Driving business change to protect people and the planet
ESG regulatory landscape
What is relevant, what to do and when?
Most people are aware of climate change and other environmental and social risks facing our planet, as well as the need to take action immediately. To drive and support these efforts, a regulatory framework focused on environmental, social and governance (ESG) issues has been established and continues to be updated and refined.
While information about new legislation and regulations is widely available, it is so scattered that it can be difficult for organisations to pinpoint what concerns them, what actions they need to take, and within what time frame.
PwC provides this service. To learn how we can support you in specific areas of ESG regulation, please explore the ESG-related links at the bottom of this page.
The ESG regulatory landscape is complex and constantly evolving. Overall, it presents a roadmap for boosting the efficient use of resources, promoting a circular economy, addressing climate change, pollution, human rights, and many other social and governance issues.
Below, we summarise key ESG-related legislation and regulations affecting companies in Europe.
Key ESG legislation and regulations in Europe
- The EU Green Deal
- European Climate Law
- EU Taxonomy regulation
- EU Corporate Sustainability Reporting Directive (CSRD)
- EU Sustainable Finance Disclosure Regulation (SFDR)
- Corporate Sustainability Due Diligence Directive (CSDDD or “CS3D”)
The EU Green Deal
In December 2019, the European Commission introduced the European Green Deal, a strategy aimed at transitioning the EU economy towards a sustainable economic model and achieving net-zero greenhouse gas emissions (or ‘climate neutrality’). The ultimate objective is for the EU to reach climate neutrality by 2050. The European Green Deal will have an impact across all businesses in Europe, since all products sold in the EU will need to meet higher sustainability standards.
European Climate Law
The EU Climate Law was one of the first legislative proposals following the Green Deal. Adopted in 2021, it enshrines the goal of reaching climate neutrality into legislation , with a legally binding target of net-zero greenhouse gas emissions by 2050. EU institutions and member states are required to take the necessary measures at both the EU and national levels to meet this target.
EU Taxonomy regulation
Many of the important regulations affecting businesses in Europe fall under the EU Taxonomy package. The EU Taxonomy is a classification framework establishing definitions and rules determining which economic activities qualify as sustainable. It sets out the world’s first ‘green list’ of sustainable business activities and is designed to identify and direct investments towards sustainable projects, indirectly combating so-called ‘greenwashing’.
The first EU Taxonomy Climate Delegated Act, defining which activities contribute substantially to climate change adaptation and mitigation, along with six amending Delegated Acts, is already in effect.
EU Corporate Sustainability Reporting Directive (CSRD)
The CSRD aims to elevate sustainability reporting to the same level as financial reporting, ensuring the transparency, consistency and reliability needed to adequately inform stakeholders. It expands the NFRD requirements, mandating companies to disclose – within their annual reports – the impact of corporate activities on the environment and society. Additionally, it requires assurance of the reported information.
EU Sustainable Finance Disclosure Regulation (SFDR)
This regulation, along with its related regulatory technical standards, aims to improve transparency around sustainable investments products and sustainability claims made by financial market participants.
The SFDR establishes disclosure requirements at the organisational, service and product levels, primarily affecting European financial institutions (banks, insurers, asset managers and investment firms) and those with subsidiaries or services in Europe.
Amending Delegated Acts on fiduciary duties, investment and insurance advice ensure that financial firm professionals (e.g. advisers, asset managers or insurers) integrate sustainability considerations into their procedures and their investment recommendations to clients.
Corporate Sustainability Due Diligence Directive (CSDDD or “CS3D”)
This directive requires companies to integrate, amongst others, due diligence procedures into corporate policies, to identify adverse human rights and environmental impacts to mitigate potential impacts, etc.
The CSDDD (also referred to as ‘sustainable corporate governance’) lays down obligations for companies to conduct due diligence, to identify and address adverse human rights and environmental impacts, and to develop climate plans.
Under the CSDDD, the EU proposes introducing specific sustainability-related duties for directors, requiring them to consider their company's short-, medium- and long-term impacts on the environment and human rights. It also proposes imposing sanctions on companies for failure to comply, and civil liability for violations of certain due diligence obligations which lead to adverse human rights or environmental impacts.
Applicable from January 2025 (to be confirmed) to:
EU-based limited liability companies with 500+ employees and EUR 150 million+ net turnover
other limited liability companies in high-impact sectors, with 250+ employees and EUR 40million+ net turnover worldwide
non-EU companies operating in the EU, with turnover thresholds aligned with the above categories, based on revenue generated within the EU.
This page provides just a selection of ESG-relevant regulations. For a deep dive into EU legislation, see the European Parliament Legislative Train website.
