Europe is leading the way when it comes to ESG regulations and new legislation. The European Union in particular have made large strides in encompassing sustainability directives into the business and financial reporting cycle. In individual European countries, there are specific measures and disclosures businesses need to make in order to be compliant with their laws and regulations. This can become extremely complicated for a global or European-based business, as knowing what you do or do not need to disclose can be tough to understand. The EU legislations can also pave the way for regulations in other countries, so being well informed on the changes within the European Union can help preparations for other country-specific requirements.
Environmental, social, and governance covers a vast range of topics. Each of the regulations discussed below covers either all of these topics, or focuses on one specific area. ESG topics include (but are not limited to) climate change, circular economy, human rights, social impact, supply chain management, governance structures within your organisation, and stakeholder management. Due to the number of topics that fall under the ESG umbrella, there is a small chance that every area will be relevant to your organisation. A great way to determine what areas you should focus and report on is through a double materiality assessment. This gives various stakeholder groups a voice as to what ESG risks and opportunities are the most impactful, likely, and important to the success of the business.
The CSRD incorporates all aspects of ESG into one reporting standard. It modernises and strengthens the rules around what information a company has to disclose, and creates an environment of accountability and transparency. The CSRD is extremely detailed, and breaks down each ESG topic and sub-topic into a set of European Sustainability Reporting Standards (ESRS topics). There is also the ability to add other topics which may not fall within the ESRS standards but might still be relevant to your business and operations. Within each ESRS topic, there are multiple data points that the business must report on in order to thoroughly disclose against that specific topic and sub-topic. For example, ESRS topic S1 Own Workforce will cover sub-topics such as adequate wages, health and safety, work-life balance, equal gender pay, training and development, and child or forced labour.
Not every topic or sub-topic will be relevant to every business, so a double materiality assessment is conducted first to identify relevant stakeholders, as well as challenges, risks, and opportunities that the business might face in regard to the financial and material impacts of said topics. This includes discussions with stakeholder groups such as customers, employees, suppliers, charities or organisations you may partner with, and financial institutions. A double materiality assessment will identify which ESRS topics are the most important and relevant, and therefore which ones you will need to disclose on for CSRD. Your business will then need to collect, measure, and report on the individual data points related to that ESRS topic, or put policies and processes in place to gather the data in the near future.
The CSRD framework was created to encourage organisations to be transparent in their ESG data and disclosures. It can allow for increased visibility of your supply chain and own operations, as well as identify areas of importance and improvement. An annual reporting timeframe means that progress can easily be tracked, and changes in priorities can be reflected in which topics are being reported on.
The ESRS standards are broken down as follows:
Currently, not every company that operates in the EU needs to report in alignment with the CSRD. Large companies must meet two of the following conditions:
Small and medium sized enterprises that are listed on the European market must meet two of the following conditions:
Non-EU companies also have to disclose if they have a turnover of more than €150+ million within the EU.
Similar to the CSRD, the CSDDD is a framework that provides clear objectives and disclosure requirements for businesses and organisations that fall within its scope. The aim of CSDDD is to foster sustainable and responsible corporate behaviour in a business’s operations and across the entire global value chain. It specifically identifies adverse human rights and environmental impacts in a company’s operations, including their subsidiaries, value chain, and business partners. It also aims for large companies to adopt a transition plan for climate change mitigation, as well as intermediate targets. Policies, code of conducts, and risk management systems are all included as supporting documents for when reporting must take place.
Companies are required to engage with multiple stakeholder groups to consult them at the different stages of the due diligence process, and allow them to provide relevant information and insights. The company will also need to establish and maintain a complaints and notification procedure, as well as continuously monitor the effectiveness of their due diligence measures. This all then needs to be communicated and reported publicly according to the CSRD and ESRS standards, topic definitions, and data points.
The CSDDD process covers six topic areas:
The CSDDD will apply to both EU and non-EU businesses with at least 1,000 employees and a net turnover of €450 million or more. For a non-EU company to be in scope, the €450 million net turnover must have been generated within the European Union. Small and medium sized enterprises may also come into scope at a later date, but this has not yet been confirmed.
The CSDDD will be enforced by EU member states who may issue injunctive orders and dissuasive penalties as appropriate. A commission will also be set up at European level to supervise disclosures, as well as bring together representatives of the different national bodies to ensure a coordinated approach.
Greenwashing refers to when a company can give a false impression of their environmental impacts and benefits, or that of their products and services. The Green Claims Directive requires companies to substantiate any voluntary green claims they make in business-to-consumer commercial practices such as marketing material or advertisements. This adds credibility to any claim made by the business so that consumers can be confident that such claims are reliable and verifiable. The European Union found that half of all green labels offer weak or non-existent verification, proving that greenwashing is a major issue. The directive was proposed in 2022, and if the European Parliament and Council of the European Union reach an agreement for adoption, EU member states will be required to implement the directive into national law within 24 months. This means that businesses do not have to report on the directive yet, but will do soon. Scope for disclosures have to be decided first.
The Green Claims Directive aims to make green claims reliable, comparable and verifiable across the EU. It protects consumers from greenwashing claims and contributes to creating a circular and green economy by enabling consumers to make informed and data-driven purchasing decisions. It also helps establish a level playing field when it comes to the environmental performance of products and services that are being sold. Businesses must use the directive to provide guidance on how to prove their environmental claims and labels, which can include checks from independent organisations and third parties. Labelling schemes ensure that the claims are transparent and reliable. For example, a business should be able to provide certification from a third party that provides evidence for a claim such as a product being made of 30% recycled material.
In 2022, a directive on gender balance on company boards was proposed to improve the gender balance in corporate decision-making positions in the EU largest listed companies. The Women on Boards Directive aims to ensure that gender balance in corporate boards in improved. The directive enforces a transparent selection process of the board members based on clear criteria and a comparison of the candidates’ qualifications. The targets are a minimum of 40% female presence in non-executive board members, or 33% among all directors of the under-represented sex by 30th June 2026.
In order for this process to be as transparent and reliable as possible, companies are required to make appointments based on a comparative analysis of qualifications by applying clear, gender-neutral and unambiguous criteria to ensure applicants are assessed objectively. This ensures that candidates are assessed based on their individual merits, irrespective of their gender identity. Large EU listed companies also have to undertake individual commitments to reach gender balance.
If a company is unable to meet these targets, they must report on the reasonings behind this, and ensure that measures are in place to address the shortcomings. EU member states may also apply penalties to companies who fail to comply with selection and reporting obligations.
The Ecodesign for Sustainable Products Regulation (ESPR) came into effect in July 2024, and is a part of the package of measures that are central to achieving the objectives within the Circular Economy Action Plan. The aim is to significantly improve the circularity, energy performance, and other environmental aspects of a product placed on the EU market. Under the regulation, steps will be taken towards protecting our planet, fostering more sustainable business models, and strengthening the overall competitiveness and resilience of the EU economy.
The ecodesign requirements for almost all categories of physical goods (except food) include:
Seeing as the regulation is new, there needs to be a prioritisation exercise that allows a plan to be set for the products and measures to be addressed under the regulation. This will be based on inclusive planning, detailed impact assessments, and regular stakeholder consultations.
The Triman logo came into effect in France in 2015, and is printed on recyclable products and packaging sold to consumers in France. The aim for this logo was to make it clear to consumers how to sort their rubbish and recycling into the correct waste streams. If a product does not show the Triman logo, then it can be disposed of in the general waste. There have been some recent updates to the necessary use of the logo, including electronic goods and their packaging needing to be marked with the symbol, which was implemented in 2022. The logo is therefore mandatory on all household packaging, textiles, shoes, furniture, tyres, paper products, electronic goods, and batteries (as long as they are recyclable).
The new updates have also meant that the format of the logo has now changed. The new format requires sorting advice which can be in French text, or symbols, or both. If the product is not sold exclusively in France, then the country code ‘FR’ needs to be applied to the logo label as well. This is to avoid confusion for consumers in other countries that may have different sorting rules and requirements. Each product or packaging category has its own specific requirements when it comes to where and how the Triman logo needs to be applied, so following sound government advice is the best way forward.
The Blue Angel has been the ecolabel for Germany for more than 45 years. It is an independent and credible label that sets clear and stringent standards for environmentally friendly products and services. It is a label that consumers can use to identify products that place less of a burden on the environment and upholds standards with respect to the protection of human health. The aim is to provide private customers, large institutional consumers, and public institutions with reliable guidance for environmentally conscious purchasing. The criteria for a Blue Angel label are developed by the German Environment Agency on a scientific basis. The label can be placed on many different products, including paint, furniture, washing detergent, or recycled paper. More than 30,000 products and services have been awarded a Blue Angel ecolabel.
In order for a product or service to be awarded a Blue Angel label, it must complete an evaluation process that takes into account a holistic view of its life cycle. The aim here is to identify areas relevant to the environment for each product group in which environmental pollutions could be significantly reduced. This means the Blue Angel criteria go above and beyond traditional environmental criteria such as lower energy consumption, lower emissions to water, air, and soil, and the preservation of resources. It also takes into account health-related aspects such as pollutant levels and noise emissions, as well as working conditions during the production process. This allows for a more holistic view of the product, especially when compared to other ecolabels that may just focus on environmental impact. This view is especially important in products from industries that are known to have many issues relating to the social side of ESG, such as textiles.
While the Green Dot is no longer mandatory (since 2023), it is still widely adopted in several countries as a voluntary symbol. Contrary to popular belief, the Green Dot symbol does not mean that the packaging it is applied to is recyclable. Instead, it is a financing symbol for producer responsibility (EPR), not an ecolabel. This means that the company who supplied the packaging has made a financial contribution to a nationally authorised take-back system. In order to use the Green Dot symbol, a company must have a trademark license to do so. These licenses are typically authorised by the Packaging Recovery Organisation Europe (PRO Europe) who have a license agreement with the national Green Dot organisations.
The Green Dot is one of the most recognised symbols associated with environmental and financial responsibility. The symbol trademark is internationally protected in order to help consumers identify the symbol as easily as possible. There are strict guidelines around how to use the Green Dot for this very purpose.
The Nordic Swan is one of the world’s toughest environmental certifications to achieve. It offers a recipe on how to reduce the environmental impact from production and consumption of goods. It offers credible, third-party certified guidance for customers and professional buyers to choose goods and services that are among the environmentally best. Their framework encompasses resource efficiency, reduced climate impact, non-toxic circular economy, and a conservation of biodiversity, with a strong focus on health as well. The raw materials, production, use of the product, and the way it is disposed of are all considered in the life cycle analysis of a product.
The Nordic Swan ecolabel also has its own certifications to strengthen the credibility of what the label represents. It is a Type 1 ecolabel in accordance with the ISO 14024 standard, and is also a member of the lobal Ecolabelling Network for Type 1 ecolabels. This goes to show how respected and trustworthy this label is.
The Nordic countries work together to verify the products that want to start carrying the Nordic Swan label. They also enforce the guidelines to make sure no ecolabel product does not live up to the requirements decided by the Nordic Ecolabelling organisation.
In conclusion, there are many different EU regulations and ecolabels that a company has to, or is encouraged to, disclose in alignment with. These may seem daunting, but there are tools and organisations available to you to help with understanding the requirements and ensuring that you are disclosing data correctly. The key is knowing and understanding your ESG strategy and targets, and identifying gaps in your data that you need to correct. Being aware of your ESG position allows you to fill in any missing information while also discovering where your strategy could go in the future. Conducting a SWOT analysis or materiality assessment is a good first step in gathering the data necessary to comply with these laws and regulations.
While these regulations are currently only in the EU, many countries will follow on from this and adopt these requirements, or a version of them, into their own laws. So even if they do not apply to your organisation at the moment, this may change in the future. Always stay updated and aware of possible changes to laws and regulations, whether they directly apply to your business, or impact some of your suppliers or customers.
