The Impact of the EU Green Deal on Global Business Practices

With the European Parliament elections just concluded a few days ago, a new chapter in European policy is set to begin. The 2019-2024 term was marked by the ambitious EU Green Deal, a major pillar of the European agenda that sought to position Europe as a global leader in sustainability and climate action. As the new parliament takes shape, it is an opportune moment to reflect on three key components of the Green Deal with a profound impact on corporate sustainability: the Corporate Sustainability Reporting Directive (CSRD), the Carbon Border Adjustment Mechanism (CBAM), and the Corporate Sustainability Due Diligence Directive (CSDDD).

Our latest white paper delves into these pivotal regulations, offering insights into their direct and indirect effects on non-EU companies. While the new parliament may bring shifts in priorities, the groundwork laid by these initiatives will continue to influence corporate practices and regulatory landscapes globally. This white paper aims to equip businesses, particularly in the APAC region, with the knowledge and tools to navigate these changes effectively.

By understanding the CSRD, CBAM, and CSDDD, companies can better prepare for compliance and strategically position themselves in the evolving global market. The following article offers a glimpse into the content of our white paper. Contact us to get a free copy of the full document and join us in exploring these essential elements of the EU Green Deal.

The EU Green Deal

The EU Green Deal, launched in 2019, is a cornerstone policy aimed at making Europe the first climate-neutral continent by 2050.

This ambitious initiative focuses on decoupling economic growth from resource depletion and environmental harm. Key principles include sustainability, just transition, a science-based approach, and global leadership in climate action.

The Green Deal sets forth a range of interconnected policies targeting climate neutrality, circular economy, zero pollution, sustainable mobility, and sustainable food systems.

The Corporate Sustainability Reporting Directive (CSRD)

The CSRD mandates detailed and rigorous sustainability reporting from companies. It introduces enhanced transparency and accountability measures, requiring businesses to disclose their sustainability impacts, risks, and strategies.

This directive aims to align corporate reporting with the EU’s broader climate goals, fostering a culture of transparency and responsible business practices.

The Carbon Border Adjustment Mechanism (CBAM)

CBAM seeks to prevent carbon leakage and ensure a level playing field by imposing carbon tariffs on imports from countries with less stringent climate policies.

This mechanism encourages global trading partners to adopt more ambitious climate measures, indirectly promoting the EU’s environmental standards internationally.

Corporate Sustainability Due Diligence Directive (CSDDD)

Adopted in May 2024, the CSDDD represents a significant shift towards holding corporations accountable for their environmental and human rights impacts throughout their supply chains. It requires companies to conduct thorough due diligence, implement risk management strategies, establish grievance mechanisms, and publicly report on their practices. This directive aims to foster a more transparent, responsible, and equitable global business environment.

Long-term Impacts and Challenges

• Increased Transparency: Companies will become more transparent about their supply chain practices, enabling consumers and investors to make informed decisions.
• Shift Towards Sustainable Practices: The directives incentivize sustainable investments, leading to reduced environmental footprints and improved working conditions globally.
• Level Playing Field: Uniform standards across the EU will educe the incentive for companies to cut corners, promoting fair competition.
• Global Impact: The EU’s leadership in sustainability is likely to inspire similar legislation worldwide, harmonizing corporate accountability standards.

However, the directives also pose challenges for companies, particularly in terms of data collection, management, integration with existing processes, and capacity building. Companies will need to invest significantly in these areas to comply with the new regulations.

The EU’s corporate sustainability rules mark a transformative period in global business practices. By setting rigorous standards and fostering transparency, accountability, and sustainability, the EU aims to lead the world in combating climate change and promoting sustainable development.?

Can the new European parliament undo these regulations?

The future direction of new EU green policies faces challenges due to recent election results, which saw gains for right-wing and far-right parties skeptical of the Green Deal and significant losses for Green parties. However, while passing new ambitious measures will be more difficult, most analysts believe that already-adopted climate policies are unlikely to be rolled back.

Linda Kalcher, Executive Director at think-tank Strategic Perspectives, suggests that new ambitious policies for sustainability might still be adopted, though framed as enhancing 'industrial competitiveness' rather than explicitly for the climate.

Additionally, the center-right European People’s Party (EPP), which led the EU Green Deal under former European Commission president Ursula von der Leyen, remains the party with the highest number of seats in the newly elected Parliament.

How ASUENE can help

As the EU enforces stringent sustainability regulations, non-EU companies must adapt to maintain market access. ASUENE offers key services to help? them ensure compliance, mitigate risks, and thrive in the global market.

Carbon Management Software | ASUENE's carbon management software aids in accurate GHG emissions measurement, essential for:

• Scope 3 Reporting: EU companies need their supply chain partners' emissions data for CSRD compliance. Our software provides precise data, ensuring continued business with EU partners.
• CBAM Compliance: Exporters to the EU must provide carbon data. ASUENE’s software ensures accurate reporting, avoiding trade barriers.
• Carbon Pricing: Accurate emissions data helps manage costs in regions with carbon pricing mechanisms.

ESG Supply Chain Management | ASUENE ESG helps companies identify and manage supply chain risks, aligning with CSDDD principles, by:

• Risk Management: Identifying ESG risks and implementing corrective actions ensures compliance with EU standards.
• Interconnected Supply Chains: Managing indirect impacts due to global supply chain connections helps meet EU partners' expectations.

Sustainability Consulting Services | ASUENE’s consulting services guide companies through EU regulations:

• Regulatory Insights: Providing detailed analyses of how EU rules impact non-EU businesses.
• Strategic Planning: Helping develop compliance strategies and operational changes.

Contact our country representatives to receive your free copy of ASUENE white paper “The Ripple Effect: Understanding the Global Impact of the EU's Corporate Sustainability Rules”: Masaaki Hamada and Shu Setogawa for South East Asia; Seiichiro (Ichiro) Tanigaki for the US.

Article by ASUENE Compass | ASUENE Compass, the global sustainability intelligence team at ASUENE, acts as the guidepost through the evolving landscape of corporate sustainability. The ASUENE Compass team identifies emerging trends and regulations in decarbonization, climate policy, and broader ESG matters. This knowledge is translated into actionable insights through white papers, articles, webinars, and regular updates on our website and social media.?