European sustainability legislation
Chapter 2 - Society
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Welcome to the European sustainability legislations page
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EU Taxonomy
Goal
The EU Taxonomy is a classification system that helps companies and investors identify “environmentally sustainable” economic activities to make sustainable investment decisions. Environmentally sustainable economic activities are described as those which “make a substantial contribution to at least one of the EU’s climate and environmental objectives, while at the same time not significantly harming any of these objectives and meeting minimum safeguards.
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What are “green” or “sustainable” economic activities
- Climate change mitigation
- Climate change adaptation
- Sustainable use and protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
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| Content souce |
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| https://ec.europa.eu/sustainable-finance-taxonomy/ |
| https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/eu-taxonomy-sustainable-activities_en |
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Corporate Sustainability Reporting Directive (CSRD)
The CSRD is the first mandatory ESG standard that requires assurance on sustainability information. The incoming regulations will guarantee that investors and other interested parties can readily access the data necessary for evaluating the influence of companies on both society and the environment. Additionally, investors will have the means to gauge financial risks and opportunities linked to climate change and other sustainability matters.
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Goal
Helps to improve the flow of money towards sustainable activities across the European Union. The CSRD aims to ensure that businesses report reliable and comparable sustainability information so that investors can re-orient investments towards more sustainable technologies and industries. The CSRD reporting will align with the Sustainable Finance Disclosure Regulation and the EU Taxonomy.
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Who has to comply?
1. Large EU companies with:
- 250+ employees;
- €20+ million in total assets;
- or €40+ million in turnover
2. Parent companies incorporated in an EU member state, where the group of companies collectively meet the large company criteria
3. Non-EU incorporated companies:
- The company carries on substantial activity in the EU, meaning the company’s net turnover in the EU in two consecutive financial years was over €150 million per annum
- The company has at least one branch in the EU that has a net turnover of at least €40 million; or subsidiary in the EU that meets at least two of the large company requirements;
- Companies listed on an EU-regulated market, including small and medium-sized companies (SMEs) but excluding micro companies
4. Captive insurance and reinsurance undertakings
5. Small and non complex institutions, provided they also qualify as large companies or SMEs
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Timing
On 5 January 2023 the Corporate Sustainability Reporting Directive (CSRD) entered into force.
- 2025: Businesses already subject to the NFRD will have to start reporting in the financial year 2024.
- 2026: Large undertakings not currently subject to the NFRD will have to start reporting n the financial year 2025.
- 2027: Small and medium enterprises and small and non-complex credit institutions, and captive insurance undertakings will have to start reporting for the financial year 2026 - with a further possibility of voluntary opt-out until 2028. The reporting standards for SMEs will be lighter.
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The International Sustainability Standards Board (ISSB)
The ISSB’s work is backed by the G7, the G20, IOSCO, the Financial Stability Board, African Finance Ministers and by Finance Ministers and Central Bank Governors from over 40 jurisdictions. It aims to develop standards for a global baseline of sustainability disclosures. It targets the informational needs of investors and enables companies to provide comprehensive sustainability information to global capital markets. In addition, it aims to facilitate interoperability with jurisdiction-specific disclosures and/or aimed at broader stakeholder groups. ISSB was created in 2021 by the IFRS Foundation. Following strong market demand, the ISSB developed sustainability standards that aim to provide a global baseline of sustainability disclosures focused on the needs of investors and the financial markets.
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Scope
The first two ISSB Standards, IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures) are effective for reporting periods beginning after 1 January 2024.
ISSB defines the standards as below;
- IFRS S1 proposes general requirements for an entity to disclose sustainability-related financial information about its sustainability-related risks and opportunities.
- IFRS S2 requires an entity to disclose its climate-related risks and opportunities that may be useful to clients of general purpose financial reports in making decisions relating to providing resources to the entity.
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Sustainable Finance Disclosure Regulation (SFDR)
There is mounting pressure for the international regulation of the financial sector concerning environmental, social and governance issues.
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Goal
The Sustainable Finance Disclosure Regulation (SFDR) is an EU initiative that requires financial market participants operating in the EU, to disclose the various sustainability risks associated with their investments and products, as well as to disclose their policies relating to these risks. The SFDR came into force on March 10, 2021 as part of the European Commission's (EC) Sustainable Finance Action Plan.
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Background
The European Union’s High-Level Expert Group (HLEG) laid out a roadmap for the European Commission (EC) with 2 main goals to be achieved by the EU:
- Integrate sustainability considerations into the financial system
- Steer the flow of capital towards sustainable investments
The roadmap leads the EC to create the Sustainable Finance Action Plan with 3 key objectives:
- To reorient capital flows towards sustainable investment and away from sectors contributing to global warming (i.e. fossil fuels)
- To manage financial risks arising from climate change
- To foster greater transparency and long-termism in financial and economic activity, to achieve sustainable and inclusive growth
The Sustainable Finance Action Plan has 10 key points, and the SFDR falls under point 7 - ESG in Investment Management.
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Do you want to know more?
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EU Climat Law
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| European Climate Law |
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| The European Climate Law writes into law the goal set out in the European Green Deal for Europe’s economy and society to become climate-neutral by 2050. The law also sets the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. Climate neutrality by 2050 means achieving net zero greenhouse gas emissions for EU countries as a whole, mainly by cutting emissions, investing in green technologies and protecting the natural environment. The law aims to ensure that all EU policies contribute to this goal and that all sectors of the economy and society play their part. |
| https://climate.ec.europa.eu/eu-action/european-climate-law_en |
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EU Taxonomy
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| Taxonomy Regulation |
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| Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088)
Statusː Adopted on 22 July 2020. Entered into force on 1 January 2022. Content and objectivesː EU-wide standardised definition of sustainability based on legally regulated criteria to ultimately prevent greenwashing. |
| https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/eu-taxonomy-sustainable-activities_en |
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| Markets in Financial Instruments Directive (MiFID II) / Delegated Regulation (EU) (DelVO) |
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| Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directives 2002/92/EC and 2011/61/EU Commission Delegated Regulation (EU) 2021/1253 of 21 April 2021 amending Delegated Regulation (EU) 2017/565 as regards the integration of sustainability factors, risks and preferences into certain organisational requirements and operating conditions for investment firms
Statusː ■ MiFID II: entered into force on 2 July 2014 ■ DelVO: Applicable since 2 August 2022 Content and objectivesː In the context of investment advice and asset management, sustainability preferences and sustainability-related investment objectives of customers should be queried and then considered when investing. |
| https://finance.ec.europa.eu/regulation-and-supervision/financial-services-legislation/implementing-and-delegated-acts/markets-financial-instruments-directive-ii_en |
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| Sustainable Finance Disclosure Regulation (SFDR) |
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| Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector
Statusː Adopted on 27 November 2019. Entered into force on 10 March 2021. Content and objectivesː Strengthening the transparency of financial products labelled as “sustainable“ to increase investor confidence in them and ultimately channel capital into sustainable financial instruments. |
| https://finance.ec.europa.eu/sustainable-finance/disclosures/sustainability-related-disclosure-financial-services-sector_en |
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EU Green Deal
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| Green Deal |
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Climate change and environmental degradation are an existential threat to Europe and the world. To overcome these challenges, the European Green Deal will transform the EU into a modern, resource-efficient and competitive economy, ensuring:
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| https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en |
| https://www.circulaw.nl/European_green_deal.pdf |
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| Green Deal Industrial Plan |
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| The Green Deal Industrial Plan enhances the competitiveness of Europe's net-zero industry and is accelerating the transition to climate neutrality. It does so by creating a more supportive environment for scaling up the EU's manufacturing capacity for the net-zero technologies and products required to meet Europe's ambitious climate targets. |
| https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/green-deal-industrial-plan_en |
| The Net-Zero Industry Act is an initiative stemming from the Green Deal Industrial Plan which aims to scale up the manufacturing of clean technologies in the EU. This means increasing the EU’s manufacturing capacity of technologies that support the clean energy transition and release extremely low, zero or negative greenhouse gas emissions when they operate. |
| https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/green-deal-industrial-plan/net-zero-industry-act_en |
The European Critical Raw Materials Act is the basis for building up the EU’s capacities and strengthening the resilience of its critical raw material supply chains. It includes measures to:
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| https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/green-deal-industrial-plan/european-critical-raw-materials-act_en |
| An integrated EU energy market is the most cost-effective way to ensure secure, sustainable and affordable energy supplies to EU citizens. Through common energy market rules and cross-border infrastructure, energy can be produced in one EU country and delivered to consumers in another. Boosting competition, improving the long-term markets and allowing consumers to choose energy suppliers keeps prices in check. |
| https://energy.ec.europa.eu/topics/markets-and-consumers/market-legislation/electricity-market-design_en |
| Free trade agreements |
| https://trade.ec.europa.eu/access-to-markets/en/content/free-trade-agreements |
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| Ecodesign Regulation |
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| Regulation (EU) 2024/1781 of the European Parliament and of the Council of 13 June 2024 establishing a framework for the setting of ecodesign requirements for sustainable products, amending Directive (EU) 2020/1828 and Regulation (EU) 2023/1542 and repealing Directive 2009/125/EC (Text with EEA relevance)
Statusː Entered into force on 18 July 2024. Part of the European Green Deal. Content and objectiveː The Ecodesign Regulation provides for minimum criteria to be applied to products to improve their recyclability and energy efficiency. The Ecodesign Regulation is intended to permanently reduce the CO2 and environmental footprint of the European Union. The Ecodesign Regulation replaces the Ecodesign Directive 2009/125/EC. |
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| EU Packaging Directive |
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| European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste
Statusː Adopted on 31 December 1994. Entered into force on 31 December 1994; updated several times, most recently 4 July 2018. Content and objectivesː Specifically, the aim is to protect the environment by preventing or avoiding packaging waste. To this end, the EU Member States are obliged to contribute to increasing the proportion of reusable packaging, ensuring that packaging can be recycled without compromising food safety and consumer health, and that the recycling targets applicable to the various types of packaging are guaranteed by creating suitable measures. |
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| EU Conflict Minerals Regulation |
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| Regulation (EU) 2017/821 of the European Parliament and of the Council of 17 May laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold originating from conflictaffected and high-risk areas
Statusː Entered into force on 1 January 2021. Content and objectivesː Aims to ensure that EU importers only purchase tin, tantalum, tungsten, their ores and gold from responsible sources and not from conflict or high-risk areas. The aim is to prevent the financing of armed groups through profits from the raw materials trade. In this way, violence and human rights violations are to be curbed, the exploitation of local village communities ended, and local development supported. |
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| EU Deforestation Regulation (EUDR) |
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| Regulation (EU) 2023/1115 of the European Parliament and of the Council of 31 May 2023 on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010 (Text with EEA relevance)
Statusː Entered into force on 29 June 2023. To be applied from 30 December 2024. Content and objectivesː Prohibits the placing on the market, supply and export of certain raw materials (cattle, cocoa, coffee, oil palm, rubber, soya, wood) and certain products containing, fed with or produced using these raw materials (see Annex I) if these products (i) have contributed to deforestation or (ii) have not been produced in accordance with relevant legislation in the country of production (background: curbing international deforestation and protecting forests as CO2 reservoirs and protecting biodiversity). In order to avoid this ban, companies must submit due diligence declarations in which they provide evidence that the products they provide have not contributed to deforestation and have been manufactured in accordance with the relevant legal provisions. |
| https://environment.ec.europa.eu/topics/forests/deforestation/regulation-deforestation-free-products_en |
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Sustainability Reporting
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| Corporate Sustainability Reporting Directive (CSRD) |
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| Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014 and Directives 2004/109/EC, 2006/43/EC and 2013/34/EU as regards corporate sustainability reporting (Text with EEA relevance)
Statusː Entered into force on 1 January 2024; transposition into national law required by 6 July 2024. Content and objectivesː To replace the current NFRD. According to the Directive, companies must release publications on the following topics: environment, social matters and the treatment of employees, anti-corruption and anti-bribery, respect for human rights, diversity on company boards (in terms of age, gender, educational and professional background). |
| https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en |
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| European Sustainability Reporting Standards (ESRS) |
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| Commission Delegated Regulation (EU) .../... supplementing Directive 2013/34/EU of the European Parliament and of the Council with sustainability reporting standards (C/2023/5303 final)
Statusː Adopted on 31 July 2023. Entered into force on 1 January 2024. Content and objectivesː ESRS contain a total of approx. 1,000 qualitative and quantitative disclosure items/data (condensed presentation of all disclosure items/data in a spreadsheet published by EFRAG). The materiality analysis is an indispensable prerequisite for the applicability of the ESRS. |
| https://finance.ec.europa.eu/news/commission-adopts-european-sustainability-reporting-standards-2023-07-31_en |
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| Corporate Sustainability Due Diligence Directive (CSDDD) |
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| Proposal for a Directive of the European Parliament and of the Council on corporate sustainability due diligence and amending Directive (EU) 2019/1937
Statusː Adopted on 24 April 2024. Comes into force in stages from 2027 to 2029. Content and objectivesː Regulates corporate due diligence obligations to avoid human rights violations and the breach of environmental obligations in the supply chain. Protected goods: such as LkSG (see there) + right to life, liberty and security; right to privacy, family, home, correspondence, honour, reputation; right to freedom of thought, conscience and religion; right to adequate housing, food, clothing and sanitation for workers; protection of children with regard to highest level of health, education, adequate living conditions, protection from economic exploitation, sexual abuse, abduction and child trafficking; protection of biodiversity; prohibition of trade in endangered species of plants and animals; consideration of procedures for the import and export of toxic substances and pesticides; rotection of the ozone layer; protection of natural heritage; protection of wetlands and protection from pollution from ships and pollution of the marine environment from discharges. |
| https://commission.europa.eu/business-economy-euro/doing-business-eu/sustainability-due-diligence-responsible-business/corporate-sustainability-due-diligence_en |
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| Non-Financial Reporting Directive (NFRD) |
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| Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU regarding disclosure of nonfinancial and diversity information by certain large undertakings and groups (text with EEA relevance)
Status ː Entered into force on 6 December 2017. Will be replaced by the CSRD and the national implementation law. Content and objectivesː Extension of the reporting obligations of large capital market-oriented companies, credit institutions, financial services institutions and insurance companies on sustainability-related aspects (environmental, |
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| Green Claims Directive |
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| Proposal for a Directive of the European Parliament and of the Council on the substantiation and communication of environmental claims (Green Claims Directive) (COM(2003)166 final)
Statusː Under consultation. Could come into force from 2025. Content and objectivesː The Green Claims Directive will regulate the substantiation and communication of environmental advertising against “greenwashing“. It contains definitions such as “or environmental label“, “environmental performance“, “environmental aspect“ and “environmental impact“ and should contain special regulations (lex specialis) in addition to the Unfair Commercial Practices (UCP) Directive, such as (i) Minimum requirements for voluntary environmental claims (substantiation and communication) (ii) equirements for environmental labels and environmental labelling schemes (iii) Verification procedures for environmental claims and environmental labels by independent, accredited test centres (iv) Stricter sanctions for violations, including fines and confiscation of products or roceeds from the transactions. The Green Claims Directive is intended to supplement the EmpCo Directive. A proposal was adopted by the EU Parliament on 12 March 2024 and is now being negotiated. |
| https://environment.ec.europa.eu/topics/circular-economy/green-claims_en |
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| CSRD |
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| Wet betreffende de openbaarmaking van duurzaamheidsinformatie door bepaalde vennootschappen en groepen en de assurance van duurzaamheidsinformatie en houdende diverse bepalingen |
| https://www.ejustice.just.fgov.be/cgi/article.pl?language=nl&sum_date=2024-12-20&lg_txt=n&caller=sum&s_editie=1&2024011683=4&numac_search=2024011683&view_numac=2024011683n |
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Emissions
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| EU Emissions Trading Scheme (EU ETS) |
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| Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (Text with EEA relevance)
Statusː Entered into force on 25 October 2003; reformed by “Fit for 55“ programme in 2023. Content and objectivesː Emissions trading with the aim of reducing greenhouse gas emissions within the EU. A fixed upper limit (cap) determines the maximum total amount of CO2 equivalents that may be emitted by the regulated companies. The cap will be gradually lowered to reduce the total permitted emissions to zero by 2050. This is intended to incentivise companies to invest in climate protection. |
| https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets_en |
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| EU Emissions Trading Scheme 2 (EU ETS 2) |
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| Directive (EU) 2023/959 of the European Parliament and of the Council of 10 May 2023 amending Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union and Decision (EU) 2015/1814 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading system (Text with EEA relevance)
Statusː Entered into force on 5 June 2023. Content and objectivesː In addition to the EU ETS, a separate EU ETS 2 is to be created in buildings, road transport and additional sectors. After a three-year preparatory phase (reporting obligation from 2024), EU ETS 2 will start in 2027 (Directive (EU) 2023/959 of 10 May 2023). Until 2030, the EU GTS 2 will be treated in a separate market from the EU ETS 1. |
| https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/ets2-buildings-road-transport-and-additional-sectors_en |
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| Carbon Border Adjustment Mechanism (CBAM) |
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| Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism (text with EEA relevance)
Statusː Entered into force on 19 May 2023. Content and objectives ː Serves to create a CO2 border adjustment system: in future, importers will have to pay a CO2 price for the emissions generated during the production of goods when importing certain emission-intensive goods from other EU countries into the EU. To this end, CBAM certificates must be purchased and redeemed with the EU from 2026. Since January 2024, importers have also been subject to extensive monitoring and reporting obligations regarding the emissions generated during the production of goods in other EU countries. |
| https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en |
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Energy efficiency
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| EU Energy Efficiency Directive (EED) |
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| Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC (text with EEA relevance)
Statusː Entered into force on 10 October 2023. Content and objectivesː The key point of the amended EED is the definition of binding European energy efficiency targets. The aim of the reform is to reduce final energy consumption, i.e. the total energy consumption of end consumers, across the EU by 11.7 % by 2030 compared to the forecasts for 2020. By 2030, the Member States must save an average of 1.5 % final energy per year, starting at 1.3 % in 2025 and rising to 1.9 % by the end of 2030. All Member States are obliged to set out their national contributions to chieving this target in their integrated national energy and climate plans (NECPs) by 2024. |
| https://energy.ec.europa.eu/topics/energy-efficiency/energy-efficiency-targets-directive-and-rules/energy-efficiency-directive_en |
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| Act for the Improvement of Climate Protection in Emission Control |
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| Act to Improve Climate Protection in Emission Control, to speed up emission control authorisation procedures and to implement EU law
Statusː Entered into force on 9 July 2024. Content and objectivesː The law is intended to speed up the authorisation procedures under the Federal Emission Control Act enable a faster expansion of renewable energy plants. |
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Governance
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| Shareholders‘ Rights Directive (ARUG II) |
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| Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of longterm shareholder engagement (Text with EEA relevance)
Statusː Entered into force on 3 September 2020. Content and objectivesː The aim of the ARUG II Directive is to further improve the participation of shareholders in listed companies and to facilitate cross-border information and the exercise of shareholder rights. |
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| General Equal Treatment Act (AGG) |
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| General Equal Treatment Act (AGG)
Statusː Entered into force on 17 August 2006. Content and objectivesː The law is intended to prevent discrimination on the grounds of race or ethnic origin, gender, religion or belief, disability, age or sexual identity. |
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Technical
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| XBRL |
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| XBRL is the open international standard for digital business reporting, managed by a global not for profit consortium, XBRL International. XBRL is used around the world, in more than 50 countries. Millions of XBRL documents are created every year, replacing older, paper-based reports with more useful, more effective and more accurate digital versions. |
| https://www.xbrl.org/the-standard/ |
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