Sustainable investments for the transition to a circular economy
10 Jul 2023

Sustainable investments for the transition to a circular economy

On 13 June 2023, the European Commission published its Sustainable Finance Package, including measures to strengthen the EU sustainable finance framework and aiming “to ensure that the EU sustainable finance framework continues to support companies and the financial sector, while encouraging the private funding of transition projects and technologies.”

With this package, the European Commission introduced a proposed new set of criteria for economic activities making a substantial contribution to one or more of the non-climate environmental objectives of the EU Taxonomy, namely:

  • sustainable use and protection of water and marine resources,
  • transition to a circular economy,
  • pollution prevention and control,
  • protection and restoration of biodiversity and ecosystems.

The European Commission also proposed amendments to the existing Taxonomy Climate Delegated Act and a proposed Regulation on Environmental, Social and Governance (ESG) ratings.

Technical screening criteria, what’s that?

Annex II of the proposed Delegated Act for the non-climate environmental objectives of the EU Taxonomy focuses on the transition to a circular economy objective and includes, amongst the targeted economic activities, the manufacture of plastic packaging goods. It puts forward technical screening criteria defining when the manufacture of plastic packaging goods makes a substantial contribution to the transition to a circular economy, including (non-exhaustive):

  1. It complies with one of the following criteria:
    • Use of circular feedstock: until 2028, at least 35% of the packaging product by weight consists of recycled post-consumer material for non-contact sensitive packaging and at least 10% for contact sensitive packaging. From 2028, at least 65% of the packaging product by weight consists of recycled post-consumer material for non-contact sensitive packaging and at least 50% for contact sensitive;
    • Design for reuse: the packaging product has been designed to be reusable within a reuse system and fulfils the requirements for the use of circular feedstock;
    • Use of bio-waste feedstock: at least 65% of the packaging product by weight consists of sustainable bio-waste feedstock;
  2. The packaging product is recyclable in practice and at scale. The packaging product demonstrates recyclability in practice and at scale;
  3. When the packaging material is produced, certain substances presenting hazardous properties are not added to the feedstock;
  4. Compostable plastic materials in packaging applications are used only for very lightweight plastic carrier bags; tea, coffee or other beverage bags; tea, coffee or other beverage pads and sticky labels attached to fruit and vegetables.

Looks familiar? Not surprising, as these criteria seem to be largely inspired by the provisions of the recent Commission proposal for a Regulation on Packaging and Packaging Waste (PPWR). However, despite being inspired from them, the criteria are not aligned with the proposed PPWR requirements, risking to create legal uncertainty for businesses and double standards across the EU.

What did you miss?

  • 18 June 2020: Publication of the Regulation on the establishment of a framework to facilitate sustainable investment (Taxonomy Regulation), amending Regulation (EU) 2019/2088.
  • October 2020: Creation of the Platform on Sustainable Finance, for a two-year mandate ending in October 2022.
  • 6 July 2021: The Commission publishes a strategy for financing the transition to a sustainable economy.
  • 30 March 2022: Platform on Sustainable Finance published its recommendations to the European Commission on technical screening criteria for the non-climate environmental objectives of the EU Taxonomy
  • 8 February 2023: New composition of the Platform on Sustainable Finance announced. First meeting of the Platform held on 7 March 2023
  • 13 June 2023: Publication of the EC Taxonomy Environmental Delegated Act

What’s next?

  • Now that the European Commission adopted its proposed text, the European Parliament and Council each have four months (simultaneously) to scrutinise the document to object to it. In line with the EU Taxonomy Regulation, both institutions may request for additional two months of scrutiny time. However, they cannot propose to amend it.