprehensive policy program of the European Commission with the goal of making Europe a sustainable continent. Specifically, the Green Deal aims for Europe to reduce CO2 emissions by 55 percent by 2030 compared to 1990, and then to be completely climate neutral by 2050. To achieve this, the Green Deal includes a large number of measures that will have a major impact on everything and everyone within the EU: governments, consumers and businesses.
In particular, the Fit for 55 climate package presented on July 14, 2021 will have a major impact on businesses. In particular, sectors such as transportation, energy, agriculture and construction will have to undergo major reforms, but since these sectors are intertwined with the entire economy, and the new regulations will affect all sectors, all companies are going to be affected to a greater or lesser extent. In this article, we list for you the main opportunities and threats that are going to affect all businesses.
1. Emitting CO2 gets a lot more expensive
To ensure that CO2 emissions go down, there will be more taxes on CO2 emissions. In this regard, the Fit for 55 package contains two measures in particular that are going to have a lot of impact. The first is the revision and expansion of the European Emissions Trading Scheme (ETS) for industry. By reducing the number of emission allowances, the Commission wants to increase the price of these, thus automatically raising the price of emitting CO2. Also, the system will soon be used for road transport, maritime transport and construction. There are also proposals ready to phase out the exemption for aviation.
A second measure being taken to reduce global CO2 emissions is a new carbon correction mechanism at the border. This is going to mean taxing imports of polluting products, such as steel, iron and cement. In this way, carbon leakage will be prevented.
These two measures obviously have a particularly (very) large impact on the industrial, construction and transport sectors, but will be felt by all companies. Getting serious about reducing carbon emissions in the supply chain now and getting started with Socially Responsible Purchasing (SRI) is a smart way to avoid high costs in the future.
2. Circularity becomes the norm
When we can use waste as a raw material for new products, we need to throw away less and need fewer raw materials. Not only do we reduce waste, but we also reduce net CO2 emissions. This is why the “Circular Economy Action Plan for a Cleaner and More Competitive Europe” presented in 2020 is also part of the Green Deal. The aim of the plan is for sustainable, circular products to become the norm. It includes a large number of new rules to promote circularity.
The circularity plan focuses primarily on sectors where there are many gains to be made. These are therefore sectors that require a lot of raw materials, such as construction, the food industry, clothing, packaging, electronics, vehicles and plastics. All companies with, for example, business premises, company canteens, company clothing and products that are packaged are also logically affected. Circular purchasing and ensuring that, for example, no microplastic or cotton without a GOTS label is used in your supply chain is still an option now, but soon it won’t be.
3. Stricter energy efficiency guidelines.
An important part of Fit for 55 is a revision of the Energy Efficiency Directive (EED). The goal of this directive is to reduce a country’s total energy use, in order to also reduce CO2 emissions. Where 32.5 percent was agreed upon in 2018, this was revised to 36 percent last summer. To continue doing the same (or rather more) with less energy, efficiency is the magic word. In other words, waste as little energy as possible.
In particular, buildings, production processes and transportation must become much more energy efficient in the coming years. To achieve this, energy requirements for companies will be tightened. There will be an efficiency first principle, which means that investments in machinery or vehicles, for example, must take into account the energy performance of those purchases. This also applies to the construction of offices and business premises. In addition, the purchase of an energy management system will be mandatory for large companies (from 100 TJ of consumption per year) and small and medium-sized companies (from 10 TJ of consumption) will be required to have an energy audit performed.
In short: new challenges for entrepreneurs, but certainly also opportunities. Those who already invest in sustainability now will soon have a competitive edge when the new regulations come into effect. In addition, the Green Deal obviously offers great opportunities for companies with innovative services, products and business models.
Want to know more about the European Green Deal and what it means for your business? Then email martin.dejong@empact.nu for a no-obligation consultation.