Beyond the EU Battery Regulation

Reporting on environmental, social and governance (ESG) performance will no longer just be the responsibility of large companies in 2023 and beyond. This is particularly true for battery manufacturers looking to scale up production in the EU.

Old and new disclosure requirements are changing the reporting landscape, and as S&P notes, companies will have to deal with a growing number of complex regulations which are difficult to align. So what reporting requirements must European battery manufacturers respond to so they can remain competitive and compliant in the next few years?

Regulations to watch out for

2021: Sustainable Financial Disclosure Regulations (SFDR)

This regulation is focused on financial players and affects battery manufacturers’ ability to unlock funds from investors or receive discounted financing based on sustainability premiums. Though manufacturers do not directly report on SFDR, investors must disclose whether any ‘sustainable investments’ are aligned with the EU Taxonomy and measure the adverse sustainability impacts of both the entity and their investment products – so they will request manufacturers’ sustainability information, such as carbon footprint, to support their own compliance.

2022: EU Taxonomy Regulations

The EU Taxonomy is a separate regulation linked with SFDR that guides financial actors on whether a company they invest in is sustainable. Disclosing against it provides manufacturers with better access to financing. To be eligible, an activity must contribute to at least one of the Taxonomy’s six objectives – climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems – without significantly harming any other and while meeting minimum safeguards.

~2023: EU Battery Regulations

As with most sustainability-based regulation, disclosure across multiple ESG areas – supply chain due diligence, carbon footprint, recycling and digital labelling – is a central part of the EU Battery Regulations.

2025–7: Corporate Sustainability Reporting Directive (CSRD)

The CSRD requires companies to report on the sustainability impacts of their entire value chain, meaning upstream supply chain players face increased pressure to comply with and report on an expansive set of topics, including climate change, pollution, affected communities and business conduct. It revises the previous Non-Financial Reporting Directive (NFRD) and significantly expands the scope of what companies must disclose.

The bigger picture

These are only a handful of the regulatory requirements and standards, in the EU and globally, that battery manufacturers will have to stay on top of in 2023 and beyond. Though smaller manufacturers may not fall within scope of some now, this is likely to change – and customers and investors already want to know how they will be prepared. Industry players who want to follow best practice, go beyond compliance and remain competitive need to quickly understand the regulatory landscape, understand their key ESG impacts, and ensure the necessary policies and processes are in place to make progress and demonstrate compliance. Doing this now lets battery makers capitalise on the new landscape for sustainability reporting and use it to access cheaper financing and win larger customers.