The EU Green Deal – How will it impact my business?

The European Green Deal (EGD) 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, including agriculture, industry, services, energy, finance, transport and construction. As such, the EGD includes key policies and measures such as the Farm to Fork Strategy and the New Circular Economy Action Plan.

The EGD policies will likely 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. Still, little is known about how and when the implementation of these policies will take place, but it is nonetheless important to learn about the objectives of the EGD to be prepared to comply with higher standards.

A blueprint for a carbon-neutral Europe

The EGD is a far-reaching plan to make Europe climate neutral by 2050. The first step to achieve this is reducing greenhouse gas (GHG) emissions by at least 57% by 2030 (compared to 1990 levels) to improve the well-being and health of citizens now and for future generations. The EGD outlines investments needed and financing tools available to achieve a climate transition. In some areas, the EGD is also proposing new and improved policies to ensure this transition.

Ambitious goals

One of the aims of the EGD is to protect European citizens against the impacts of climate change. To do this, the EGD has set ambitious goals to preserve, maintain and improve the EU’s natural resources, land, and ecosystems. To achieve those goals, the European Commission has set up the European Green Deal Investment Plan (EGDIP) (also known as the Sustainable Europe Investment Plan - SEIP). It aims to mobilise at least €1 trillion in sustainable investments before 2030.

Another goal of the EGD is to make Europe a frontrunner in global climate action. To achieve this goal, the EU is engaging its allies and trade partners worldwide. Moreover, the EU recognises that there will be some regions, industries and workers that will find it more difficult to make this transition. To mitigate these impacts, the Commission has issued policy guidance to complement the package on delivering the EGD.

Key elements of the EGD

On 11 December 2019, the European Green Deal was presented by the European Commission and on 14 July 2021, the first set of legislative proposals was launched. These proposals include both binding and voluntary measures, ranging from a European Climate Law to establishing and developing cross-cutting strategies to catalyse the transition in aspects of economic importance such as aviation, energy, industry, mobility, land use, forestry and agriculture.

2. What is the Farm to Fork Strategy?

The Farm to Fork Strategy (F2F) is a set of regulatory and non-regulatory initiatives to make Europe climate neutral by 2050. F2F seeks to address the climate crisis by championing a fair, healthy and environmentally-friendly food system for all Europeans.

F2F was launched on 20 May 2020 for the purpose of reducing the environmental and climate footprint of Europe’s food system, and to reverse biodiversity loss. To achieve this goal, F2F will implement actions to reduce food waste and ensure that there is a sufficient and affordable supply of foods for Europe’s citizens, while also securing the EU’s global competitiveness and assuring that food producers get a fair price for their products (Figure 1).

Figure 1: The Farm to Fork (F2F) strategy in short

Source: European Commission (n.d.)

The actions required to realise the objectives of F2F include revising many existing regulatory instruments for the food and agriculture sector, as well as the creation of new rules and the improvement of coordination tools within the EU (Table 1). The Commission also proposed promotion programmes that establish a sustainable food labelling system (Table 2 and Table 3), a public procurement of organic products and the adoption of an Organic Action Plan 2020-2026.

Table 1: Sustainable food production actions to deliver the Farm to Fork Strategy

Relevant implementation actions	Timeline	Impacted CBI sectors
EU Guidelines on Aquaculture	Published: Q2 2021	Fish and seafood
The new Common Agricultural Policy	Adoption: Q3 2021 Transitional period: 2021-2022 Implementation: Q1 2023	Agricultural and Forestry sectors
Biopesticides – approval criteria for microbial active substances	Adoption: Q3 2022	Agricultural sector
Revision of the existing animal welfare legislation, including on transport and slaughter	Adoption: Q3 2023	Apparel, home decoration and home textiles
Revision of Sustainable Use of Pesticides Directive	Adoption: Q2 2022	Agricultural sector
EU Strategy on Algae (Blue bioeconomy)	Adoption: Q4 2022	Natural ingredients and Fish and seafood sector
Action plan for integrated nutrient management to reduce pollution from fertilisers	Adoption planned: Q4 2022	Agricultural and Forestry sectors

Note: “Relevant policies and legislation” means relevant to the CBI sectors covered in this research and relevant to production/trade in non-EU countries

Table 2: Ethical food production actions to deliver the Farm to Fork Strategy

Relevant implementation actions	Timeline	Impacted CBI sectors
Initiative to improve the corporate governance framework (integrate sustainability into corporate strategies)	Adoption delayed: Q2 2022	Agricultural, Fishery and Forestry sectors
EU Code of Conduct on Responsible Food Business and Marketing Practices	Implementation: Q2 2021	Tourism, Agricultural, Fishery and Forestry sectors
Revision of EU geographical indications scheme (to tackle food fraud)	Adoption delayed: Q2 2022	Agricultural, Fishery and Forestry sectors

Note: “Relevant policies and legislation” means relevant to the CBI sectors covered in this research and relevant to production/trade in non-EU countries

Table 3: Nutrient content, food safety and labelling actions to deliver the Farm to Fork Strategy

Relevant implementation actions	Timeline	Impacted CBI sectors
Revision of rules on information provided to consumers	Adoption delayed: Q4 2022	Agricultural, Fishery and Forestry sectors
Proposal for harmonised mandatory front-of-pack nutrition labelling to enable consumers’ health-conscious food choices	Publication delayed: Q4 2022	Agricultural, Fishery and Forestry sectors
Revision of EU marketing standards for agricultural, fishery and aquaculture products (ensure uptake and supply of sustainable products)	Feedback on adoption delayed: originally planned for Q2 2022	Agricultural, Fishery and Forestry sectors
Revision of EU legislation on Food Contact Materials (food safety and environmental footprint)	Q2 2023	Agricultural, Fishery and Forestry sectors
Set nutrient profiles to restrict promotion of high salt, sugar or fat content	Q4 2022	Agricultural, Fishery and Forestry sectors
Revision of legislation for plants produced by certain new genomic techniques	Q2 2023	Agricultural and Forestry sectors

Note: “Relevant policies and legislation” means relevant to the CBI sectors covered in this research and relevant to production/trade in non-EU countries

From tropical fruits and spices, to grains, oils and animal feed; the EU food system depends on global supply chains. Therefore, to realise the objectives of F2F, EU trade policy will boost cooperation with countries outside the EU to improve nutrition and to alleviate food insecurity by strengthening the resilience of food systems to climate change and reducing food waste.

Areas of international cooperation will include:

• Food research and innovation; with particular reference to climate change adaptation and mitigation;
• Agroecology;
• Sustainable landscape management and land governance;
• Conservation and sustainable use of biodiversity;
• Inclusive and fair value chains;
• Prevention of and response to food crises, especially in fragile contexts;
• Resilience and risk preparedness;
• Integrated pest management;
• Plant and animal health and welfare;
• Food safety standards,
• Antimicrobial resistance; and
• Sustainability embedded in humanitarian and development interventions.

Moreover, the EU’s cooperation strategy in the context of F2F will focus on obtaining ambitious commitments from third countries in key areas such as animal welfare, the use of pesticides, and the fight against antimicrobial resistance.

Laws and initiatives of relevance to CBI sectors have been proposed since F2F was published. To date, these are:

New Common Agricultural Policy (CAP)

The New Common Agricultural Policy (CAP) will enter into force in 2023. Building on the existing Common Agricultural Policy, the aim of the New CAP is to promote sustainable and competitive agriculture that can support the livelihoods of farmers and provide healthy and sustainable food for society. Compared with the previous CAP, the New Common Agricultural Policy sets stricter goals to deliver the objectives of the EGD:

• An obligation to set higher ambitions on environment and climate action;
• Alignment of national CAP strategic plans with the targets of the EGD;
• EU farmers entitled to subsidies will have to meet stronger mandatory requirements (such as a higher percentage of arable land dedicated to biodiversity);
• At least 25% of the budget for subsidies will be allocated to eco-schemes, providing stronger incentives for climate and environment-friendly farming practices and approaches as well as animal welfare improvements;
• At least 35% of funds will be allocated to measures to combat climate change and support biodiversity, the environment and animal welfare;
• In the fruit and vegetables sector, operational programmes will allocate at least 15% of their expenditure towards the environment (compared to 10% in the previous CAP);
• 40% of the CAP budget will have to be climate relevant and strongly support the general commitment to dedicate 10% of the EU budget to biodiversity objectives.

The New Common Agricultural Policy will be tailored by EU Member States into national programmes, and these will be guided by the Farm to Fork Strategy and the Biodiversity Strategy. Like the previous CAP, the New Common Agricultural Policy is focused on the EU agricultural sector – although EU agriculture impacts the agricultural sector globally. As such, the impact of this policy on SMEs in developing countries will be related to the regulations and actions of F2F and other relevant policy areas of the EGD. In this context, SMEs exporting to the EU will have to lower their use of pesticides and chemical fertilisers, improve the conditions of farmed animals, and comply with stricter labelling regulations.

New organics legislation

The new Regulation on Organic Production and Labelling of Organic Products (also called the new organics legislation) entered into force on January 1, 2022. Apart from the general labelling requirements that exist for all food products, additional rules apply to labelling of organic products and raw materials.

The aim of the new organics legislation is to strengthen the control system, helping to further build consumer confidence in the EU organics system. It is supported by the action plan for organic production in the EU, which was launched by the European Commission in March 2021. The requirements of the New EU Organic Regulation will apply to imports from third countries with a 1-1.5-year delay, compared to the EU.

The EU regulations on organic farming are designed to provide a clear structure for the production of organic goods across the whole of the EU. This is to satisfy consumer demand for trustworthy organic products while providing a fair marketplace for producers, distributors and marketers.

Imported organic food is also subject to control procedures to guarantee that it has been produced and shipped in accordance with organic principles.

In this context, changes to the new organics legislation include:

• The scope of production rules has been expanded to include secondary agricultural products such as beeswax, sea salt, wool and others.
• Engineered nanomaterials are not allowed in organic products.
• Mandatory models are to be followed, for both EU and non-EU operators, to obtain an organic certificate.
• New rules apply for group certification. These new rules are very detailed with some significant changes for operators in developing countries.
• The rules on ‘Labelling’ in the new organics regulation will not only cover the label on the product, but apply to all statements, indications, trademarks, trade names, pictures or signs concerning a product on packaging, documents, signs, labels, rings or bands accompanying or referring to that product.
• Using terms such as organic and ecological (or shorter terms like ’bio’ and ’eco’), will only be permitted if the product is certified organic. Likewise, producers must observe that product packaging design is not too similar to the colours (green and white) and shapes (leaf) of the EU Bio logo, as this could mislead consumers into believing a product is organic.
• Labels for organic products entering the EU market must include the code number of the control body to which the producer is subject and the place where the agricultural raw materials of which the product is composed were grown (e.g., EU/non-EU agriculture and whether the product and its raw materials were partially or entirely produced in third countries).

Biopesticides – approval criteria for microbial active substances

Reducing dependency on chemical pesticides is one of the aims of the EU’s ‘farm to fork’ strategy. This includes making it easier to place biological active substances on the market, including microorganisms.

This initiative specifies approval criteria for microbial active substances in Annex II to Regulation (EC) No 1107/2009. The aim is to reflect the particularities of these substances, which are different from chemical substances. With the initiative’s approval in June 2022, permission for the use of more than 60 microorganisms in the EU was obtained. The Annex to the Regulation entered into force in November 2022.

For SMEs in the agricultural sector exporting to Europe, this means that they will have to adopt other agricultural practices that do not include microbial active substances (for example, using pest-fighting companion crops) or apply different products that are within the allowed chemical thresholds or that do not include microbial substances (thus, new investments and to involve technical experts as well as some degree of experimentation). For processers of agricultural products, this might mean closer involvement with their suppliers to assist them in adopting different agricultural practices that comply with the biopesticide initiative.

EU Code of Conduct on Responsible Food Business and Marketing Practices

The EU Code of Conduct on Responsible Food Business and Marketing Practices is one of the first deliverables of the Farm to Fork Strategy and an integral part of its action plan. It sets out the actions that the actors ‘between the farm and the fork’, such as food processors, food service operators and retailers, can voluntarily undertake to improve and communicate their sustainability performance. These actions can be implemented within a company or in collaboration with industry peers and other food system stakeholders (such as farmers and consumers). The Code entered into force on 5 July 2021 and constitutes a voluntary industry initiative, but it will be revised and maybe turned into a law if the European Commission decides that voluntary commitments are insufficient.

The Code includes 7 aspirational objectives, each with its own set of targets and actions aimed at making healthy and sustainable food choices easier for European consumers. Actions in major areas can be expected together with an agreement to move towards higher levels of ambition within a defined timeframe. For the more advanced companies that wish to step up their commitments, the Code also includes a framework for more ambitious, measurable actions.

For companies exporting to Europe, this might mean more strenuous traceability requirements, as well as corporate social responsibility (CSR) policies.

Figure 2: F2F will change the type and number of inputs used in agriculture

Source: Pixabay

Other relevant regulations

There are other regulations with potential impacts for exporters from countries outside the EU that will enter into force in the short and mid-term. For example, the Action plan for integrated nutrient management to reduce pollution from fertilisers, which is expected to be adopted at the end of 2022, includes considerations of impacts of fertilisers not only on human health, but also on the environment. New limit values for contaminants in fertilisers will likely be introduced, as well as restrictions about the type and amounts of chemical fertilisers used in agriculture. This will have consequences for the business model of enterprises under a conventional agriculture regime both in Europe and abroad.

We still know very little about the requirements that new or revised regulations will entail. It is likely, however, that these new rules will bring changes in:

• The types of materials used to package raw materials and specially processed products;
• The type of practices allowed in animal farming;
• The type and level of pesticides allowed in agriculture;
• The type of genetic technologies allowed in plant breeding and cultivation;
• The nutrient content of food products;
• The type of information provided to consumers, including front-of-pack labelling and other marketing standards.

3. What is the Circular Economy Action Plan?

The EU’s Circular Economy Action Plan (CEAP) was adopted in March 2020 as one of the main elements of the EGD. The CEAP is a package of laws and initiatives which aim to transform the design, production and consumption of products so that no waste is produced. This means that the materials in circulation are used and re-used in a way that reduces the need for natural resources. The CEAP initiatives target many different sectors such as packaging, technology, vehicles, and textiles.

Sometimes, people refer to CEAP as the ‘new CEAP’ because it builds on the first CEAP adopted in 2015. The ‘new’ CEAP is more coherent and includes more products and materials than the previous CEAP.

Measures that are being introduced under the new CEAP aim to:

• make sustainable products the norm in the EU,
• empower consumers and public buyers in the EU,
• focus on the sectors that use most resources and where the potential for circularity is high, electronics, textiles and furniture
• ensure less waste,
• make circularity work for people, regions and cities,
• lead global efforts on circular economy.

The first CEAP resulted in some significant steps towards developing a resource-efficient economy, including a Directive on single-use plastics and mandatory EcoDesign requirements for energy-related products like household products, motors and power supplies. However, many of the measures proposed in the first CEAP remained voluntary with few entering official legislation by the beginning of 2019.

Figure 3: A circular economy

Source: Parliament News (2021) “Circular economy: definition, importance and benefits”

The new CEAP is made up of many different legal and non-legal initiatives for implementing the circular economy concept throughout the EU’s economic, manufacturing and trade activities. This means, for example, updating the rules on pollution from waste, or revising what types of materials can be used for the construction sector. The CEAP measures that are relevant to SMEs from developing countries in the agriculture, food, apparel and home textiles sectors (Table 4), saw some progress in 2022, but also significant delays.

Table 4: Summary of relevant actions by the European Commission to implement the CEAP 

Relevant implementation actions	Timeline	Impacted CBI sectors
EU Strategy for Textiles	Adopted March 2022	Apparel, Home Textiles
Proposal for empowering consumers for the green transition	Published Q1 2022	Apparel, Home Textiles
Proposal for a new Ecodesign for Sustainable Products Regulation	Published Q1 2022	Apparel, Home Textiles
Proposal for a regulation on substantiating green claims	Delayed: Q1 2022	All
Regulation on reducing packaging waste	Delayed: Q1 2022	All

Source: Profundo summary based on the European Commission announcements. Note: “Relevant policies and legislation” means relevant to the CBI sectors covered in this research and relevant to production/trade in non-EU countries.

Laws and initiatives of relevance to CBI sectors have been proposed since the CEAP was published. To date, these are:

EU Strategy for Sustainable Textiles

The aim of the many initiatives under this strategy is to make textiles more durable, repairable, reusable and recyclable, to tackle fast fashion, textile waste and the destruction of unsold textiles, and ensure their production takes place in full respect of social rights.

Figure 4: Environmental impact of EU consumption of textiles

Source: Textiles Factsheet

This strategy will have an impact on many different laws, as it will integrate considerations of textiles circularity into other EGD laws and initiatives that are being proposed. For example, the strategy promises to set new design requirements for textiles under the Ecodesign for Sustainable Products Regulation, and will implement EU rules on extended producer responsibility (see box below on extended producer responsibility) for textiles as part of the Waste Framework Directive in 2023.

Other impacts of a European circular textiles economy on SMEs in third countries include:

• Demand for recycled content in textiles (in the short-term, likely to be mostly recycled polyester, as this is the most available), including designing less complex material combinations to make textiles more recyclable;
• There is a trend of reshoring formerly outsourced supply chains. This will mean that EU retailers will want to cut down supply chain costs that are determined by proximity between R&D, product development and manufacturing, time to market and increased wages in offshoring destinations (such as China, Philippines and India);
• Growing secondary material market in Europe that is focused on reuse, repair, and return. In theory, this means there will be more availability of quality second-hand textiles products and materials, less consumption of new products, which may translate to decreasing demand for newly produced textiles from outside of Europe; and
• Implementation of extended producer responsibility (see box below) in promoting sustainable textiles and in the treatment of textile waste.

Proposal for empowering the consumer for the green transition

The proposal for empowering the consumer for the green transition consists of making changes to existing laws and will help consumers in the EU to make informed and environmentally friendly choices when buying products. The proposal still needs to be reviewed by Parliament and the Council before being adopted and turned into law.

The new proposed rules will require traders to provide much more information about the durability, repairability and sustainability of the product being sold. It will also protect consumers from early obsolescence in the products that they buy (see box below), and permit only the use of verified sustainability labels.

Proposal for a new Ecodesign for Sustainable Products Regulation

This initiative aims to make products placed on the EU market more sustainable. This builds on a law which already exists called the Ecodesign Directive, which focused on energy-related products and allowed each EU country to implement their own rules. The new proposal covers all products manufactured except for food, feed, medicines, plants and animals, and some key changes include:

• Ecodesign requirements: for different product groups, new rules will be made which take into account all stages of the life cycle, and minimum criteria will be set to ensure that products are durable, reliable, reusable, repairable, energy efficient and have recycled content. These requirements will also guide the possibility to remanufacture, recycle and/or recover materials, and will aim to limit environmental impacts and the waste produced as a result of the use of the product.
• Product Passport: all products will be accompanied by a digital ‘product passport’ which contains relevant information that will be determined by the sector and product group.

The proposal for a new Ecodesign Regulation was adopted in March 2022 and is now being reviewed by Parliament and the Council before it is approved as a law. Once it is approved, it will immediately enter into force in every EU country, but the details of how the law applies for each product will be determined by the delegated acts. Thirty new delegated acts are expected to be developed by 2030.

A working plan will outline all of this and is due to be published at the end of 2022. The plan will also include the priority products for which laws will be developed first (the list currently includes textiles and furniture).

Impact of the CEAP for you

None of the CEAP actions have become law yet. Proposals are still being adopted by the European Commission, and those that have already been adopted must still be approved by the European Parliament and Council, and then implemented by each EU country within 2 years of the law being approved. This means that in the short term (1-2 years) there will be no official changes in the way European companies import goods and services.

There are however some changes happening in the market, as companies are having to respond to shifting practices and expectations from consumers in the EU. Already, there are signs that buyers want more recycled packaging, more recycled textiles, and generally more information from suppliers about sustainability aspects in the supply chain.

More and more, companies in the EU are also being called out for greenwashing. In 2022, the Netherlands Authority for Consumers and Markets (ACM) requested that large chains Decathlon and H&M remove unproven sustainability claims from their products. This means that even though the law has not yet been passed, companies in the EU are having to be more careful about the claims they make about their products, and may be more careful about sustainability claims made by suppliers.

Figure 5: There are indications that EU buyers want more recycled textiles

Source: CBI

In the long-term (3-10 years), more and more laws and regulations will be put in place to determine how products are made, packaged and reported on in the European market, but it is still impossible to say what the timing and exact content of the laws will look like. The main things that SMEs exporting to Europe will need to adapt to are:

• Requirements that minimise waste throughout the life cycle, or in the process of making your product
• Limits on how much packaging and what type of packaging you can use for your products
• Demands for more information on how your product is made and whether it complies with the new Ecodesign requirements. There will also be increased information required from you so that buyers can make ‘green claims’ and European consumers can be informed about their purchasing choices.

See the section below on extra requirements suppliers may have to comply with. It provides more information on other potential laws which may emerge from the CEAP and tips for how to deal with them.

4. 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. In the short term, this could mean that production and export costs will increase. In the long term, it could mean increased competitiveness in a sustainable global market.

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 and processing 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 that raises the standards for animal welfare, amongst other sustainability commitments. For example, Dutch supermarket 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.

All of this means there is an increased demand for sustainably produced goods and services. The EGD policies and initiatives will only drive this demand up further. This could be a great opportunity for SMEs that are already producing food and textiles in conformance with high sustainability standards, like organic.

• Increased demand for information about practices used in the production of commodities

The EGD seeks to increase the responsibility of European manufacturers and retailers to be transparent about where and how goods are being produced and their impact on people and the environment. To meet these objectives, new laws are in the making, including a law on human rights and environmental due diligence, as well as regulations on non-financial reporting.

But the growth of voluntary sustainability initiatives such as certification schemes and companies’ own initiatives has also increased the availability of information about goods that are marketed as sustainable. Today, in some sectors, sustainable-certified goods occupy a significant portion of the market (Figure 6). Coffee has been sustainable-certified the longest, for over 30 years. Other certified commodities have seen their share in their markets grow in the last 10 years. In some cases, this growth started even earlier. Seafood production, from both wild catch and aquaculture, is also increasingly expected to comply with basic sustainability standards.