In recent months, the business sector has been experiencing what many are already calling the a regulatory tsunami in sustainability. New European directives, regulations and standards are redefining what it means to to be a responsible company in the 21st century. This phenomenon is not unknown to the cosmetics and pharmaceuticals sector, two industries that are closely scrutinised due to their environmental impact, their global supply chains and growing pressure from environmentally conscious consumers.
One of the key players in this regulatory change is the CSRD Directive (Corporate Sustainability Reporting Directive), which replaces and expands on the former Spanish Law 11/2018 on non-financial information statements (EINF), the well-known sustainability reports.
These new regulations, which was due to be transposed in 2024, means:
- The adoption of mandatory reporting standards (ESRS), which are currently under review with a view to simplifying them.
- The extension of the scope: this will potentially affect more than 49,000 businesses in the EU (also under review).
- New reporting formats: the use of XHTML with iXBRL tagging will be required, which will necessitate the use of specific software.
Given the complexity of its implementation, a modification known as the Directive ‘’Stop the Clock’, the aim of which is to reduce the administrative burden on businesses. This proposal also affects another key piece of legislation: the Directive on due diligence in corporate sustainability (CS3D or CSDDD)).
The challenges of the regulatory tsunami: What does CS3D entail?
The Directive (EU) 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate due diligence on sustainability and amending the Directive (EU) 2019/1937 and the Regulation (EU) 2023/2859 (CSDDD), better known as CS3D Directive, will require certain companies to:
- To identify and mitigate social and environmental risks and impacts within its supply chain.
- Establish due diligence procedures relating to human rights and the environment.
- Adopt transition plans in line with the climate targets of the Paris Agreement.
This will have a direct impact on companies with outsourced production or those that rely on suppliers in third countries, which is common in the cosmetics sector.
The Challenges of the Regulatory Tsunami: Other Regulations Under Review
Alongside the CSRD and the CS3D, the European Commission has proposed simplifications to other key regulations:
EU Taxonomy
- Report limited to companies within the scope of the CS3D.
- Financial materiality threshold to avoid unnecessary reporting.
- Simplification of the 70% in the reporting forms.
- Greater flexibility in transitional activities.
- Adjustments to the DNSH (Do No Significant Harm) criteria, which are key for chemical substances.
CBAM Regulation (Carbon Border Adjustment Mechanism)
- Exclusion of small importers (less than 50 tonnes per year).
- Simplification of authorisation requirements and emissions calculations.
The challenges posed by the regulatory tsunami: And what about the regulations that have already been approved?
Apart from these proposed amendments, there are others regulations already in force that will affect the cosmetics and pharmaceutical sectors:
- ESPR Regulations: requires products to be designed to be more durable, repairable and recyclable from the outset. Pending the publication of the delegated acts.
- EUDR Regulation: prohibits the sale of products linked to deforestation, such as palm oil, soya or cocoa.
- Green Claims Directive: restrict the use of claims such as “eco” or “green” if they are not scientifically substantiated.
- SFDR Regulation: although aimed at the financial sector, it encourages companies to provide reliable ESG data if they wish to attract investment
sustainable.
Adapting to this new regulatory landscape it is not optional. But it is also an opportunity to stand out, become more competitive and respond to increasingly discerning consumers. Companies in the sector that take action now will be better placed to lead the way.
Article written by:
Núria Carreras i Roca
Sustainability Manager. Tandem HSE.