The EU's new and upcoming legal requirements for green transition

The Corporate Sustainability Reporting Directive (CSRD) is an EU directive that requires certain companies to report on sustainability. The reporting must follow common standards (European Sustainability Reporting Standards), which specify what information must be reported.

The purpose of the directive is to increase access to information about how companies' operations affect people and the environment, as well as how companies are affected by sustainability issues in the form of risks and opportunities for the business. Sustainability reporting should also make it easier for investors to get a clearer picture of how companies are taking responsibility for a sustainable transition, which makes it possible to direct investments in a more responsible way.

Further reading: Sustainability reporting at FI

CSRD is covered by omnibus package I. For more information, see: Commission proposes to simplify business environment at the European Commission

The Corporate Sustainability Due Diligence Directive (CS3D) places a responsibility on certain companies to exercise due diligence in their operations and value chains to prevent negative impacts on human rights and the environment.

Examples of such negative impacts include forced labour, child labour and environmental degradation. The aim of the directive is for companies to actively contribute to the sustainable transformation of the European economy. At the same time, the directive aims to promote competitive neutrality and strengthen legal certainty in the EU’s internal market.

Further reading: Corporate sustainability due diligence at the European Commission

CSDDD is covered by omnibus package I. For more information, see: Commission proposes to simplify business environment at the European Commission

The Ecodesign for Sustainable Products Regulation (ESPR) is a central part of the Union's strategy to promote environmentally sustainable and circular products. The regulation acts as a framework law with a broad application and allows the European Commission to set ecodesign requirements for a wide range of product categories through delegated acts.

Ecodesign requirements can concern the performance of the product (performance requirements) or the information that must accompany the product (information requirements). The requirements can include, for example, how durable, reusable, upgradable and repairable the product is, as well as the hazardous substances it contains and how these affect the possibility of recycling.

In addition to the possibility of setting ecodesign requirements, the regulation also contains provisions on how information requirements should be packaged (in a digital product passport), as well as information on and a ban on the destruction of unsold goods.

The requirements apply to all companies, regardless of size, that supply products within the categories covered by the regulation. A few product groups are exempted from the regulation. In the future, energy-related products, including those already covered by the Ecodesign Directive, will be covered by the rules in the ESPR.

Further reading: Ecodesign for Sustainable Products Regulation at the European Commission

The Ecodesign Regulation at the Swedish Energy Agency (in Swedish)

The Regulation on Deforestation-free Products (EUDR) aims to prevent trade in goods that contribute to global deforestation and forest degradation, as part of reducing greenhouse gas emissions and global biodiversity loss.

The regulation requires companies to actively ensure that a number of raw materials and products that they sell on the EU internal market, or export from the Union, have not recently caused deforestation or forest degradation anywhere in the world. This applies to products that contain, have been fed with or are produced from raw materials such as cattle, cocoa, coffee, oil palm, rubber, soy and wood.

Further reading: Regulation on Deforestation-free products at the Swedish Forest Agency

The Taxonomy Regulation, also known as the EU Taxonomy, sets a common standard for when an economic activity, such as an investment, can be classified as environmentally sustainable. To be classified as environmentally sustainable, the economic activity must contribute significantly to one or more of the EU’s six environmental objectives, not cause significant harm to any of the other objectives and meet certain minimum sustainability requirements.

Companies covered by the Regulation must meet a number of requirements and technical criteria. Among other things, they are required to report to what extent their activities are covered by and in line with the EU Taxonomy.

The EU Taxonomy provides companies, investors and policymakers with a common framework to identify and compare sustainable investments. The aim is to channel capital more effectively into activities that promote the EU’s climate and environmental objectives.

Most companies covered by the CSRD are also covered by the Taxonomy Regulation.

Further reading: Taxonomy at FI

EU taxonomy is covered by omnibus package I. For more information, see: Commission proposes to simplify business environment at the European Commission