The European Green Deal

The European Green Deal (EGD) is the EU's overarching green growth strategy to transform the EU into a modern, resource-efficient and competitive economy, while ensuring that:

- greenhouse gas emissions are net zero by 2050,

- economic growth is decoupled from resource use,

- no human being and no place is left behind.

The EGD contains many different initiatives and aims to integrate climate and sustainability into all EU policies (for example, by ensuring that a significant part of EU research funding supports sustainable objectives). For example, one of the fundamental parts of the EGD, the Climate Law, makes the goal of becoming climate neutral by 2050 legally binding for EU institutions and Member States. Another important part of the EGD is the related investment plan, which aims to mobilise at least €1 trillion over 10 years through EU and Member State budgets, public and private investments and other support measures. At least 25% of all EU funding will be allocated to climate action.

The Ladder can play a crucial role in achieving these goals: by structurally incorporating insight into greenhouse gas emissions and ambitious reduction targets into organisations. Of the eight themes of the EGD, the Ladder contributes to six: climate, energy, transport, agriculture, finance and industry. By using the Ladder as a procurement instrument, governments can give a significant boost to the sustainability of business in many sectors.

Therefore, the EGD is setting the agenda - and the Ladder helps to make it a reality.

Fit for 55 package

The Fit for 55 package is the set of measures designed to meet the EU’s 2030 climate goals. Foremost among them is the target to reduce greenhouse gas emissions by 55% in 2030 (compared to 1990). The package addresses the EU's climate, industrial, energy, transport and taxation policies, setting specific targets for each sector.

The package revises many EU directives, including rules on emissions trading and energy efficiency, tightens greenhouse gas reduction targets for each EU member state (the Netherlands for example will have to reduce by 48% instead of 36%). In addition, the EU is aiming for 40% renewable energy by 2030 and it will become compulsory to measure the CO2 emissions of building materials throughout their life cycle. Fossil fuel taxes will be increased to accelerate the shift from grey to green energy and to boost energy efficiency. Methane is also tackled, along with alternative fuels and fuel used by planes and ships.

All this with the aim of accelerating the energy transition in a cross-sectoral approach that can achieve the substantial reductions needed over the next eight (!) years. The Fit for 55 package will therefore be crucial in the coming years, not only for those with an intrinsic motivation to work for sustainability, but for all organisations, regardless of sector or size.

The CO2 Performance Ladder is once again an applicable tool to achieve these goals, and to drive ambition. The Ladder can help all types of organisations - businesses and governments - to reduce their energy use, and save money through increased efficiency and by burning increasingly less (increasingly expensive) fossil fuels. Moreover, the Ladder can give a significant boost to the use of alternative fuels and increase the demand for renewable energy. As a procurement tool, the Ladder can harness the Power of Procurement to embed structural reduction in organisations of all types.

So, the Fit for 55 package maps the dot on the (near) horizon and the steps to get there, and the Ladder helps to bring us to that point.

Corporate Sustainability Reporting Directive

The Corporate Sustainability Reporting Directive (CSRD) sets new rules for what and how companies must report on sustainability. It covers not only CO2 but also circularity, biodiversity and the rights of workers in the value chain, among other topics. The CSRD will apply to all large companies and listed SMEs - some 50,000 companies across the EU.

The CSRD represents a paradigm shift in how companies should report on their activities and their impacts - sustainability becomes central, instead of second to financial reporting. Organisations must not only pay attention to their organisation's sustainability impacts but also to the impact of environmental developments on their business, so-called double materiality. For example, if their activities depend on a certain raw material whose supply may be affected by climate change. Companies will then not only report on the past year, but also on their long-term sustainability goals and the progress they are making towards these goals.

Standard reporting methods per theme are being developed and separate reporting standards will be developed for small and medium-sized companies. The European Commission aims to introduce the reporting standard in October 2022, so that companies can report from 2023, but this is not yet certain.

Understanding, monitoring and communicating about emissions is a core part of the CO2 Performance Ladder. As such, it can help organisations meet or even exceed the climate-related requirements of the CSRD. Furthermore, by using the CO2PL as a GPP tool in procurement processes, governments can stimulate green companies and projects, and organisations concerned with their upstream scope 3 emissions can have a similar effect on their suppliers. This all contributes to the CSRD's goal of redirecting financial flows to the sustainable economy.

So the CSRD sets the reporting requirements, and the Ladder helps to fulfil them.

EU sustainable taxonomy

The purpose of the taxonomy is to establish rules for which economic activities can be considered green - no mean feat. The idea is that it will:

- make it easier to invest in green activities,

- shift money to the sustainable economy,

- minimise greenwashing,

- increase clarity for all parties.

The taxonomy doesn’t simply provide a list of green and non-green activities - rather it defines a framework of objectives and requirements that activities must meet in order to be considered sustainable. Activities must make a significant contribution to one of six categories (climate mitigation, climate adaptation, sustainable use/protection of water and marine resources, circularity, pollution prevention/control and protection and restoration of biodiversity and healthy ecosystems). Moreover, an activity must not cause significant damage to any of the other six categories.

The taxonomy currently covers 72 economic activities (including hard-to-reduce sectors such as cement, steel and aluminium), but this could be expanded. Transition and enabling activities can be assessed based on their emissions and whether they hinder the development of low-carbon alternatives. The use of the taxonomy will be mandatory for EU Member States, EU institutions, financial market participants and large public interest companies with more than 500 employees. The taxonomy thus plays an important role in facilitating sustainable reporting by determining the sustainability of activities and investments, and thus works in conjunction with the Corporate Sustainability Reporting Directive (CSRD).

Like the taxonomy, the CO2 Performance Ladder aims to make investments (whether via public tenders or in the value chain) more sustainable and to facilitate this by increasing transparency. The Ladder focuses on organisations and projects rather than activities, and can therefore reinforce the effects of the taxonomy by helping companies differentiate themselves from others within their sector, and by rewarding sustainable companies for their efforts through procurement advantage.

So, the taxonomy provides the tools to identify sustainable activities, and the Ladder contributes to promoting that sustainable economy.

New Energy Efficiency Directive

The Energy Efficiency Directive (EED) has existed since 2012, but as part of the Fit for 55 programme it is being revised, and strengthened.

The targets for reducing energy consumption by 2030 will become more ambitious: -39% primary and -36% final energy use. Carbon budgeting will be the basis of the directive and whether the EED applies to companies  will be based on energy use, rather than turnover or FTE. Therefore it will target the largest users: organisations using 10 terajoules or more per year will be required to be audited every 4 years, while those consuming 100TJ or more will be required to also implement an energy management system.

Public authorities will also have to get to work: the Commission proposes that the public sector should renovate 3% of its buildings every year. One thing won’t change: the principle of energy efficiency remains central - all energy not used is a positive, and savings are favoured over renewable generation.

The Ladder is a proven and effective energy and CO2 management system, with energy efficiency as its foundation. That is why a CO2 Performance Ladder certificate counts as an alternative way of fulfilling the current EED in the Netherlands. The Ladder can therefore contribute to the EED goals both for 2030 and in general. At the same time, the expansion and tightening of the EED will motivate more companies to gain insight into both their greenhouse gas emissions and energy use and, crucially, to reduce them. The CO2 Performance Ladder is an extremely suitable instrument to do this.

Thus the new EED strengthens the ambition around energy efficiency and the Ladder helps to translate that ambition into reality.

New Emissions Trading System ETS

The Emission Trading System (ETS) has been in place since 2005 for electricity and heat generation, energy-intensive industries and aviation. But as part of the Fit for 55 package, the ETS is getting a major boost. The new EC-ETS proposal strengthens the overall target for the sectors concerned to a 43% reduction in emissions by 2030 (compared to 2005). At the same time, the phase-out of emissions allowances will be accelerated, and from 2027 there will be no free allowances for intra-EU aviation. Shipping to and from the EU will also gradually come to be covered by the system between 2023 and 2026.

In addition, the European Commission proposes to create a new separate ETS for fuels used in road transport and buildings. This will set rules for upstream suppliers of fuels from 2025, with a cap on emissions from 2026. Suppliers will be responsible for monitoring and reporting the amount of fuel they put on the market. This will encourage them to decarbonise their products to reduce compliance costs. Further it will follow the same principles as the current ETS.

And for those who fear that these green measures will drive companies out of the EU, or give an advantage to cheaper, more polluting foreign industry - the EU is introducing a carbon border adjustment mechanism (CBAM). This will keep the playing field level by pricing the CO2 content of products imported into the EU.

The CO2 Performance Ladder has been proven to be effective in reducing emissions - companies using the Ladder reduce twice as quickly. Thus, the Ladder can contribute to the goals of the ETS in the relevant sectors. At the same time, if the ETS is extended to more sectors as is proposed, the explicit CO2 price will provide a clear incentive to reduce energy use and improve energy efficiency, especially at the right price. The CO2 Performance Ladder is extremely suitable to help achieve those goals.

 Thus the ETS pushes for CO2 reduction, by capping emissions and making them more expensive, and the Ladder helps to embed emissions reduction within organisations.

European Procurement policy

The European Union is very important in determining European public procurement rules. The European Procurement Directive sets the rules for all public procurement procedures in Europe above a certain monetary value. The aim is to ensure that the internal market for public contracts operates smoothly and that any company in the EU can apply for a tender, regardless of where in the EU the contracting authority is based. National rules must also comply with the general principles of the EU Directive: transparency, equal treatment, open competition and sound procedural management. Since 2017, part of the European Commission's procurement strategy has been to ensure wider adoption of innovative green and social procurement, partly by providing advice and training and disseminating best practice examples to Member States on how to integrate GPP criteria into procurement procedures.

The European Green Deal investment plan reinforces these commitments, making sustainable procurement more binding by proposing “mandatory minimum criteria or targets for green public procurement" through various product- or sector-specific initiatives or funding programmes. For example, the latest European Circular Economy Action Plan takes steps to stimulate green procurement. The plan makes it mandatory to introduce minimum criteria for Green Public Procurement (GPP), to set targets in sectoral legislation and to gradually introduce mandatory reporting to monitor the uptake of GPP. The EU's COVID-19 recovery instrument (NextGenerationEU) also provides opportunities to scale up GPP, as at least 30% of expenditure must support climate objectives.

The CO2 Performance Ladder is an ideal GPP tool to help public authorities at all levels to stimulate the green economy. The Ladder is easy to implement because third party certification bodies regularly check whether contractors are meeting their chosen level of ambition in the tender. As a result, procurement officials do not need to become climate experts for the Ladder to have a significant impact. Moreover, the Ladder also uses clear and verifiable environmental criteria and has been legally tested. The principle of "one language, one instrument" is central to SKAO, making the Ladder highly transferable, certainly within the EU.

In short, the Ladder can make a significant contribution to the implementation of European ambitions around GPP, in an efficient and structural way.

Are you curious to know more about the Circular Economy Action Plan? Then read our interview with Jos Pees, Sustainability advisor at the Knowledge Centre Europe Decentralised.

EU environmental footprinting methods

The European Commission is also active in developing methods to calculate ecological footprints and trying to harmonise them. They are trying to improve comparability, reduce barriers across the European single market and prevent false green claims. As part of this, the EU has developed Product and Organisation Environmental Footprint methodologies that can potentially cover 14 environmental impact categories. These methodologies thus aim to take into account multiple environmental performance criteria - not just CO2 emissions. The methodologies were developed through pilot projects with companies, and are intended to complement and enrich other existing tools such as eco-labelling, eco-design and GPP. In drafting the OEF requirements, other guides were considered, including ISO standards, the GHG Protocol and the Global Reporting Initiative. The OEF looks at an organisation's product portfolios based on aggregate data.

Currently, it is not mandatory to use the methods, but it is envisaged that they will be used in a number of upcoming EU policies including the taxonomy, the Sustainable Batteries Initiative, substantiating green claims and the circular economy action plan. The EC is exploring how the methodologies can be used in other policy areas. As the methodologies are linked to more and more EU legislation, they will become increasingly important.

There are many commonalities between the CO2 Performance Ladder and the PEF and OEF. Both seek to promote sustainability and sustainable procurement. The PEF and the OEF strive for comprehensiveness (beyond greenhouse gases), practicality and comparability, low legal risk, and transferability within the EU as key principles for Life Cycle Assessment (LCA) and environmental footprint methods used in GPP. In this line, the Ladder is practicable (and particularly easy for contracting authorities to implement), has been legally tested and is based on the "one tool, one language" principle, making it highly transferable. Moreover, the management system at the heart of the Ladder system can help organisations address other sustainability issues, such as circularity. The Ladder therefore fulfils these criteria and can contribute to European objectives in this area.

The Ladder and the European environmental footprint methodologies thus fit together very well, and can result in significant cross-fertilisation.

The European Green Deal
Fit for 55 package
Corporate Sustainability Reporting Directive
EU sustainable taxonomy
New Energy Efficiency Directive
New Emissions Trading System ETS
European Procurement policy
EU environmental footprinting methods