Implications of the EU’s ESG regulatory framework

The European Commission continues to push ahead with numerous legal instruments imposing Environmental, Social, and Governance (ESG) requirements, such as the Corporate Sustainability Due Diligence Directive (CSDDD), Corporate Sustainability Reporting Directive (CSRD), Sustainable Finance Disclosure Regulation (SFDR), EU Deforestation Regulation (EUDR), the Green Claims Directive, the EU Taxonomy Regulation, and Carbon Border Adjustment Mechanism (CBAM), but is also acting on increased calls for simplification and delayed implementation as the full effect of new ESG regulations becomes a reality for business and other stakeholders.      

During our event, our experts shared diverse perspectives on how to navigate current hot topics with legal, regulatory, and tax implications that are impacting businesses. 

During our seminar we identified several takeaways:

• Through its Omnibus Package the European Commission has presented a significant shift in its ESG regulation, aiming for simplification, delayed implementation, and reduced scope of application. This change in approach is remarkable, especially since certain regulations being affected have yet to enter into force. Developments regarding the Omnibus Package will need to be monitored closely, as they will affect a broad range of corporate entities.
  
  
• During our social law session, we identified some of the clarifications to ESRS 1 and provided insights in the new Pay Transparency Directive (transposition deadline into national law: 7 June 2026). We also identified the Regulation on Forced Labour Ban as a key development to be monitored, becoming applicable to companies as from December 2027.
  
  
• Our third session focused on the civil liability and contractual risks allocation aspects of ESG. It is important for companies to integrate ESG in their contractual framework, both from a risk mitigation, a commercial and a risk mitigation perspective. Here as well, the upcoming Omnibus Package will have an impact, putting the focus on due diligence obligations vis-à-vis direct business partners (instead of all business partners). Furthermore, greenwashing is becoming a topic of increased importance, including through the Directive on Empowering Consumers for the Green Transition and Green Claims Directive. The Belgian FPS Economy has likewise been focusing on identifying and sanctioning greenwashing practices.
  
  
• From a tax perspective, the CBAM is the key initiative intended to mitigate the risk of carbon leakage created by the elimination of free emissions trading scheme (ETS) allowances. Moreover, it is intended to provide incentives for global decarbonization and to create equal conditions of competition. As from 2026, goods can only be imported into the customs territory of the EU by an established declarant that is authorized by the competent authority. By 31 May of each year every authorized declarant must submit a CBAM declaration for the calendar year preceding the declaration, via the CBAM registry. Here as well, the Omnibus Package is likely to have an impact in terms of alleviating certain obligations.
  
  
• The increasing ESG regulatory framework also raises an increasing number of practical applications for companies in terms of implementation, monitoring, and data collection. During our fifth session, we provided insight into KPMG’s partnership with SAP to offer formidable solutions in relation to carbon accounting.
  
  
• Finally, we put the spotlight on voluntary reporting standards for SMEs. These standards have an increasing relevance in view of the reduced scope of CSRD, which brings a larger group of companies to consider whether to report on sustainability on a voluntary basis.

Our experts remain available to discuss any of the above topics in further detail. You are welcome to reach out to us.