COP-15 on Biodiversity: Key Takeaways for Business

COP-15 on Biodiversity: Key Takeaways for Business

January 20, 2023, Covington Alert

On 19 December 2022, the Conference of the Parties (“COP-15”) of the Convention on Biological Diversity (“CBD”) took place in Montréal (Canada). It concluded with the adoption of the historic Global Biodiversity Framework for 2050 (the “GBF” or "Framework").

The GBF sets ambitious global goals to protect and restore nature for future generations, ensure its sustainable use, share benefits from its use, and spur investment into a green global economy. COP-15 had two full days devoted to "business and biodiversity" and one full day to "finance and biodiversity." Companies take heed, as gone are the days that biodiversity is an issue only for governments and NGOs. Covington partner Bart Van Vooren participated in COP-15 as a business delegate, alongside representatives from a variety of sectors, including food, biotech and pharmaceuticals.

In this alert, we focus on those targets of the GBF that will have the most direct impact on companies. We also explain how these translate into current and future European Union (“EU”) legislative initiatives (with global relevance) that companies should look out for.

The Framework sets four long-term global goals for 2050 to protect nature, in summary:

• Goal A: Halt human-induced extinction of threatened species and reduce the rate of extinction of all species tenfold by 2050;
• Goal B: Sustainably use biodiversity to ensure that nature’s contributions to people are valued, maintained and enhanced;
• Goal C: Fairly share monetary and non-monetary benefits of the use of genetic resources and digital sequence information (“DSI”), and the traditional knowledge associated with them; and
• Goal D: Ensure that all Parties have adequate means of implementation, including financial resources, capacity-building, technical and scientific cooperation to fully implement the Global Biodiversity Framework.

Goals A and B highlight the actions that need to be taken to save biodiversity, while Goals C and D are about mobilizing the resources to achieve that. Goals C and D will require financial and other efforts from companies.

The GBF then lists 23 interim action-targets to achieve by 2030, which are separated in three priority groups: (1) reducing threats to biodiversity; (2) meeting people’s needs through sustainable use and benefit-sharing; and (3) tools and solutions for implementation and mainstreaming biodiversity considerations. In this Alert, we focus on the following targets and topics:

• Digital Sequence Information (Target 13)
• Disclosure Obligations for Companies (Target 15)
• Biodiversity and Sustainable Consumption (Target 16)

The full list of the four long-term goals and the 23 action-oriented targets can be found here. There are a number of targets with more sector specific issues not discussed in this alert, such as the target on pesticide reduction.  Evidently, you are warmly invited to speak with our ESG experts on any aspect of the GBF.

2. Watch Out: Targets that Affect Industry

Digital Sequence Information (Target 13)

The Framework and the Decision on Digital Sequence Information (“DSI Decision”) proposed the creation of a global “multilateral mechanism for benefit-sharing from the use of digital sequence information on genetic resources.”

As reported in detail in our December insider’s long read blog, this development will have a major impact on the private sector, especially life sciences companies. Any company that conducts R&D on “digital sequence information” on biological materials will be expected to pay for accessing this DSI, something which was not expressly mandatory under the Nagoya Protocol to the Biodiversity Convention. These private funds will be deposited in a newly created Global Biodiversity Trust Fund (“Fund”), which will be set-up by late 2024, a very ambitious deadline.

At this stage, many details surrounding this global benefit-sharing mechanism remain unclear.

First, the DSI Decision does not provide an express definition for “DSI”. It is still being discussed whether it would encompass R&D in the field of genomics only (relating to DNA and RNA), or also proteomics (relating to proteins) or including also metabolomics (relating to metabolites and other macromolecules). The broader the definition, the more company R&D will be subject to the new payment obligation, and the more of our clients will be in scope.

Second, over the next two years, countries will be hashing out e.g. the trigger points for benefit-sharing (such as a payment when placing a product on the market?); or how high will the contribution be: 1% of global retail price or 1% of global net revenue, and how can this be enforced?

Covington will closely monitor the implementation of this new payment obligation over the coming two years.

Disclosure Obligations for Companies (Target 15)

In 2010, the parties to the Biodiversity Convention agreed the 2011-2020 “Aichi Biodiversity Targets.” The world failed to achieve any of these targets. Monitoring compliance with the new Global Biodiversity Framework is one way of avoiding another such failure. The result is Target 15, introducing a raft of reporting and disclosure obligations for companies.

Target 15 asks Parties to encourage “large transnational companies and financial institutions” to:

• (i) monitor, assess, and transparently disclose their biodiversity risks, dependencies, and impacts through their operations, portfolios, supply, and value chains;
• (ii) provide more information to consumers to promote sustainable consumption patterns; and
• (iii) report on compliance with access and benefit-sharing (ABS) regulations and measures under the Nagoya Protocol, as applicable.

Point (iii) in Target 15 is remarkable for its specificity and was strongly pushed by Brazil. An obligation for large enterprises to report on ABS compliance will likely exacerbate companies' challenges on complying with the Nagoya Protocol to the Biodiversity Convention. Companies will need to (1) ensure they have robust ABS compliance processes; (2) then decide how to publicly report on ABS compliance; and (3) fully expect that authorities will use public reporting on ABS compliance in their enforcement activities. In 2021, Germany has been the first country in the EU to impose a fine for ABS non-compliance.

While earlier drafts of the Framework intended to make this reporting “mandatory” for companies, parties are now at liberty to impose such obligations. In the European Union, Target 15 is closely related to the new Corporate Sustainability Reporting Directive (“CSRD”) that entered into force in December 2022. As reported on our blog in December, this Directive introduces the world’s most far-reaching mandatory reporting regime to date.

In order for the CSRD to take effect, by mid-2023 the European Commission must adopt the European Sustainability Reporting Standards (“ESRS”) on the basis of the draft submitted by the European Financial Reporting Advisory Reporting Group (“EFRAG”). EFRAG is also working on additional sector-specific standards. As they are, the draft reporting standards explicitly refer to the CBD and Nagoya Protocol.

Finally, the European Parliament and Council are considering for adoption the much anticipated proposal on the Corporate Sustainability Due Diligence Directive (“CS3D”), a broad-ranging text that would impose environmental (and human rights) due diligence duties on companies, and introduce civil liability for companies that failed in their human rights and environmental due diligence obligations (we covered the Commission's proposal in detail in our earlier alert). Among others, these obligations include compliance with the CBD, Nagoya Protocol, and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”). Reporting biodiversity risks and compliance will no doubt shape and increase enforcement in this space.

Biodiversity and Sustainable Consumption (Target 16)

The GBF makes the link between sustainable consumption and restoring biodiversity. Target 16 encourages the Parties to introduce policy, legislative or regulatory frameworks, which would encourage and enable the consumers to make sustainable consumption choices.

This target has the potential to expand an already ongoing revision of European consumer protection legislation.

First, in early 2022, the European Commission introduced a Proposal for a Directive on empowering consumers for the green transition through better protection against unfair practices and better information. This introduces a “reparability score”, allowing consumers to make better informed and sustainable choices.

Second, in December 2023 the European Parliament and the Council reached an agreement on the text of the Deforestation Regulation. It should be adopted in early 2023. The Deforestation Regulation aims to combat biodiversity loss by avoiding deforestation and forest degradation. This is achieved by imposing due diligence obligations on the placing on the market and export of products that contain, have been fed with, or have been made using relevant commodities, being cattle, cocoa, coffee, oil palm, rubber, soy and wood.

Third, as we reported, there is an upcoming EU proposal for a Directive on “green claims”, aimed at introducing rules for the use of sustainability-related claims by companies. The proposal imposes strict requirements on the substantiation of green claims. Among others, companies must ensure that the positive green impact they claim does not lead to a negative impact on, e.g., biodiversity and ecosystems. We expect this to arrive in early 2023.

Conclusion

Covington’s ESG practice brings together specialized lawyers with decades of unique, hands-on experience on biodiversity, climate change, life sciences and all aspects of environmental law. If you have any questions concerning the material discussed in this client alert, please contact the members of our ESG practice.