Everything You Need to Know About Sustainability Legislation in the EU
The EU has advanced, strict, and complex laws and reporting requirements for sustainability, which are among the most progressive in the world. In 2019, the EU introduced a long-term plan called the 'European Green New Deal' to encourage sustainable practices across many sectors and achieve climate neutrality by 2050. Significant regulatory changes usually result in new compliance obligations for companies and investors. This article aims to help businesses navigate the new sustainability legislation and major changes that are due to take place, which will have an effect on companies operating in the EU.
By committing to a variety of sustainability goals and making significant progress doing so, the EU is setting an example for other countries to follow. Its leadership in areas such as renewable energy, sustainable products, and circular economy practices provides a roadmap for other nations to transition towards a more sustainable future. There are several reasons as to why the European Union is spearheading the sustainability movement to improve sustainable growth and climate change:
- The EU’s strong policy framework promotes sustainability, through a set of policy measures, such as the Renewable Energy Directive, the Emissions Trading System, and the Circular Economy Action Plan. 10 EU countries have enacted laws for net zero goals as of 2023, according to the Energy and Climate Intelligence Unit Net Zero Tracker. An additional 12 EU countries have policies in place that set net zero goals.
- In the past five consecutive years (2018-2022), 5 out of the top 10 most innovative countries ranked by the 2022 Global Innovation Index were European Union countries, namely Sweden, Netherlands, Germany, Finland, and Denmark. The strong focus on innovation, particularly in the areas of sustainable technologies, such as renewable energy and sustainable agriculture, have led many countries in the EU to stay at the forefront of sustainable development and find new solutions to environmental challenges.
- The collaborative nature of the EU, being that it is a political and economic union of 27 member states. While each country in the EU is free to make its own goals, the EU as a whole has a collaborative approach that helps to build consensus and ensures that all parties are working towards a common goal.
Some important legislations were introduced by the European Commission in 2022, which propose frameworks and guidelines that will make consumer products, among other categories, more transparent and compliant with environmental regulations. This article highlights key details within four recently proposed directives that companies should be aware of to prepare for the implementation of these regulations in the near future.
1. Ecodesign for Sustainable Products Regulation (proposed on March 30, 2022)
This newly proposed regulation aims to amend Ecodesign Directive 2009/125/EC by setting ecodesign requirements for nearly all product categories placed on the EU market. The range of requirements covered relate to: product durability, reusability, upgradability and reparability; presence of substances that inhibit circularity; energy and resource efficiency; recycled content; remanufacturing and recycling; carbon and environmental footprints; information requirements, including digital product passports.
In particular, Digital Product Passports (DPPs) in the form of QR codes or similar technologies, have been suggested as a means of promoting transparency and facilitating circularity. These passports would share comprehensive information about products throughout their entire value chain, including details about the extraction of raw materials, the production process, recycling, and more. Industries such as textiles and batteries, which operate complex supply chains and produce immense amounts of waste, will be affected by this regulation. If everything goes according to plan, DPPs will be mandatory on all textile and textile products sold in the EU by 2030.
Ecodesign for sustainable products
2. Empowering Consumers for the Green Transition Directive (proposed on March 30, 2022)
This initiative amends the Unfair Commercial Practices Directive 2005/29/EC and the Consumer Rights Directive 2011/83/EU by proposing product requirements that aim to reduce misleading environmental claims, planned obsolescence, and instead require companies to provide information related to verified sustainability labels, durability, and repairability of products. This directive is intended to empower consumers to make informed decisions by delivering clear and accurate product information.
Circular Economy: Commission proposes new consumer rights and a ban on greenwashing
3. Packaging and Packaging Waste Directive (proposed on November 30, 2022)
This directive aims to improve the quality of the environment by preventing and reducing the impact of packaging and packaging waste on the environment. Several key requirements that companies will have to abide by include: recycling targets for each type of recyclable material, nationwide packaging collection and recycling systems across all EU countries, extended producer responsibility for waste, designing packaging for reuse and recycling, proper recyclability labeling, and reporting waste data to national authorities.
4. Green Claims Directive (to be formally announced in March 2023)
The European Commission is drafting a Green Claims Directive due to be formally announced by the end of March that would require companies to provide evidence to support environmental claims made about their products or services. The directive is aimed at preventing "greenwashing," where companies make false or misleading environmental claims in order to mislead consumers. Under the proposed directive, companies would have to provide clear and specific information about the environmental impact of their products or services, and back up any claims they make with evidence. The directive would also establish a list of environmental claims that are considered "misleading," such as claims that are vague or unverifiable. The proposed directive would also establish penalties for companies that make false or misleading environmental claims. The penalties would be proportionate to the severity of the offense and would take into account factors such as the size of the company and the nature of the claim.
Sources: JD Supra, Lexology, Reuters, Covington & Burling LLP, The Guardian
The EU's strong policy framework, long-term vision, focus on innovation, and collaborative approach all contribute to its position as a global leader in sustainability. The introduction of new proposed directives urges companies to understand the potential regulatory requirements and prepare for the implementation of these regulations in the near future. With this in mind, we can expect the next few years to bring about regulations that will set the tone to make sustainability the norm across all sectors. Broadly, these policies coming from the EU are a part of a greater objective that emphasizes sustainable growth and circularity that set a good example for countries around the world.