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Writer's pictureMaija Āboliņa-Tomsone

Navigating Essential Sustainability Regulations: A Guide for New Sustainability Managers

Updated: Aug 6



Introduction

Stepping into the role of a sustainability manager is both exciting and challenging. The landscape of sustainability regulations is vast, and understanding these laws is crucial for guiding a company towards a sustainable future. Here’s a comprehensive guide to the key regulations you need to know, why they matter, and how to apply them effectively within your organization.

Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS)

The Corporate Sustainability Reporting Directive (CSRD) requires companies to include detailed environmental, social, and governance (ESG) data in their annual reports. Alongside the European Sustainability Reporting Standards (ESRS), this directive aims to enhance transparency and comparability of sustainability information.


Why It Matters: Ensures stakeholders, investors, and policymakers have access to reliable and comparable ESG information.


Key Requirements:

  1. Report on ESG performance using ESRS.

  2. Ensure the reporting is audited for accuracy.

  3. Disclose information on governance, social, and environmental issues.

  4. Provide forward-looking and retrospective data.

  5. Align with the EU taxonomy for sustainable activities.

  6. Offer detailed descriptions of business models and strategies.

  7. Outline risk management strategies related to ESG factors.

  8. Include information on supply chain impacts.


Application: CSRD is currently a hot topic for many large companies as it requires building transparent and robust sustainability processes and data collection systems, which they may not be used to. When preparing to report in alignment with CSRD, you will need to build strong sustainability governance procedures and implement comprehensive data collection systems across your operations. This includes collaborating with various departments to gather accurate ESG data and ensuring the data is audit-ready.

More Info: CSRD Overview


Corporate Sustainability Due Diligence Directive (CSDDD)

The Corporate Sustainability Due Diligence Directive (CSDDD) focuses on fostering responsible corporate behavior throughout global value chains by addressing human rights and environmental impacts.


Why It Matters: Ensures companies are ethically responsible and mitigate negative impacts in their supply chains.


Key Requirements:

  1. Conduct due diligence on supply chains.

  2. Identify and mitigate adverse human rights and environmental impacts.

  3. Establish and implement due diligence policies.

  4. Monitor and report on due diligence activities.

  5. Engage with stakeholders and affected parties.

  6. Provide remediation for identified adverse impacts.

  7. Ensure alignment with international human rights standards.

  8. Regularly review and update due diligence processes.


Application: For companies with complex supply chains, the CSDDD requires thorough examination and monitoring of supplier practices. Implementing this involves creating a framework to assess suppliers' adherence to human rights and environmental standards, conducting regular audits, and developing strategies to address and remediate any identified issues. Engaging directly with suppliers and stakeholders is crucial to ensure compliance and foster responsible practices throughout the supply chain.

More Info: CSDDD Proposal


Ecodesign for Sustainable Products Regulation (ESPR)

The Ecodesign for Sustainable Products Regulation (ESPR) sets requirements for product design and lifecycle to improve sustainability.


Why It Matters: Reduces environmental impacts by ensuring products are durable, reusable, and recyclable.


Key Requirements:

  1. Meet design criteria focusing on energy efficiency.

  2. Ensure material composition promotes sustainability.

  3. Design products for longevity and durability.

  4. Implement measures to reduce waste during the lifecycle.

  5. Facilitate easy repair and recycling.

  6. Include clear labeling for consumer awareness.

  7. Reduce harmful substances in product composition.

  8. Ensure products comply with set sustainability standards.


Application: For manufacturing companies, the ESPR necessitates integrating sustainability into product design from the outset. This involves collaborating closely with R&D and production teams to ensure products meet the required sustainability criteria. Companies may need to reassess their material sourcing, enhance product durability, and develop strategies for end-of-life recycling. Clear labeling and consumer information also play a critical role in compliance.

More Info: ESPR Information


EU Green Claims Directive

The EU Green Claims Directive addresses false environmental claims (greenwashing), ensuring that claims about the environmental characteristics of products are substantiated.


Why It Matters: Protects consumers and promotes trust in green products.


Key Requirements:

  1. Claims must be clear, accurate, and verifiable.

  2. Provide evidence supporting environmental claims.

  3. Avoid vague or misleading language.

  4. Use standardized methods for verification.

  5. Regularly review and update claims.

  6. Ensure transparency in communication.

  7. Be prepared for third-party audits.

  8. Disclose all relevant information to consumers.


Application: For companies marketing eco-friendly products, compliance with the Green Claims Directive requires rigorous substantiation of environmental claims. This involves conducting thorough assessments and providing verifiable evidence for all claims. Marketing and product teams need to work together to ensure all claims are accurate, clear, and transparent, avoiding any potential for misleading information.


Nature Restoration Law

The Nature Restoration Law aims to restore ecosystems and biodiversity across the EU.


Why It Matters: Supports the EU’s biodiversity strategy and climate neutrality goals.


Key Requirements:

  1. Restore degraded ecosystems.

  2. Implement measures to improve biodiversity.

  3. Set specific restoration targets.

  4. Monitor and report progress.

  5. Engage with local communities and stakeholders.

  6. Develop and implement restoration plans.

  7. Secure funding for restoration projects.

  8. Ensure alignment with EU biodiversity strategies.


Application: For companies owning or managing large tracts of land, this law necessitates the development of restoration projects that improve biodiversity. Collaborating with environmental agencies and local communities to implement these measures is crucial. Companies may need to allocate resources and secure funding to support restoration efforts, monitor progress, and report on their achievements.


EU Pay Transparency Directive

The EU Pay Transparency Directive addresses the gender pay gap by ensuring pay transparency.


Why It Matters: Promotes equality and fair pay in the workplace.


Key Requirements:

  1. Provide information on pay levels.

  2. Ensure transparency measures for job applicants and employees.

  3. Conduct regular pay audits.

  4. Publish gender pay gap reports.

  5. Implement corrective actions if needed.

  6. Ensure equal pay for equal work.

  7. Offer transparency in recruitment processes.

  8. Engage with employees on pay transparency initiatives.


Application: HR departments in companies need to review and adjust pay structures to ensure compliance with the directive. This involves conducting regular pay audits, publishing detailed gender pay gap reports, and implementing necessary corrective actions. Transparency in recruitment processes and ongoing engagement with employees on pay matters are essential steps.


EU Accessibility Act

The EU Accessibility Act establishes common accessibility requirements for certain products and services.


Why It Matters: Ensures that people with disabilities have access to essential products and services.


Key Requirements:

  1. Comply with accessibility standards for products and services.

  2. Ensure products and services are usable by people with disabilities.

  3. Conduct regular accessibility audits.

  4. Provide accessible information and documentation.

  5. Offer training on accessibility standards.

  6. Implement user feedback mechanisms.

  7. Ensure digital interfaces are accessible.

  8. Regularly update products and services to maintain compliance.


Application: Companies in the tech and service sectors must ensure their products and services are accessible to people with disabilities. This involves conducting regular accessibility audits, providing accessible information, and implementing feedback mechanisms to improve accessibility. Ensuring compliance with digital interfaces and ongoing staff training are key components.


EU Green Deal

The EU Green Deal is a comprehensive strategy to make the EU’s economy sustainable by turning climate and environmental challenges into opportunities.


Why It Matters: Aims for climate neutrality by 2050.


Key Requirements:

  1. Significant reductions in greenhouse gas emissions.

  2. Investment in green technologies and sustainable practices.

  3. Promote energy efficiency and renewable energy.

  4. Support circular economy initiatives.

  5. Enhance biodiversity and natural capital.

  6. Ensure sustainable agricultural practices.

  7. Foster sustainable transportation and mobility.

  8. Engage stakeholders in green initiatives.


Application: Companies across various sectors need to align their business strategies with Green Deal targets. This involves investing in green technologies, promoting energy efficiency, and adopting circular economy practices. Engaging stakeholders and fostering sustainable practices throughout the supply chain are also crucial for compliance and contribution to climate neutrality goals.

More Info: EU Green Deal


EU Taxonomy

The EU Taxonomy is a classification system establishing a list of environmentally sustainable economic activities.


Why It Matters: Helps investors and companies identify sustainable investments.


Key Requirements:

  1. Meet criteria for substantial contribution to environmental objectives.

  2. Avoid significant harm to other objectives.

  3. Provide transparency and disclosure on sustainability practices.

  4. Align with EU environmental policies.

  5. Regularly update and review taxonomy alignment.

  6. Engage with stakeholders on sustainable finance practices.

  7. Incorporate taxonomy criteria into investment decisions.

  8. Ensure compliance with reporting standards.


Application: Financial institutions and companies need to assess and classify their activities according to the taxonomy criteria. This involves providing transparency and disclosure on sustainability practices, engaging with stakeholders, and incorporating taxonomy criteria into investment decisions. Regular updates and reviews are necessary to maintain compliance.

More Info: EU Taxonomy


XBRL Taxonomy for Sustainability Reports

The XBRL Taxonomy for Sustainability Reports is a digital reporting language that aligns with CSRD and ESRS requirements for standardized sustainability reporting.


Why It Matters: Enhances the accuracy and comparability of sustainability data.

Key Requirements:

  1. Use of XBRL format for sustainability reports.

  2. Compliance with CSRD and ESRS standards.

  3. Ensure data accuracy and completeness.

  4. Facilitate easy data exchange and analysis.

  5. Provide transparency and auditability.

  6. Integrate XBRL into existing reporting systems.

  7. Train staff on XBRL usage and reporting.

  8. Regularly update XBRL taxonomy to align with regulatory changes.


Application: Companies required to report under CSRD and ESRS need to adopt XBRL for their sustainability reports. This involves integrating XBRL into existing reporting systems, ensuring data accuracy and completeness, and training staff on its use. Regular updates to the XBRL taxonomy are necessary to stay aligned with regulatory changes.

More Info: XBRL International


OECD Guiding Principles on Business and Human Rights

The OECD Guiding Principles on Business and Human Rights provide a framework for preventing and addressing adverse human rights impacts linked to business activities.


Why It Matters: Ensures businesses respect human rights in their operations and supply chains.


Key Requirements:

  1. Conduct human rights due diligence.

  2. Identify and mitigate human rights impacts.

  3. Implement human rights policies and procedures.

  4. Engage with affected stakeholders.

  5. Provide remediation for human rights violations.

  6. Monitor and report on human rights practices.

  7. Align with international human rights standards.

  8. Regularly review and update human rights practices.


Application: Companies, especially those with global operations, need to develop and implement human rights policies aligned with the OECD principles. This includes conducting due diligence, engaging with stakeholders, and providing remediation for any violations. Regular monitoring and reporting on human rights practices are essential for ongoing compliance.

More Info: OECD Guiding Principles


OECD Guidelines for Multinational Enterprises

The OECD Guidelines for Multinational Enterprises offer recommendations for responsible business conduct in areas such as human rights, labor, environment, and anti-corruption.


Why It Matters: Promotes sustainable and ethical practices in multinational enterprises.


Key Requirements:

  1. Implement responsible business practices.

  2. Respect human rights and labor standards.

  3. Ensure environmental protection and sustainability.

  4. Combat bribery and corruption.

  5. Engage with local communities and stakeholders.

  6. Provide transparency in operations and reporting.

  7. Monitor and report on compliance with guidelines.

  8. Align business practices with international standards.


Application: Multinational companies need to integrate these guidelines into their business practices. This involves developing policies and procedures that align with the guidelines, engaging with stakeholders, and ensuring transparency in operations and reporting. Monitoring compliance and addressing any issues promptly are also crucial.

More Info: OECD Guidelines


OECD Due Diligence Guidance for Responsible Business Conduct

The OECD Due Diligence Guidance for Responsible Business Conduct provides practical support to businesses on how to conduct due diligence to avoid and address adverse impacts.


Why It Matters: Enhances corporate responsibility and ethical conduct.


Key Requirements:

  1. Identify, prevent, and mitigate adverse impacts.

  2. Conduct regular due diligence assessments.

  3. Engage with stakeholders and affected parties.

  4. Provide transparency and report on due diligence activities.

  5. Ensure remediation for identified issues.

  6. Align with international standards and best practices.

  7. Develop and implement due diligence policies.

  8. Regularly review and update due diligence processes.


Application: Companies need to establish comprehensive due diligence frameworks to identify and mitigate adverse impacts. This involves conducting regular assessments, engaging with stakeholders, and providing transparency in reporting. Developing and implementing robust due diligence policies and regularly reviewing them for updates are essential for compliance.

More Info: OECD Due Diligence Guidance


Conclusion

Understanding and complying with these essential sustainability regulations and laws is fundamental for every new sustainability manager. By integrating these requirements into your company’s operations, you can ensure better sustainability performance, mitigate risks, and contribute to a more sustainable future. For further details and to access the full documents, follow the links provided in each section.

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