JONES DAY TALKS®: The EU’s ESG Framework: Decoding Sustainability Regulations

Dave Dalton:

The European Union's ESG regulatory landscape continues to undergo significant shifts in recalibration, but corporations still must carefully comply with directives relating to sustainability, especially in the areas of deforestation, green claims, and packaging and packaging waste. Today's Jones Day panel with representatives from Paris, London, Frankfurt, and New York will sort out recent developments and talk about what corporations residing in the EU or having operations and transactions in the EU need to know, and the stakes can be high. Don't move. I'm Dave Dalton. You're listening to JONES DAY TALKS®.

Jones Day partner, Dr. Jürgen Beninca, counsels European and US corporate clients on antitrust regulatory compliance and represents businesses before cartel authorities, including the German Federal Cartel Office and the European Commission, and before courts and antitrust matters. He also advises clients on European supply chain legislation and guides clients through the screening process of foreign direct investments into Germany.

Armelle Sandrin-Deforge's practice focuses on French, European, and international environmental law, including energy, health and safety, and regulatory issues. Her experience covers climate change and sustainable development, industrial facilities, contaminated sites, waste and circular economy, renewable energy, marine and coastal environmental issues, and asbestos.

Aidan Lawes advises clients on matters relating to financial services regulation in the UK and Europe, and he's a leader on the firm's ESG regulatory team. He advises clients from across the financial markets, as well as multinationals on their global ESG obligations.

And finally, Howard Sidman is a global chair of environmental, social, and governance ESG at Jones Day, and he advises clients on ESG litigation and risk issues. Howard represents financial institutions and other companies in ESG-related investigations and complex commercial disputes. In addition, he consults on risk issues relating to energy transition and green bonds.

An outstanding panel today. Thank you all so much for being here.

Howard Sidman:

Thanks, Dave.

Armelle Sandrin-Deforge:

Thanks, Dave.

Jürgen Beninca:

Hi, Dave. Thanks for being here.

Dave Dalton:

I was so happy to get this together because this is such a relevant topic. There's so much interest out there that I don't even need to explain to the audience, but this is timely, this is insightful, so let's jump right in. Let's go to Howard first.

Howard, talk if you can at a very high level about the ESG practice and the lawyers involved in ESG at Jones Day. How did that come together? How's that work?

Howard Sidman:

Sure. Thanks again for having us, Dave.

We have over 200 lawyers at the firm that advise clients globally on ESG-related transactions, regulatory compliance issues, litigation, and of course, risk management. What's most important about our practice is that we do not have an ESG or sustainability driven agenda. I like to say we are ESG-agnostic at the firm. We represent clients, not causes. In that regard, we help clients with respect to specific ESG challenges, including representing them with respect to some of their most important and relevant ESG-related investigations and litigations globally. And because we have all this experience, we can also help clients mitigate their ESG-related risks going forward. We also regularly advise management and boards of directors on governance issues related to ESG, including impact on corporate strategy and competing stakeholder perspectives.

And perhaps most relevant for today, we have a team of lawyers, some of whom are here with me right now, to help clients navigate often inconsistent reporting and regulatory requirements for companies. We help clients prepare a coordinated, consistent, and holistic global strategy to address regulations in different jurisdictions. At the end of the day, we try to offer practical, business-focused advice to advise on regulations and mitigate risks.

Dave Dalton:

It sounds like 200 lawyers may not be enough, Howard. This is a lot to unpack globally, right? How does the firm get its arms around that? Now, granted, everybody knows Jones Day has this global footprint and very talented lawyers. But cross-jurisdictionally speaking, different rules, different areas, how do you coordinate and kind of keep your pulse on what's really important to clients?

Howard Sidman:

It's all about communication. We are one firm worldwide, and that is not just a tagline, that is a manner in which we operate. We have constant communications between offices, between practice leaders, and between lawyers. I am on the phone in the morning with Paris and Germany and in the afternoon with Cleveland, Texas, and in California talking about what's happening and where this is going, and most importantly, how it's impacting our clients. I'm in New York, but it's not just a New York issue. It's not even a US issue, as we're going to discuss today, it's a global issue.

Dave Dalton:

And these things were relevant before anybody had coined ESG. These things were pertinent to C-suite people everywhere, right?

Howard Sidman:

That's right. Absolutely. Look, on the east side, the firm has been doing environmental law for the last 40 years. And in Europe, we have one of the best environmental practices of any firm, I would say. And in the US as well, we have large industrial clients who've been navigating these issues for many, many years. And so ESG or sustainability, whatever you want to call it, is a way of organizing our guidance to clients and a way of presenting ourselves. But the things we've been doing are not new, they're just changed with the impact of increased politicalization and increased risk for our clients.

Dave Dalton:

Let's pick up on that for a second because I want to talk about, as we move into the last part of 2026, looking to 2027, what are clients asking about most on a global basis? What's keeping them up at night? Where are the pain points? What are they concerned with? If you had to identify one or two areas where, "Here's what we're working on," what would you say?

Howard Sidman:

Sure. ESG obviously, or sustainability, is a broad area. It depends on the client and the industry. Our guidance to clients is unique because each client is unique. Businesses and manufacturing have different ESG considerations than healthcare, and of course, our banking clients have different considerations from both those industries. And even within those sectors, our clients' approach to ESG is different. Some want to be out in front, some want to be last in line, and actually most probably want to be somewhere in the middle, just keeping their head down, doing their job, doing the business that makes their customers happy, but also being compliant with the rules.

As a general matter on the E side, we're seeing clients still need to be thoughtful about greenwashing issues, that is greenwashing, which is the practice of making a product or a service more environmentally friendly than it actually is, along with related consumer protection claims, and that includes some of the regulations we'll be talking about today. On the S side, supply chain. Regulations will require more due diligence. Industry supply chains, that will put burden on companies to do their due diligence, but also make more disclosures. And on the G side, governance-related considerations vary by jurisdiction, but it is really thinking about how to best position your company to have a process in place that makes those decisions and thinks through the local and global impacts of your voluntary and required disclosures and protect your company and your officers and directors.

Dave Dalton:

Great overview. And today's focus is on the European Union, EU-related ESG issues. Historically, it seems like the EU is a little bit out in front of many other parts of the world, whether it's North America or Asia, whatever. Do you find that to be true in terms of EU corporations addressing these issues and being a bit more proactive, seeing what might be coming down the regulatory and legislative pipelines?

Howard Sidman:

Without question, Dave. The EU has been out in front of these issues for a while, over the last 20 years. It's going to likely to continue to be the case going forward. The point is though that the EU laws are not just impacting EU companies. They could impact any company that does business in the EU, and so it's not just an EU thing. When the EU makes a law, it can have global implications for companies that are... they're not in the EU.

Dave Dalton:

And you don't know what you don't know. If you're a Canada-based company, you better understand if you're exporting or doing business, et cetera. This is a lot to unpack. Good overview.

Let's go to Jürgen next. Jürgen, we are going to talk about deforestation regulation in the EU. Talk about what that is exactly and what problem or problems is it trying to solve.

Jürgen Beninca:

Thank you very much for the question. It's important to put the deforestation regulation into perspective. The European Union, as we discussed before, has apparently been very successful in producing statutes. And within the wealth of ESG legislation of the European Union, the EU Deforestation Regulation addresses one particular issue that can be considered a kind of supply chain compliance management issue. The regulation addresses an obvious problem, agricultural expansion for commodities like palm oil, soil, cattle, cocoa, coffee, rubber, and wood is a leading driver of deforestation. The EU Deforestation Regulation is designed to limit the impact that the EU contributes to deforestation on a global basis, and it wants to ensure that certain products sold in or exported from the EU do not come from land that was deforested or degraded after December 31, 2020, which is obviously an artificial deadline, but of course at some point you need to start.

Dave Dalton:

That's a lot to unpack too. Those product areas that you mentioned, that's hefty, palm oil, timber, everything else you mentioned. Who checks on this? Who's watching?

Jürgen Beninca:

Well, that is exactly the point. The deforestation regulation is designed to require companies to check whether the commodities and certain derived products from these commodities have not contributed to deforestation. And they need to meet also further additional legal requirements, but deforestation is key. So companies that import, let's say, wood or wood products into the European Union, they need to show and they need to check that their products have not contributed to deforestation.

Dave Dalton:

Now, does this apply to everybody in the supply chain or the originator or the ultimate purchaser? Who's accountable?

Jürgen Beninca:

Accountable is, first of all, the so-called operator, which is a technical term that is essentially the entity that imports these commodities or derived products. Come back to an example, natural rubber is a commodity covered by the EU Deforestation Regulation. A tire that contains natural rubber is a derived product within the meaning of the deforestation regulation. As a result, if you have, let's say, an Asian tire company that produces tires made out of natural rubber, at least in part, that Asian tire company needs to show and to prove, if necessary, that the tire in question has not contributed to deforestation, which is an unbelievable difficult task.

Dave Dalton:

Yeah. So if I'm a tire manufacturer in Hong Kong and I'm selling tires in Paris, I've got to make sure that my manufacturing process did not contribute to deforestation.

Jürgen Beninca:

That is correct. What happens here, the company or the entity that imports the respective tire from Hong Kong, or let's say, more relevant, it's Korea or Taiwan or China, that particular entity that imports a tire into the European Union is the operator and therefore needs to show that the tire has not been made out of natural rubber that has contributed to deforestation as defined. On top, under the EUDR, the first entity importing the product is also deemed a kind of operator and therefore also needs to submit, like the original operator, so-called due diligence statement into an IT database established by the European Commission.

And then of course the interesting thing is once a tire has been used to produce a car, which of course normally has four to five tires, then the car itself is not a derived product within the meaning of the deforestation regulation, only the tire itself. It's a highly complex system, which of course has caused significant concern and headaches and has caused significant compliance costs for our clients.

Dave Dalton:

Well, and even if a client is trying to do the right thing, it sounds like there are a lot of potential traps out there. How are they supposed to know everything? I guess I'm dumbing this down, I apologize for that, but it just does seem like this is a full-time job for a lot of people. Watching the compliance issues are huge here.

Jürgen Beninca:

Our clients have made significant investments to tackle this particular questions, in particular, of course, tire companies. But also, chocolate is a huge issue in this particular area, coffee companies as well. Any wood product is a major, major issue in this particular context. And this is indeed a major concern for our clients.

And the risk is twofold. First of all, we have the risk of fines. And second, and from my perspective, even more important, you have the issue, and that applies not only to the operators, the importer of covered commodities or derived product, but also the customer of such importer/operator, that they have to be aware of the risk that, from one day to the other, their supplier can be considered to be non-compliant with the EU Deforestation Regulation with the result that they cannot use the product any longer. And that, of course, can lead to significant disruption. So our general recommendation is to look for a second supplier from a different region in the world.

Dave Dalton:

Which is another layer of complexity.

Jürgen Beninca:

Oh, yeah.

Dave Dalton:

I'm looking at some notes here from when we started putting this program together. This action, the regulations were postponed twice.

Jürgen Beninca:

Yeah.

Dave Dalton:

Yeah. I'm wondering about the political context of that. What was going on? There were changes made very late last year. How might that be relevant to this discussion? Are things moving along as you anticipated, or things kind of still trying to get traction, or where are we?

Jürgen Beninca:

The European Union prides itself of having a very sophisticated process of adopting statutes, rules, and regulations. In practice, the European Union does not meet its own standards, and the EU Deforestation Regulation is a perfect example. First of all, the original deforestation regulation was adopted in May 2023, entered into force in June 2023, and then was supposed to start to become applicable at the end of 2024. The EU Deforestation Regulation met a significant opposition from businesses and certain EU member states alike. As a result, there was a political process in the year of 2024, which led to a decision at the end of 2024 to postpone the application of the EU Deforestation Regulation by one year. So it was supposed to start, and I'm simplifying here, by the end of 2025.

And then we had a very interesting development. It was a commission that had to acknowledge the fact that they were not able to build the IT system on which the entire EU Deforestation Regulation is based. I mentioned before the so-called due diligence statement and such these due diligence statements need to be uploaded on the IT system, and the EU commission completely underestimated its own task. And as a result, the commission had to ask for an additional extension. There was some debate back and forth on how to accomplish that. The result was postponed by an additional year. So by the end of 2026, the EU Deforestation Regulation will become applicable at least for the large entities. And then we had even additional changes in the summer of this year when certain derived products were excluded, and that obviously is good news on the one hand. On the other hand, it's clear that the companies working with these derived products, in particular certain leather products, had invested years of preparation now to learn that all of these efforts were futile.

Dave Dalton:

Waste of resources when you look back.

Jürgen Beninca:

Waste of resources and the huge amount of frustration. And here, I should also mention that part of the legislative package at the end of 2025 was to implement certain additional changes to the EU deforestation, designed to limit the pressure on the functionality of the IT system that the EU commission needs to run. And under these additional changes, a new concept was introduced. And according to this new concept, the number of due diligence statements to be submitted was reduced significantly, and of course, also good news for many of our clients. At the same time, many of them have realized that years of preparation were wasted.

Dave Dalton:

In a prior conversation, you mentioned the downstream operator category. Tell me how that fits into this discussion and why that's relevant.

Jürgen Beninca:

That's exactly the mechanism I referred to. Originally, the requirement was that not only every operator, i.e., the entity importing or exporting the covered product, but also everybody downstream in the supply chain had to submit the due diligence statement to the IT system. Of course, it was possible to make some reference to prior statements submitted, but essentially the rule was everybody in the supply chain until the end consumer had to submit a due diligence statement. And that concept was changed at the end of 2025. And now, today, we have only the operator needs to submit the due diligence statement, and the downstream operator does not have to submit a due diligence statement any longer. And only the first downstream operator needs to keep certain records, but everybody else in the supply chain only needs to keep for five years. It's a very limited information describing the product and supplier.

Dave Dalton:

Well, that's good, right?

Jürgen Beninca:

It's absolutely good. But I can tell you, we advised, even in the summer of 2025, clients that had to set up rules and internal procedures to allow each entity. It was not possible to have a kind of group compliance within the corporate group. So every entity within a corporate group working on particular product was considered an operator or a trader, and as a result, had to submit due diligence statements. A huge bureaucracy. And of course, that was limited and reduced because of the changes adopted at the end of 2025. But still, all of these efforts to prepare for that particular situation were wasted. And I can tell you, of course, on the one hand, the clients were happy, but on the other hand, I could use many words here, which of course are not appropriate for this audience.

Dave Dalton:

This is a family podcast. We can't tell you... But yeah, you used the term frustration earlier. That's got to encapsulate... One more thing, Jürgen. Talk about what companies should be doing right now to prepare for the December 2026 deadline. Is that something that's front-burnered right now?

Jürgen Beninca:

I would recommend doing two things. First of all, I would recheck again and again to make sure for every single product on which my company has contact to what my particular role is. Am I an operator? Am I a trader? I'm a downstream operator, or am I a downstream trader? This is really important to understand. And even the same company can have numerous roles depending on the various products and its role in the supply chain. That's the first thing.

And second, I come back to the point I was making earlier. What's really important is to check, from a resilience perspective, what is my plan B if my supplier cannot sell me the product I'm relying on any longer? As I said, single sourcing these days under these regulatory requirements, I think, is a highly risk business, and I would strongly recommend looking for alternative suppliers.

Dave Dalton:

The perils of single sourcing. How do you help clients, Jürgen, as outside counsel, manage all this? Short answer, but where do you usually come in? Where do they call you, or what do you help with? I'm sure we could probably talk till midnight about that, but high level, where do you help?

Jürgen Beninca:

Clients, first of all, have developed their own internal resources. That is the experience that we have made. And of course, for very good reasons, because only the clients themselves do have a perfect understanding of their own supply chain and how they do their business. And that knowledge is the key requirement for any proper application of the laws. Where we are being called upon is to address certain specific questions on how to interpret certain rules. Even we get questions on how to interpret frequently asked questions, publications issued by the European Commission. It's that absurd. And for that reason, we get very specific questions to provide advice on particular circumstances. And of course, the real demand and the real questions will come up as soon as enforcement authorities will start investigations.

Dave Dalton:

Sure, sure. Jürgen, thanks for that overview. Great information.

Let's go to Armelle. We're going to talk about green claims for a couple minutes. Talk to us, at a very high level, what is the EU Empowering Consumers for the Green Transition directive? I guess that's anti-greenwashing, but can you tell us what that is?

Armelle Sandrin-Deforge:

Exactly, Dave. It is a directive regarding anti-greenwashing. The full name of this directive is Empowering Consumers for the Green Transition through Better Protection Against Unfair Practices and through Better Information, and it actually sums it up. It summarizes the provision of the directive very, very well. This directive wants to protect consumers against misleading and false either environmental claim or sustainable claims. It also prohibits generic environmental claims if they're not supported by strong evidence, and this is super important. And it also creates a so-called harmonized label, like a document really for the consumer, but it's going to be the same document for all kinds of products, which is going to inform the consumer regarding the legal guarantee of conformity of the product they're buying and the commercial guarantee of durability. So how long is my product going to be working, and do I know how much recyclable content it has or things like that? That is the guarantee of durability.

Dave Dalton:

Great information there. And these orders went into effect on 27 September 2026, correct?

Armelle Sandrin-Deforge:

That's absolutely correct. However, two things here. First of all, some member states and countries are actually running late transposing the directive. It's a directive, so it has to be transposed into national law in each and every member state. Generally speaking, it's not going to change the general provisions of the directive, which are very clear, but transposing into national law is going to define the authority. Who is the authority in charge with monitoring the implementation of this directive? The penalties, will there be administrative, criminal penalties, et cetera? And certain member states also want to implement, extend really, the obligations a little further. For instance, this directive is meant to be only for B2C, business-to-consumer relationships, but some member states may decide and can decide to extend that to B2B, business-to-business relationship, which is extremely important for our clients. Also, yes, the deadline was September 27th for this directive. However, some of those provisions already exist under certain national law. Greenwashing isn't new to the EU regulatory landscape. In fact, greenwashing has been a criminal offense in France since 2021.

Dave Dalton:

Oh, they were out in front. Well, talk about that for a second. Green claims and green packaging, big components of all this. What instigated this or brought it all about? Were there a lot of bad actors that were taking advantage of this sort of packaging or branding categorizing, if you will? What brought all this on?

Armelle Sandrin-Deforge:

I don't know if it's a matter of bad actors or if it is a matter of increasing sensibility of consumers and NGOs on the topic, both with respect to green claims and to green packaging. Packaging is something that we have in our everyday life, and with respect to sustainability, it is a great tool, right? So you may want to buy a bottle because it is made out of recycled content, or you're happy to know that you can recycle it down the line. So if there is a green claim specifically on packaging, it may actually trigger the consumer to choose that product rather than a competitor product.

Just to illustrate the increasing issue, during the Paris Olympics in 2024, there was a big case. Actually, NGOs filed, litigated against Coca-Cola, Coca-Cola was one of the sponsors of the Olympics, and they claimed that they were helping reducing packaging. They were offering participants in the audience to use plastic cups, and you could use it again. You would buy it once. It was like one euro for the cup. And then every time you went to do soda fountain, they would refill it, but you didn't have to buy a new cup, and so I actually have a stack of those beautiful Coca-Cola cups at home and we love them. But the thing is that there were a tool of 13 million plastic cups during the Paris Olympics, which is a huge amount. And also, the NGOs found out that in certain occasions, the staff and the soda fountain would use a plastic bottle to pour the Coca-Cola into the plastic cup, which was not really reducing packaging at all.

Dave Dalton:

So talk for a second about some of the key rules companies need to know about and how do companies prepare for operations under the new regime.

Armelle Sandrin-Deforge:

Well, companies need to be very, very careful about the claims that they make, and they need to check, every time they use the word green, clean, sustainable, recyclable, recycled content, there should be a trigger warning in their brain. They need to substantiate those claims with robust methodology. Color coding a product, a label, a packaging is also very sensitive to NGOs. The green color is a red flag. And they also want to make sure, in the jurisdiction where they operate, whether greenwashing applies only to B2C but also B2B because this is very important to them as well. And they should watch out for self-labeling, which is another thing that the EmpCo directive is challenging.

Dave Dalton:

Thanks.

Aidan, thank you for being so patient, first of all. We're going to talk about PPWR, Packaging and Packaging Waste Regulation, PPWR. That went into effect already this year. What was that designed to do?

Aidan Lawes:

Hi, Dave.

Yeah, so you're right. It came into effect. There's a number of phased things which we'll come to speak about. But the problem is this, and Armelle has alluded to it already, according to the EU's numbers, 40% of all plastics and 50% of all paper consumed in the union is packaging. That's an astonishingly large number. And apparently, 36% of all solid waste in the EU is packaging. So the EU thought it's about time that we try and do something about it to get those numbers down, and so really everything that flows from that is to address that specific problem.

Dave Dalton:

What are some of the key provisions as it went into effect?

Aidan Lawes:

All right. So there's a couple of related things, but they're also quite different as well. So the first thing is that there's a responsibility to minimize packaging. So you can no longer have very small things in very big boxes turning up. You've got to have packaging that is minimized to the greatest extent possible to sort of conform to an item. Logically, that's kind of hard to argue against. We all get annoyed when you get very big boxes with very small things. Maybe I just like things that are in bigger boxes in the first place, but who knows? It also encourages recyclability, so making things that are recyclable, but also are made from recycled materials, which are two different but related things.

Better labeling, so for example, it requires a scheme to be established where you can sort goods better to allow them to be recycled. And the idea is that by having specific labels or color codes or something like that, "Oh, well, if this packaging has got this color or this word on it, it goes in this bin. And if it's got this color or this code, it goes in the other one." Because we all slightly struggle with you see a recyclable bin, but you think, "Well, is this actually recyclable? I don't know what to do with it." That's another thing which is trying to be sold here.

And lastly, there are national-level targets, and I guess this is one of the headline things. The goal is to reduce per capita waste against a 2018 baseline by 5% by 2030, 10% by 2025, and 15% by 2040. Like I said, that's a national target that they've enshrined in this legislation. How it's going to be enforced is a different question, but that's the goal and that's the target that people are to be shooting for.

Dave Dalton:

Well, you segued wonderfully into my next question because I was going to ask about enforcement actions and penalties and monitoring and all that stuff that a client might be concerned with. How's that going to unfold?

Aidan Lawes:

I don't think there's a good answer to this question. Armelle and Jürgen might well jump in here. But PPWR is a regulation, so it applies uniformly across the EU. However, from an enforcement perspective, it's designated member state authorities that are largely going to be responsible for enforcing these rules, a number of the rules apply, and we'll come onto this as well, to importers, distributors, and manufacturers. For example, if they breach their requirement to label their packaging in a certain way, then they could be fined for that. Obviously, enforcing against member states and missing targets is a whole nother thing altogether. But at the moment, it's a bit of a patchwork, and I don't think it's clear to say how this is going to work.

I don't know if Jürgen or Armelle wanted to comment on that as well.

Armelle Sandrin-Deforge:

I agree with you. It is a patchwork. And it's not only just a matter of penalties, it's a matter of just implementing the scheme. One of the main tools of the PPWR is the extended producer responsibility, which requires its producer of packaging to register onto a national registry in each of the countries where they place packaging on the market. And then they provide sort of a tax that they have to pay based on the volume and the nature of the packaging that they place on the market. But we have such a scheme in each different member state, and the exact details of that scheme will differ country by country. So it's going to be very difficult for companies to follow up and make sure that they're doing the right thing and identify how much they need to pay in France versus Germany, et cetera. And there is no way around, because the packaging that we place is on a specific market.

Jürgen Beninca:

I couldn't agree more. And unfortunately, this is a very common theme for almost all European legislation, even if you are talking about regulations, which are of course a binding law in every EU member state. But often, they need to be supplemented by additional supporting national legislation in order to work. And that is true with respect to the PPWR, but also true with respect to numerous additional legislation. And we are in the process of killing ourselves with additional rules and legislation.

Dave Dalton:

And just to be clear, Aidan, PPWR applies to anybody selling into the EU, right? Not just EU-based companies. If you're selling there, you've got to abide. Is that correct?

Aidan Lawes:

Yeah, it's even broader than that. Say something was produced in the US. A distributor then imports it into the EU. That importer would need to comply with these rules. If you manufacture in the EU, yes, that has to comply as well. You can also have secondary distributors. So it sort of attaches to the person who first places the good on the market, who has the primary responsibility. This is kind of similar conception to what Jürgen was talking about earlier with the deforestation regulation. It's that person who has that first touch point with Europe who has to think about, "Have I complied with PPWR?"

Jürgen Beninca:

And that even applies to small mom-and-pop shops. eBay sellers in Germany has stopped selling into other EU member states because of the PPWR, because they wanted to avoid the extended producer responsibility.

Dave Dalton:

I'm sorry, I'm not supposed to editorialize, but that's discouraging, isn't it? People are just, "It's not worth it."

One more question of you, Aidan, delves into this, but let's talk about compliance for a second. Now, companies have had some time to prepare, but what else should they be doing, could they be doing to make sure they're not crossing any lines?

Aidan Lawes:

So, again, this is going to sound very familiar to what Jürgen said earlier for deforestation regulations. It's really looking at the goods that you import, or if you're a manufacturer in the European Union, looking at your packaging. What is the recycled content of your packaging? Where does it come from? Does it comply with these rules? There's one thing which we haven't talked about, but which has sort of made some headlines is that there has to be this empty space ratio of less than 50%. And by the way, if you fill it with air sacks or bubble wrap or whatever, that counts as empty space. So you're going to have to think about your package, and it can take a really long time to adjust your supply chain and your packaging around your products to be adapted to these things. And obviously, there's costs with all of that too.

So looking at your packaging, looking at your recycled content, looking at which products you do actually place in the union, if you're a global multinational, again, like Jürgen said, it's due diligence on what you've currently got and then trying to benchmark yourself against the requirements, even though for some of them, you don't have to hit some of these targets until, for example, 2030 or 2028.

Dave Dalton:

Going into different markets, you're introducing different and new products. It never ends, I suppose. Aidan, obviously today's focus was on the EU, but I've got to imagine there are similar regulations coming into force globally. Talk about that for a second.

Aidan Lawes:

You're absolutely right. And this is an important point, you've alluded to it already, global companies are having to deal with similar rules, but with significant differences across the globe. So for example, you wouldn't necessarily think that financial institutions were hugely worried about packaging and waste rules. And yet under the PPWR, envelopes and things that... for example, if you get a new bank card, which obviously is something you want and there's no other way to get it, that counts as waste under the EU regime. In the UK, those things are specifically excluded because they say that's part of the product. In the US, and Howard will correct me here, it varies by state as to whether that is waste or not and whether there's certain exclusions. For example, if I'm required to send you your mortgage documents, is that waste? Is it a product? Is it neither? Is it both? So it's a minefield, and it's good fun.

Dave Dalton:

Oh, for sure.

Howard Sidman:

No corrections needed, Aidan. It is a minefield, and we have been advising clients in this area for a while. So we have the expertise to help.

Jürgen, this has been great. Can I jump in for a second though and just ask? Because sitting here in New York, I do a lot of work advising companies that are based in the US and outside the EU. Obviously, our practice is global. In terms of the deforestation regulations, what do companies outside of Europe need to be thinking about?

Jürgen Beninca:

Well, let's put it this way. It is clear that every company that exports into the European Union will have to think about the EU Deforestation Regulation as soon as it produces products that are covered by the EU Deforestation Regulation, in particular the commodities I mentioned, as well as the derived products. To give you an example, we have advised clients producing paper products that are shipped into the European Union. And paper products are really difficult because the wood content, of course, comes from numerous sources. It's very difficult to trace down these wood products and to make sure that they are deforestation-free as defined by the EU deforestation. But as soon as you start shipping these wood products into the European Union, you are caught, you need to think about it.

Howard Sidman:

That's fascinating and certainly very, very material for our non-EU companies. Thanks, Jürgen.

Armelle, I'm a bit of a broken record here, and I apologize for jumping in, but I asked Jürgen the question about how does it impact companies outside the EU, and I'm wondering if you have a thought on EmpCo and how companies outside the EU will be impacted.

Armelle Sandrin-Deforge:

Well, that's a very good question, Howard. The minute a company sells the product into Europe, whether it is a European company or Europe subsidiary of a multinational or it is an international company, the mere fact that a European consumer is going to buy this product possibly based on a green claim or a sustainable claim that has been made about this product or about the company that is selling this product, EmpCo is going to apply. That means that consumers or NGOs may actually sue any company they want in the jurisdiction in Europe based on this empowering consumer directive. There might even be some type of forum shopping because, as I explained earlier, this directive is going to be transposed into national law with a different set of penalties, sanctions, et cetera, depending on each jurisdiction. So there might be a case of NGOs deciding to suing a global company with a global tagline, for instance, into one or another European country based on the penalty that applies in that country.

Howard Sidman:

Wow, that's a lot. Thank you.

Dave Dalton:

This has been a great discussion. We've been trying to get this on the calendar for a long time. I'm glad we finally did. I have a feeling we're going to talk again, either as a group again or a couple of you, as things develop and as things change. But let's go back to Howard for just one moment, and then we'll wrap.

Howard, first of all, you've got a great team here. You knew that already, but-

Howard Sidman:

I do. I do. I'm learning as we go along. There's a lot happening in this space, and it is a testament to the firm and to the lawyers on this call that we are so able to provide thoughtful guidance and practical guidance to our clients.

Dave Dalton:

Yeah, for sure. Great. Anything else you'd like to leave the audience with about the EU ESG's efforts or Jones Day's help or anything else you want to-

Howard Sidman:

Yeah, I think, look, the bottom line is we have the expertise here to help clients. It's very, very important, as I mentioned at the beginning, that you have to think about these regulations, not in a vacuum, but how they apply to you and to your specific industry and the areas in which you operate. First thing you need to do is understand the laws and how they apply to your company. We can help there. I always say get legal involved early and often and develop a coordinated and consistent approach to responding to these laws across your jurisdictions and where you operate and do business.

Dave Dalton:

We covered so much today. I think we're all going to talk again, either as a group or maybe individually as topics and subject matter arise, but great, great program today. Armelle, Aidan, Jürgen, of course, Howard, thank you so much. Thanks for being here, and we'll talk again soon.

Aidan Lawes:

Thank you, Dave.

Armelle Sandrin-Deforge:

Thank you, Dave.

Jürgen Beninca:

Thanks. Bye.

Howard Sidman:

Thanks, Dave.

Dave Dalton:

Go to jonesday.com. You're going to find a lot of relevant information there. There's a whole page dedicated to the ESG practice, which you heard from today. You'll have contact information there to today's panel participants and more information. Our Insights page will give you more podcasts, videos, publications, blogs, and other pertinent information. Subscribe to JONES DAY TALKS® wherever you find your favorite podcast. JONES DAY TALKS® is produced flawlessly by Tom Kondilas. He keeps showing up.

As always, we thank you for listening. I'm Dave Dalton. We'll talk to you next time.

Speaker 6:

Thank you for listening to JONES DAY TALKS®. Comments heard on JONES DAY TALKS® should not be construed as legal advice regarding any specific facts or circumstances. The opinions expressed on JONES DAY TALKS® are those of lawyers appearing on the program and do not necessarily reflect those of the firm. For more information, please visit jonesday.com.