Environmental, social and governance (“ESG”) concerns refer to a set of environmental, societal and corporate governance matters which allow for assessing the sustainability and ethics of a certain activity/enterprise.
Initially a concept linked to capital markets and financial investment decisions, ESG has become a key consideration for all companies, also in light of the recent push for states and organizations to be more sustainable across the board linked to the definition of 17 sustainable development goals (“SDGs”) by the UN resolution on “Transforming our world: the 2030 Agenda for Sustainable Development”.
As such, we are now seeing increased requirements and expectations of stakeholders relating to ESG being imposed on organizations via laws and regulations, such as EU provisions concerning sustainability such as the proposal for a Corporate Sustainability Reporting Directive (CSRD), and the recent proposal for an EU Directive on corporate sustainability due diligence.
Space activities are, of course, no strangers to ESG concerns. Indeed, on the one hand, ESG affects the way in which space activities can be carried out. As an example, national space laws such as the Portuguese, French, UK and Luxembourg laws set out in their licensing procedures the need for space operators to ensure that the envisaged activity does not cause harm to the environment and that the corporate structure of the operator is fit for purpose – something that is expected to require a significative effort from the operators to accommodate their business structures to those requirements. On the other hand, ESG compliance has triggered the development of new business models for space data and services, in a market estimated to be worth around US 100 billion.
An immediate example lies in the potential uses of space-based Earth observation data for achieving ESG goals.
However, such (new) uses of space data and services for ESG may trigger relevant legal questions, that the players at stake need to consider, otherwise running the risk of jeopardizing their investments, such as: (i) the lack of universal or widely accepted standards for ESG criteria definition and assessment, (ii) the lack of widely accepted standards or rules for ensuring and proving origin, accuracy or completeness of data, or for interoperability, in the context of ESG assessment and monitoring. These legal challenges will need to be properly factored in the definition of the business model at stake and in the negotiation of the necessary agreements and contractual arrangements to implement such business models.
In sum, it is clear that, albeit currently there is no dedicated legislative approach for space on ESG matters (at least at EU level), ESG concerns and accountability will continue to trickle down and influence the way in which space actors carry business in the future, especially if they want/need to access European sources of financing.