Want to export to Europe? Get ready. Get responsible.

Jan 30, 2024

Want to export to Europe? Get ready. Get responsible.

Jan 30, 2024

You may have heard about it: The European Green Deal (EGD). It is the most ambitious package of policies and initiatives to combat climate change and prevent the loss of biodiversity in the world. It is the European Union’s (EU) response to the global climate emergency. The EGD is a package of policies that define Europe’s strategy to reach net zero emissions and become a resource-efficient economy by 2050. All sectors of the economy will be affected by the EGD. Moreover, also suppliers from outside the EU will be affected.

The EGD includes more than 50 policy initiatives and will be funded with more than 1 trillion euros. The EGD policies will change the way goods are produced and consumed. This means that goods sold on the EU market, including imports from third countries, will have to meet higher environmental and sustainability standards. Many policies have already been passed since the launch of the EGD, and some important decisions will be made in the coming year.

EU Corporate sustainability

source:https://cor.europa.eu/

How does the European Green Deal impact imports to Europe?

The EGD will impact imports into Europe in different ways. Not only will the EGD require higher sustainability standards in primary production and industrial processes, but SMEs from third countries will have to provide more information about the products they export to Europe.

The European Green Deal will change existing norms to make businesses and supply chains more sustainable. The following impacts can be expected on imports to Europe:

Stricter social and environmental sustainability requirements in the production of goods and services

Even if laws and regulations do not change, or do not come into practice for many years, European consumers’ demand is growing for products that do not harm the environment and respect human rights and animal welfare. This is pushing buyers, especially larger companies, to source goods that are produced, processed and packaged using high social and environmental standards. The Make Fashion Circular initiative brings together major garment industry players (including H&M, Lacoste, Primark and Ralph Lauren) to scale up circular solutions.

Most of the large food and beverage brands have committed to sourcing agricultural products responsibly. The fisheries sector is starting to follow this trend. Likewise, some of the major European retailers are publicly committing to creating a sector that avoids food waste and raises the standards for animal welfare, amongst other sustainability commitments. For example, Dutch supermarket chain Albert Heijn has committed to ensure that at least 60% of the protein it sells by 2030 is plant-based. To do this, the supermarket is offering plant-based meat alternatives at the same or cheaper price than conventional products.

EU Corporate Sustainability Due Diligence Directive

The EGD seeks to increase the responsibility of European companies to be transparent about where and how goods are being produced and their impact on people and the environment.

For that matter, new legislation has been prepared, which takes into consideration the entire supply chain of the companies. This therefore directly affects suppliers of these companies as well. As part of the EU Corporate Sustainability Due Diligence Directive (CSDD), companies in Europe are responsible for all parts of their supply chains and must identify, assess, prevent, mitigate, bring to an end and remedy the negative impact on human rights and the environment.

EU Corporate sustainability

The CSDD applies to larger EU companies with 500+ employees and €150 million+ in turnover. But in high-impact areas like textile, agriculture, and mining, it already applies to companies with 250+ employees and a turnover of €40 million+.

So companies who want to export to Europe are likely assessed by European importers on their practices when it comes to impact on human rights and the environment.

The CSDD is expected to be approved in 2024.

Deforestation-free Regulation

Under the EGD, there is also the so-called EU Deforestation-free Regulation (EUDR). The EUDR impacts on 7 main commodities.

EU corporate sustainability Due Diligence directive

The 7 commodities must be:

  • Deforestation-free, meaning not subject to deforestation after 31 December 2020, proven by geolocation data of the production land
  • Covered by a due diligence statement, including a risk assessment
  • Legal, produced according to relevant legislation in the country of production.

The EUDR will apply to large companies based in Europe from the end of 2024, and SMEs as of mid-2025.

Get ready. Get responsible.

Altogether this means that SMEs exporting to Europe will need to adjust to providing more information about how goods are produced and will potentially be audited on this information. This may mean putting in place systems for collecting information from suppliers and subcontractors about production and labour practices and justifying where the goods are coming from (also called traceability). It may also mean becoming compliant with a voluntary sustainability standard, whether a certification scheme or a company’s own initiative.

The Ethical Trade Initiative Base Code is a good start if companies want to benchmark their practices when it comes to human rights and labour rights. It is a freely available code of practice and is the foundation for many certification schemes.

Other valuable tools to develop a sustainability strategy are the Bcorps impact assessment and the ISO26000 self-assessment. These are more comprehensive than the ETI base code and cover more sustainability areas. Both are free to download.

As of now, the EU is a front-runner with such an extensive package of measures to combat climate change and preserve biodiversity, but it is expected that other countries will follow. So when SMEs are ready to meet the EU requirements, they will be ready for other markets as well.

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