Legislation & Compliance
In line with the EU Green Deal and the efforts to achieve a carbon-neutral European Union by 2050, several laws have been established or are presently being discussed in European institutions. This initiative towards a more environmentally friendly region was proposed by the Commission President in 2019 and approved by the European Parliament in 2020. Therefore, diverse strategies that impact both European and non-European stakeholders have been embraced to fulfill the goals of the Green Deal.ECONOS has the capacity to help you in understanding these distinct directives and learn more about them, and to offer assistance in their integration within your company’s practices. Contact us to obtain further details and discuss about the ways we can provide support.
What? The European Climate Law sets targets for net-zero greenhouse gas emissions in all EU countries by 2050, with a 55% emissions reduction goal by 2030 (compared to 1990 levels). It establishes a process for setting 2040 targets and mandates progress assessments every five years to ensure a steady transition to carbon neutrality.
For who? All EU member states and entities within them, including public and private actors, must work towards reducing emissions.
When? In July 2021, a series of revisions and amendments were adopted aiming to drive collective climate action and sustainability efforts in the EU.
What? The Corporate Sustainability Reporting Directive (CSRD) requires companies to disclose detailed information on social and environmental risks, opportunities, and impacts of their activities, and value chain aiming to enhance transparency and strengthen reporting standards.
For who? The CSRD applies in the first phase to large EU public interest companies, in a second phase to other large companies and in third phase to listed SMEs.
When? Companies who reported under the Non-Financial Reporting Directive transitioned to the CSRD with their first disclosures due in their 2025 management report based on 2024 data. Other large companies that are not in the first wave should have their report ready in 2026 using 2025 data. Listed SMEs will begin CSRD reporting in their 2027 management report using 2026 data. Qualifying non-EU firms subject to parent-company level reporting will commence this reporting in 2029 based on 2028 data.
What? The Sustainable Finance Disclosure Regulation (SFDR) mandates transparency in disclosing sustainability information for informed investor decisions. SFDR facilitates assessment of sustainability risks in investment decisions, supporting private funding for Europe's net-zero economy shift.
For who? It primarily affects financial institutions operating within the EU, including banks, insurers, asset managers, and investment businesses. Non-EU firms are indirectly impacted through their EU subsidiaries, services offered in the EU, and market pressures.
When? Starting January 1st, 2022, companies subject to the SFDR were required to report their Principal Adverse Impact. The SFDR's regulatory technical standard became enforceable as of January 1st, 2023.
What? The EU Taxonomy provides a standardized definition of environmentally sustainable economic activities for both financial and non-financial companies. This common framework supports the EU's efforts to increase sustainable investment by providing clarity to investors, guarding against greenwashing, promoting climate-friendly practices among companies, and reducing market fragmentation.
For who? Companies subject to the Corporate Sustainability Reporting Directive (CSRD) must disclose in their annual reports the extent to which their activities are eligible to the EU Taxonomy (Taxonomy-eligibility) and adhere to the criteria outlined in the Taxonomy delegated acts (Taxonomy-alignment).
When? The Taxonomy Regulation took effect on July 12, 2020, laying down the foundation for the EU's taxonomy.
What? Corporate Sustainability Due Diligence Directive aims to promote sustainable and responsible corporate behavior by integrating human rights and environmental considerations into companies' operations and governance. The new rules will require businesses to address adverse impacts of their actions, including those within their value chains both within and outside Europe.
For who? Large EU limited liability companies:
First wave: +/- 9,400 companies - 500+ employees and net EUR 150 million+ turnover worldwide;
Second wave: +/- 3,400 companies in high-impact sectors - 250+ employees and net EUR 40+ million turnover worldwide, and operating in defined high impact sectors, e.g. textiles, agriculture, extraction of minerals. For this group, the rules start to apply two years later than for group 1.
Non–EU companies: +/- 2,600 companies in Wave 1 and +/- 1,400 in Wave 2. Third-country companies operating within the EU whose turnover thresholds align with those of Wave 1 and Wave 2, are generated within the EU.
When? The entry into force of the CSDDD on July 25, 2024, initiates the transposition period for Member States to incorporate the directive's obligations into their national laws. Companies will be required to comply with these obligations according to a specific timeline.
What? The EU's Carbon Border Adjustment Mechanism (CBAM) prices carbon emissions on imported carbon-intensive goods entering the EU to promote cleaner industrial production globally and safeguard the EU's climate goals. This mechanism ensures imported goods reflect a carbon price equivalent to domestic production, aligning with WTO (World Trade Organization) rules.
For who? It applies to imports of covered goods from non-EU countries, excluding those that are part of or linked to the EU Emissions Trading System (ETS), such as Iceland, Norway, Liechtenstein, Switzerland, and a few other territories.
When? During the transitional phase until December 31, 2025, importers or indirect customs representatives must submit a CBAM report for each quarterly reporting period.
What? This proposal aligns with EU taxonomy criteria to define green economic activities, emphasizing transparency in line with market best practices, and mandates European-level supervision for companies conducting pre- and post-issuance reviews.
For who? The EUGB will be accessible to all green bond issuers, including companies, public authorities, and issuers located outside of the EU.
When? The Regulation starts applying on 21 December 2024.
What? The Low Carbon Benchmark Regulation (Regulation (EU) 2019/2089) introduces two types of low carbon benchmarks known as the EU Paris-Aligned Benchmark (EU PAB) and the EU Climate Transition Benchmark (EU CTB).
For who? The EU PAB is a benchmark tailored to the Paris Agreement's objectives, aiming to limit global temperature rise to well below 2°C and pursue efforts for 1.5°C. It entails a 50% reduction in carbon intensity compared to the investable universe, with a subsequent 7% annual decarbonization. The EU CTB is a benchmark designed to follow a decarbonization trajectory aligned with the Paris Agreement's goals. This trajectory mandates a measurable, science-based movement towards alignment with the Agreement's objectives.
When? Benchmark administrators had to comply with the reporting requirements starting 30 April 2020.
What? The Land Use, Land Use Change and Forestry Regulation aims to promote nature-based solutions for mitigating greenhouse gas (GHG) emissions and to minimize the impact of land management and forestry practices on climate change. The revision made to the regulation aimed to achieve the following key objectives:
- Reversing the declining trend of removals in the land sector, targeting 310 Mt CO2e removals by 2030.
- Attaining a climate-neutral land sector by 2035, balancing agriculture emissions with net removals from LULUCF.
- Simplifying reporting requirements for member states.
For who? Addressed to Member States to adopt more effective policies and measures.
When? Member States must consider the role of the land use sector in their updated National Energy and Climate Plans (NECPs) as the revised LULUCF entails stricter reporting criteria, heightened transparency, and a scheduled review by 2025. From 2026 to 2029, Member States risk incurring an extra 8% penalty on their 2030 national target if their progress reports indicate insufficient strides towards meeting their specified goals.
What? It aims to ban products made from forced labor in the EU market. This regulation will affect businesses selling products into or from the EU.
For who? This document is intended for and directed to the Members and staff of the European Parliament.
When? It is expected that the Regulation will enter into force after the finalization of the formal approval from the European Parliament and the Council.
