Dear reader,
Welcome to Publyon’s monthly Sustainability Newsletter. In this edition, we explore the evolving trends in EU legislation as the current term nears its end. Stay informed to anticipate upcoming changes and developments. We also delve into Enrico Letta’s report, which is shaping the EU’s future priorities. Join us as we uncover key insights that are driving discussions in Brussels and beyond. Additionally, our sustainable finance expert, Maria Pulina, sheds light on the crucial role of financing in future transitions. Don’t miss out on these valuable perspectives!
The spotlight
It’s a wrap for this mandate! What’s to expect next?
On Thursday, 25 April, the last plenary session wrapped up, signalling the end of the current mandate. Lawmakers running for re-election in June are now in full campaign mode, while others may take some time away from politics.
In the last Plenary session, Members of the European Parliament (MEPs) voted on almost 90(!) initiatives, including more than 50 legislations under the European Green Deal. The plenary approved, among others, a ban on products made with forced labour, the Right to Repair Directive, the Ecodesign for Sustainable Products Regulation, the Packaging and Packaging Waste Regulation, the Corporate Sustainability Due Diligence Directive and the Net Zero Industry Act.
In the next mandate, which will begin after the European elections of 6-9 June, most of these legislations are foreseen to be implemented at national level, whereas others will receive further clarification and amendments via legislative instruments such as delegated and implementing acts. Moreover, there are several files that the EU institutions did not manage to conclude in the current mandate and that will be picked up after the elections. These include legislations such as the revision of the Waste Framework Directive and the Green Claims Directive.
As we can see, the end of the current mandate, which was fully focused on making the continent climate-neutral under the European Green Deal, coincides now with trends pulling the EU regulatory framework for the next five years towards a phase of implementation of key green files. At the same time, calls from industries and policymakers suggest a progressive shift in priorities from strong environmental protection policies towards more balanced legislation, which will need to take into consideration the competitiveness of the EU industry. These may result for instance in policies simplifying bureaucratic obligations of industries and farmers, while funding research and development of key technologies to support the twin transition.
A High-Level Report on the Future of the Single Market issued by former Italian prime minister Enrico Letta (see below) is also expected to feed into the formulation of tangible proposals aimed at building a future-proof Single Market, including the creation of a Circular Single Market.
We can expect a report from another former Italian Prime Minister, Mario Draghi, in June, which will concern Competitiveness. Together with the Letta report, it will inform the high-level priorities from the European Council, expected in late June. These priorities are expected to form the basis for the priorities of the new European Commission.
Policy update
Report on Single Market by Enrico Letta
Enrico Letta’s High-level Report on the Future of the Single Market, commissioned by the European Council and President Ursula von der Leyen, highlights the need for significant reforms to adapt the Single Market to contemporary challenges. Letta identifies shortcomings in the current framework and proposes concrete solutions to ensure European competitiveness and prosperity. More specifically the former Italian prime-minister looks at private investment, supply chain resilience and a future EU circular market.
What about sustainability?
Private investment in sustainability
By 2025, Enrico Letta envisions to support private investment in sustainability, creating a specific European Green Guarantee (EGG). According to the report, the European Commission and the European Investment Bank would develop the framework and raise the financial resources for an EU-wide scheme of guarantees to support banks landing to green investment projects and companies.
What does it mean for businesses? Eco-friendly activities would be incentivised and rewarded by a better access to capital. The more sustainable the projects of a business are, the more chances they would get to receive support from banks. Such businesses would be enabled to grow and expand their operations, therefore position themselves as frontrunners compared to their competitors.
Circular market
According to Enrico Letta, the European Union must gradually establish a Circular Single Market where economic growth and well-being are no longer dependent on unsustainable use of natural resources and dangerous dependencies. In this pursuit, the European Union is tasked with the role of leading initiatives that foster not only environmental sustainability but also drive economic growth within its Single Market.
The report envisions that the EU would amplify access to circular materials by stimulating demand for high-quality recycled materials, establishing an EU-level end of waste criteria for various material and make a strategic use of biomass.
What does it mean for businesses? Businesses that are involved in the production, distribution, or sale of recycled materials, products, and services would be presented with market opportunities as they benefit from increased demand stimulated by EU initiatives.
Compliance will be central, as businesses would need to adhere to end-of-waste criteria and other regulations related to circular materials. Finally, companies that proactively embrace circular economy principles may gain a competitive advantage by differentiating themselves as environmentally conscious and sustainable.
Supply chains resilience
Enrico Letta acknowledges the fundamental role of critical raw materials in ensuring the stability and sustainability of European industries. He therefore considers that addressing the resilience of supply chains represents another critical area of intervention to protect the Single Market.
In doing so, he underlines that a balanced approach is required – one that prevents unhealthy competition among Member States in reshoring policies while allowing them the flexibility to leverage their competitive advantages.
What does it mean for businesses? Businesses will need to prioritise building resilience into their supply chains. Letta’s emphasis on preventing unhealthy competition among Member States suggests that businesses may also need to collaborate more closely with government entities and other stakeholders.
This could involve sharing information, coordinating efforts to address supply chain challenges, and advocating for supportive policies. Finally, businesses must carefully assess their competitive advantages and consider how best to leverage them within the evolving regulatory environment.
In conclusion, Enrico Letta’s report emphasises the urgent need for significant changes in the Single Market to tackle modern issues. He suggests ideas like the European Green Guarantee and creating a Circular Single Market, focusing on sustainability. These plans aim to encourage environmentally friendly actions and make supply chains stronger. They also bring both obstacles and chances for businesses in adapting to a more sustainable and competitive European market.
Expert interview
Maria Pulina
Maria Pulina is the sustainability practice lead in Publyon and sustainable finance expert. In this edition, Maria is sharing her insights on the role of sustainable finance during the next mandate and the most tangible implications for businesses.
Can you tell us what is sustainable finance in the EU?
In the EU, sustainable finance can be defined as finance to support both economic growth and to reach the climate- and environmental objectives of the European Green Deal, while taking into account social and governance aspects. At the same time, sustainable finance includes setting up transparency rules when it comes to risks related to Environmental, Social and Governance (ESG) factors that may have an impact on the financial system, and the mitigation of such risks through the appropriate governance of financial and corporate actors.
Since 2018, the European Union has further developed the current framework for sustainable finance with a series of regulatory initiatives, including among others the Sustainable Finance Disclosure Regulation, EU labels for benchmarks and benchmarks’ ESG disclosures, guidelines on non-financial reporting, the EU Taxonomy for sustainable activities and its delegated acts, European green bond standard, and sustainability due diligence rules and reporting.
Do you think that sustainable finance will take a central role in the next mandate?
In the run up to the next European elections, we noticed a tendency in Brussels towards a lower output of new environmental legislation. However, despite calls for a ‘regulatory pause’ on climate legislation, climate protection seems to appear still high in the agenda of the main political groups in Brussels. The challenge of the next mandate will be to prioritise financial support for the green transition, for which the European Commission has identified the need for an annual mobilisation of €620 billion from both public authorities and the private sector.
Also in his high-level report on the Future of the Single Market, former prime minister Enrico Letta highlighted the need to start implementing relevant green legislation, also through financial tools. He states that one of the main objectives of the Single Market must be to make European industrial capacity compatible with the goals of, among others, the green transition. To this end, in the next legislative term, Letta highlights the need to direct all energy towards the financial support of the transition, channelling all necessary public and private resources towards this goal to make the transformation of the European production system possible, also through the institution of a Savings and Investments Union to complete the Capital Markets Union.
What would this mean for businesses operating in Europe?
The push towards financing the green transition in the next term may translate in interesting opportunities for organisations operating in the EU, in particular for those that are already sustainable frontrunners in their industry. This may translate in additional funding to their economic activities, together with increased investments coming from both private and public sources to boost research and development, technological advancement, and education and formation of skilled workers.
This is an exciting time for all business that are already putting sustainability at the centre of their activities, and for those that are planning to follow this path.
My recommendation to them is to closely follow how these discussions around financing the EU green policies will manifest into concrete proposals in the next legislative term, also in terms of funding opportunities.
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Eliza Druta
Hi, my name is Eliza and I am curating this newsletter to bring Brussels’ main sustainability insights to your inbox, every month. Do not hesitate to reach out should you need more information on the newsletter’s content or if you have suggestions for our next editions.
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