Hello Readers,
Today I learned about 5 key pillars of EUs sustainability rulebook. In this blog I will try to explain these 5 key pillars in simple, interpretable language. If you are also someone who finds these topics complicated and would want to understand the real meaning behind without getting drowned in legal jargons give this blog a read.
This 5 key pillars are really important for those working in ESG sector, because perhaps you use these terms daily but don’t really know the semantics behind these terminologies.
Here is a simple guide to those 5 pillars:
1. CSRD – Corporate Sustainability Reporting Directive
Think of CSRD as the EU saying:
If you are a company doing business in EU, tell us in details how you affect people and the planet – and do it in a standard way so that we can compare you to others.
It means there is a legal framework which you as a ESG manager has to follow while giving out this information to the concerned authority. However, there arises few more questions that links to this framework.
- Who it applies to: Large companies operating in EU
- What it requires: Detailed sustainability reports alongside financial reports, covering climate impact, social issues, human rights, governance, etc.
- Why it matters: Investors, regulators and the public get reliable, comparable ESG information – no fluffy marketing without proof.
2. CSDDD – Corporate Sustainability Due Deligence Directive
If CSRD is about reporting, CSDDD is about action.
Don’t just tell us what is going on – make sure your supply chain isn’t harming people or the environment.
- Focus: Human rights and environmental standards across your own operations and your suppliers.
- Key duty: Identify, prevent, or stop issues like forced labour, unsafe working conditions, deforestation, or heavy pollution in your value chain.
- Extra twist: Companies could be held legally responsible if they fail to act.
3. CBAM – Carbon Border Adjustment Mechanism
If you import stuff into the EU and it was made in a high pollution way, you’ll pay a fee so EU producers aren’t undercut.
- Purpose: Stop companies from dodging EU climate rules by moving production to countries with looser environmental laws.
- How it works: Importers have to buy certificates to cover the embedded CO2 emissions in goods like steel, cement, fertilizers, aluminium and electricity.
- Goal: Level the playing field and push global industries to decarbonize.
4. Invest EU – The EUs flagship investment programme
This is the EUs big wallet for future-friendly projects.
We will help fund innovative, sustainable projects by sharing the risk with investors.
- What it funds: Infrastructure, clean tech, digitalization, skills training, research and innovation – with a strong focus on climate and sustainability.
- How it works: EU budget money is used as guarantee, encouraging private banks and investors to put more money into green projects.
- Why it matters: Bridges the gap between great ideas and the money needed to make them real.
5. EU Green Taxonomy
This is the dictionary of what “green” actually means in EU law.
You cannot just call yourself sustainable – we have a checklist.
- What is does: Classifies which economic activities count as environmentally sustainable, based on science based criteria.
- Covers: Six environmental objectives(eg, climate change mitigation, water protection, pollution prevention)
- Impact: Helps investors, companies and policymakers know what really qualifies as “green” – and avoids greenwashing.
In short,
- CSRD-> Tells us what you are doing on ESG
- CSDDD-> Make sure you are nom in your operations or supply chain.
- CBAM -> Pay for the carbon cost of imports to keep competition fair and drive decarbonization.
- InvestEU -> Funding help for sustainable and innovative projects
- EU Green taxonomy -> Try official rulebook for what counts as truly sustainable.