3 minutes
Table of contents
ESG (Environmental, Social, and Governance) is playing an increasingly important role in business, and legislation in this area is continuously tightening. EU and national authorities are placing increased demands on corporate reporting, accountability and sustainable practices. But what does ESG legislation entail and how can your company ensure compliance?
Important legal requirements businesses need to know
There is a lot going on in ESG legislation at the moment - especially from the EU, where the EU Green Deal is driving a lot of new legislation. Some legislation focuses on communication, reporting and transparency, and others on social inequality and pressures on human rights, climate, circular economy and the environment. A selection of relevant legislation:
- Corporate Sustainability Reporting Directive (CSRD) - Expanding sustainability reporting requirements
- Corporate Sustainability Due Diligence Directive (CSDDD) - Commits companies to manage their impact on the environment and human rights
- EU Forced Labor Regulation (EUFLR) - Requires that products made using forced labor cannot be imported and sold in the EU or exported from the EU.
- EU Battery Regulation (EUBR) - Sets specific requirements for businesses selling batteries, including circular principles, transparency and supply chain due diligence
- EU Deforestation Regulation (EUDR) - prohibits the sale of raw materials and products in the EU that originate from recently deforested areas or are associated with illegal deforestation
- EU Ecodesign for Sustainable Products Regulation (ESPR) - Introduces new requirements on how products are designed to improve durability, reparability, recyclability and energy efficiency across the EU market. Part of the requirements are linked to the Digital Product Passport.
- EU taxonomy - Defines criteria for what qualifies as sustainable economic activity
- Empowering Consumers for the Green Transition (ECGT) - addresses greenwashing by setting requirements for how companies communicate environmental claims and sustainability labels.
- National regulations - Several countries have their own reporting and accountability rules
- Investor requirements - Sustainability is becoming increasingly important for access to capital
These regulations affect companies throughout the value chain and place greater demands on documentation and responsible management.
How businesses ensure compliance
- Requirements mapping: Identify which rules apply to your business - based on revenue, number of employees, markets, products and customers
- Data collection and reporting: Create systems to monitor and document sustainability efforts
- Due diligence processes: Implement procedures to manage risks in the value chain
- Management anchoring: Make sure responsibility is an integral part of your business strategy
- Continuous update: Legislation is evolving - make sure you stay up to date
A strategic advantage
- Reduce the risk of fines and penalties
- Strengthen your company's reputation and credibility
- Increases attractiveness for investors and business partners
To work actively with GSS and complying with legislation isn't just about compliance - it's first and foremost about creating real change, and it can also be a clear competitive advantage. Many companies find that a strong sustainability profile gives them an edge in the market.
An ongoing process
ESG regulatory requirements are constantly evolving and companies need to be prepared for new regulations. A flexible and proactive approach ensures both compliance and a stronger position in a market where responsibility is becoming an increasingly important factor.