Our thinking

EU’s Regulations – Red Tape or Green Gains?

13 September, 2024

A recent FT article raises concerns that sustainability regulations in the EU could be ‘strangling’ Europe’s growth. But does this narrative of negativity around regulation hold true? Does it really damage progress? In the past, companies were largely free to decide what they did about environmental and social responsibility and reporting. While some made admirable strides, many did little. Without tighter regulations, progress towards sustainability would be slow. 

In the short term, EU companies may face competitive disadvantages on the global stage, as the EU leads the way in raising the disclosure bar. However, in due course compliance to EU regulations should become a differentiator, leveraging sustainability as a competitive advantage in global markets. 

We sympathise with the short-term pain: the onslaught of new regulations can feel overwhelming. Governments need to work with regulators to streamline processes and increase cohesiveness between the various regulations. For businesses, rather than treating each set of regulations as an individual and distinct challenge, the overall objective should be to identify impacts, risks and opportunities, build a robust strategy with targets and then report against this. In so doing, compliance becomes easier and businesses should see the benefits.  

It’s also worth noting that while the global position is likely to shift. China is expected to adopt stringent sustainability disclosure regulations. Progressive EU legislation will likely force the hand of non-EU companies in global supply chains, as European companies put pressure on suppliers to obtain the data required for reporting. As such, embracing sustainability now is crucial for future resilience, and frustration around regulatory shortfalls shouldn’t be used as a tool to stunt progress. 

By Nia Vines