[People of member states holding the EU flag together © EU]
Europe's ESG Is an Essential for Tangible Profit
Why is Europe so serious about ESG? After the Industrial Revolution that began in the UK, Europe experienced serious environmental problems and came to recognize the importance of sustainable development relatively quickly. Because of this, Europe's early environmental policy established itself not as the realization of a mere ideal but as an essential strategy for tangible profit. Europe designated the environment as an object of legal-level protection. On this basis, the idea that acts threatening the environment need "more deterrent" punishment for effective environmental protection took hold among EU member states.
The active investment in eco-friendly companies as the perception spread that companies practicing ESG succeed managerially and financially is also in line with this background. It is naturally the reason European large and small companies alike cannot help but attend to ESG. Europe, judging that environmental protection and solving structural social problems are a real profit, also premises this on the international-relations side and is pursuing the European Green Deal, aiming to become a net-zero greenhouse-gas emitter by 2050.
The EU, Divided Over Trump's Abolition of ESG Regulation
The EU anticipated the possibility of trade conflict even before Trump's reinauguration. Now the EU faces a difficult choice. It is not to the extent of scrapping existing ESG policies on the grounds of the US policy change, but for the industrial competitiveness of EU countries, it has begun to consider loosening corporate regulation or delaying the timing of regulatory application. But EU countries are offering different opinions on easing the Corporate Sustainability Reporting Directive (CSRD).
The CSRD stipulates a due-diligence-obligation law under which companies check human-rights and environmental issues in the supply chain. Spain requested that the EU not ease this obligation. Spain's Minister for the Environment, "Sara Aagesen," argued in writing, "Let us support the values and priorities of the European Union across borders and set an example of leadership." Italy also urged the EU not to delay the CSRD, stating that there are tens of thousands of companies that will report the CSRD this year under the existing regulations. On the other hand, Germany and France are demanding that the EU postpone the CSRD by two years.
[A Volkswagen plant using solar energy for carbon neutrality © Volkswagen]
Germany, Strengthening ESG with Renewable Energy and Electric Cars
Germany has actively pushed CSRD implementation. So, as it stands, from 2025 large companies with 250 or more employees by German standards must begin sustainability reporting. But due to the aftermath of the Trump second administration's policy, Germany is troubled by the risk that US subsidiaries within Germany may resist Europe's environmental standards and cause confusion in industry. Even amid such risk, the German carmaker "Volkswagen" has already introduced energy-efficiency technology and achieved complete carbon neutrality as of January 1 this year. Volkswagen's Ingolstadt plant, which produces 340,000 cars a year, built renewable-energy infrastructure through the use of solar modules. Volkswagen announced a plan to raise the share of electric-vehicle production and establish a battery-recycling plant for eco-friendliness going forward. This is entirely the result of following Germany's existing ESG strategy of reducing carbon emissions. It is worth watching a little more whether the German government's and German companies' ESG strategy plans will meet great change in 2025 due to the US's influence.
[The "L'Oréal for the Future" campaign video © L'Oréal]
France, Leading on the CSRD
France is a country paying great attention not only to climate issues but also to society's sustainability. France was the first among EU countries to transpose the CSRD into domestic law. From 2024 already, French large companies began CSRD-related reporting, such as carbon-emission supply-chain reporting. Meanwhile, it was also French companies that offered opinions on the move to simplify corporate environmental regulation by pushing the introduction of the EU Omnibus Simplification Package, which collectively refers to matters such as the EU Taxonomy — the standard classifying whether industrial activity is eco-friendly or not — and corporate sustainability due diligence.
The French company "L'Oréal Group," which influences the whole world in the beauty field, also publicly emphasized the need to keep maintaining ESG standards by sending a letter to the EU. L'Oréal plans to use 100% recycled resources in its product packaging by 2030. It also stated that it would further expand hiring for vulnerable groups and women.
France has so far led climate action within the EU. Therefore, it is expected to continue showing a leading stride, making balanced efforts toward the environment, society, and governance even amid Trump's anti-ESG policy.
The UK, Implementing Its Own ESG Regulation
The UK, which left the European Union, has prepared its own ESG regulation separately from the EU and is maintaining a 2050 carbon-neutrality target. The UK energy company BP is pursuing a "Net Zero strategy" of increasing renewable-energy investment to 5 billion dollars annually by 2025 and reducing the share of oil-and-gas exploration. As a financial hub, the UK also had a plan to introduce a "Green Taxonomy" to clearly define ESG investment while making the "Task Force on Climate-related Financial Disclosures (TCFD)" mandatory for all listed companies this year. In an environment that contrasts with such policy, what choice the UK will make going forward is a matter to watch a little more.
2025 ESG, a Challenge for Europe
Hong Seung-pyo, an EU foreign attorney at Espée & Lancée based in the EU, predicted that "in the Trump 2.0 era, the conflict between the US's realist international politics and Europe's ESG policy could intensify." The point is that "Europe's ESG policy is based on realist interests and can change flexibly according to indicators such as the economic growth rate." He also explained that Europe, in particular, with the economic pressure from the current war in Ukraine and a deepening defeatist perception due to the absence of cutting-edge technology within Europe, says it is "simplifying" Green Deal regulation but is in reality pushing it at the level of "restructuring."
With the launch of the Trump second administration, European countries too face challenges regarding ESG. Amid already-begun trade conflict and shifts in global investment strategy, countries with high export dependence, such as the Netherlands and Germany, are in a situation of having to find new outlets. Changes in the economic environment cannot help but drive changes in the ESG-policy trends that had aimed at a better life and sustainability. How the changed ESG flows of the US and Europe will affect Korea's economy and trade continues in the next installment.
ESG.ONL's Three-Line Summary 💡
- With the Trump second administration's "anti-ESG" move, Europe faces a situation where it could have difficulty in trade with the US and in attracting global investment.
- European countries such as Germany and France are considering easing ESG-related corporate regulation and extending its implementation, but positions within Europe are also divided, with Spain and Italy arguing that existing ESG policy should be maintained. The UK operates its own ESG regulation separately from the EU.
- In an environment where the ESG stride is apt to weaken — economic pressure faced by European countries such as the war in Ukraine, and the absence of cutting-edge technology — what choice Europe will make is still a fluid situation to watch.
By Editor L