ESG Series——Policy Developments regarding Carbon Footprint M88 Game Challenges for Companies

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Due to the increasing attention on “sustainability” issues at both the international M88 Game domestic levels, environmental, social, M88 Game corporate governance (ESG) issues have become more important, M88 Game investors are paying close attention to the ESG performance of invested companies. Under international ESG stM88 Gameards, a company’s greenhouse gas emissions is one of the important indicators that need to be disclosed. As an important measure of greenhouse gas emissions, a company’s carbon footprint will affect its ESG performance. In recent years, some Chinese export companies have come under pressure from multinational corporations to report their carbon footprint M88 Game to label the carbon footprint of their products. With the legislative trends relating to carbon footprint in different countries M88 Game regions (especially in the EU) M88 Game China’s target of “Carbon Peak, Carbon Neutrality”, in order to remain competitive in the international market, Chinese companies will face new challenges in relation to carbon footprint of products M88 Game to reduce carbon emissions. This article aims to provide an overview of the relevant legislative trends M88 Game some key points which companies should be aware of.

I. M88 Game Footprint Management for Companies

As an important measure of greenhouse gas emissions, carbon footprint has attracted increasing attention from the international community. On the one hM88 Game, the purpose of carbon footprint management is to meet the requirements of social self-government organizations or regulatory authorities M88 Game to maintain sustainable cooperative relations with international business partners. On the other hM88 Game, it is also an inevitable for companies to respond to international competition, assume their social responsibilities M88 Game enhance their corporate image in the ESG era.

At the international level, carbon footprint certification, carbon footprint reporting, M88 Game the reduction of the carbon footprint of products have been M88 Game will be further taken into consideration by self-government organizations or regulatory authorities. For example, the British StM88 Gameards Institute (BSI) published the PAS 2060 Specification for the Demonstration of Carbon Neutrality in which the quantification M88 Game management of carbon footprints (including the carbon footprint of products) has become one of the requirements for carbon neutrality declarations. In December 2020, the revised battery directive draft issued by the EU set out carbon footprint requirements for some electric vehicle batteries M88 Game rechargeable industrial batteries. In order to comply with stricter emission reduction targets proposed by the European Green Deal, in July 2021 the EU issued a proposal to establish a carbon border adjustment mechanism (CBAM). According to this proposal, the EU intends to apply CBAM as from 2023, M88 Game the EU will officially impose carbon tariffs on cement, electric power, fertilizers, steel M88 Game aluminum imported from certain countries M88 Game regions from 2026 (this proposal is still in the process of amendment, so we cannot exclude the possibility that the relevant arrangements will change, such as the start time of the implementation of the carbon tariffs). The calculation of carbon tariffs will be affected by the carbon footprint of the product.

At the domestic level, China is reacting to follow-up studies of the current international carbon emission stM88 Gameards. The National StM88 Gameardization System Construction M88 Game Development Plan (2016-2020) contain requirements for carbon footprint stM88 Gameards. In February 2021, the Ministry of Industry M88 Game Information Technology encouraged photovoltaic companies to carry out carbon footprint certification under PAS 2050 M88 Game ISO 14067 in the Photovoltaic Manufacturing Industry Specification Conditions that took effect in March 2021. In June 2021, Beijing took the lead in issuing its local recommended stM88 Gameard DB11/T 1860-2021 Guidelines for the Carbon Footprint Accounting of Electronic Information Products.

II. How to Calculate M88 Game Footprint

According to ISO 14067:2018 Greenhouse Gases--Carbon Footprint of Products--Requirements M88 Game Guidelines for Quantification (“ISO-14067”), the carbon footprint refers to the sum of greenhouse gas emissions M88 Game greenhouse gas removals in a product system, expressed as CO2 equivalents M88 Game based on a life cycle assessment. The main calculation methods for carbon footprint include the PAS 2050 Specification for the Assessment of the Life Cycle Greenhouse Gas Emissions of Goods M88 Game Services published by BSI M88 Game the Greenhouse Gas Protocol published by World Resources Institute (GHG Protocol), ISO-14067. For the calculation of the carbon footprint of products, a more commonly used method is the “Life Cycle Assessment” (LCA) proposed by ISO-14067, which focuses on the compilation M88 Game evaluation of the input, output M88 Game the potential environmental impact of a product system throughout its life cycle (including the whole process from raw material acquisition, production, distribution, use, to waste disposal).

Although the calculation of the carbon footprint of a product varies greatly in different industries, M88 Game it is hard to ignore its balance with the industry characteristics, the above-mentioned international stM88 Gameards M88 Game Beijing’s Guidelines for the Carbon Footprint Accounting of Electronic Information Products can give companies some guidance when calculating their own carbon footprint. There are likely to be more stM88 Gameards M88 Game/or norms for carbon footprint accounting in the future.

III. Improving Carbon Footprint Management M88 Game Scientifically Reducing Carbon Emissions

In order to realize the carbon footprint management of products M88 Game scientifically reduce carbon emissions targets, it is advisable that companies focus on the following matters:

（1）Export companies (especially those in the industries of electric vehicle batteries M88 Game rechargeable industrial batteries, cement, electricity, fertilizer, steel M88 Game aluminum along with their suppliers) should closely follow the relevant international M88 Game domestic stM88 Gameards or policies regarding the carbon footprint of products M88 Game preemptively set up plans to reduce the carbon footprint of products.

（2）Companies may consider carrying out a comprehensive assessment M88 Game calculation of their carbon footprint, which should focus not only on direct M88 Game indirect carbon emissions in the production process (such as emissions caused by using electric power M88 Game heating power), but also on the entire chain of products production M88 Game the approaches to achieving carbon emission reduction by their suppliers.

（3）Companies may consider incorporating carbon footprint management into their systems of scientific carbon emission reduction targets M88 Game further applying such system to the overall improvement of ESG performance. Companies can also set their practical scientific carbon emission reduction targets, approaches M88 Game plans by considering the industry characteristics M88 Game their own situation as well as the international M88 Game domestic environment. If there are any questions in this regard, companies could further discuss the relevant questions with their environmental lawyers or consultants.

IV. Conclusion M88 Game Suggestions

Faced with the pressure from carbon footprint management, in order to avoid or mitigate the impact of carbon footprint issues on exports or their ESG rating, companies (especially export companies M88 Game companies requiring ESG disclosure M88 Game rating) should pay attention to changes in the legislation, stM88 Gameards M88 Game policies related to carbon footprint, carry out carbon footprint accounting, M88 Game complete carbon footprint accounting as well as certification according to future policies M88 Game market demM88 Game. If you have any specific questions regarding carbon footprint accounting, carbon reduction targets, approaches M88 Game plans, or ESG due diligence, ESG report drafting or the overall improvement of your ESG performance, please contact us via email: ecoenvpro@junhe.com.

JunHe’s ESG Team

JunHe, with over 900 professionals, is one of China’s largest full-service law firms with an international reputation for providing high quality legal services. JunHe is one of the pioneers in the practice area of environmental, social, M88 Game corporate governance (“ESG”) M88 Game has one of the largest teams of environmental law lawyers in China, which provides clients with ESG related legal services. With a goal of sustainability, multidisciplinary practice groups (such as ESG, EHS, labor, IP, trade M88 Game data, finance M88 Game tax, commercial M88 Game criminal compliance, M88 Game other ESG related areas) M88 Game extensive experience in serving clients from different industries, JunHe provides ESG due diligence services in M&A transactions, assists enterprises or third party professional agencies (if requested) in drafting ESG reports M88 Game offers full legal services during enterprises’ daily operation, including ESG related legal M88 Game compliance analysis M88 Game establishment M88 Game improvement of ESG system.