How key EU sustainability regulations are driving the reinvention of consumer markets

Sustainability regulations within the EU’s climate agenda are prompting companies to rethink how goods are produced, sourced, and marketed. These policies are reshaping business models in the short and long term, influencing financial strategies, operational transparency, supply chains and governance practices.

Understanding and adapting to these regulatory changes is not just a matter of compliance, but a strategic imperative for sustained success. Research shows that products with sustainability claims grow faster than non-sustainable ones, and consumer preferences are increasingly shifting towards sustainability-driven brands, with searches for sustainable goods growing 71% in the span of five years¹.

This presents a clear opportunity for businesses to enhance their brand reputation and tap into the growing eco-conscious market. 

The European Green Deal introduces a variety of regulations that are fundamentally reshaping the consumer markets industry. 

• Reporting / transparency: Regulations that require companies to disclose sustainability metrics and increase transparency
• Direct financial impact: Regulations that increase or decrease the costs of goods and services (through taxes or incentives)
• Direct supply chain impact: Regulations across global supply chains can add complexity and lead to business disruption 

To understand how these policies drive innovation and transformation, we will explore three key legislations and their impact on the consumer markets industry.

Extended Producer Responsibility (EPR)

The EPR places responsibility on companies for the entire lifecycle of their products, especially recycling and disposal. EPR schemes have existed in the EU (and beyond) for years, but they are expanding to new products and constantly evolving. EPR directly affects supply chains, requiring companies to manage the environmental impact of their products throughout the entire value chain. This includes enabling proper collection, recycling, and disposal of products. By obligating producers, EPR encourages companies to integrate circularity principles into their operations and product designs, aligning with sustainability goals.

Viewing EPR only as a cost overlooks its potential to drive innovation. By rethinking product life cycles in line with Ecodesign² and waste law³, companies can develop more sustainable offerings that can attract eco-conscious consumers. For example, electronics companies can adopt modular designs for easier repair and recycling (PDF) (file size: 9.3 MB), aligning with the “right to repair” regulations^4. This approach reduces waste, extends product lifespans and could increase demand and unlock opportunities for business models in areas like repair, remanufacture, refurbish, retrofit, etc, (Re-X), as surveys consistently show strong support for these sustainable features⁵. This shift meets regulatory demands and positions companies to capitalise on growing market trendsOpens in a new window.

Green Claims Directive (GCD)

The GCD aims to prevent greenwashing by requiring companies to substantiate environmental marketing claims. Businesses must provide verifiable evidence for sustainability-related assertions, fostering consumer trust. The GCD calls for transparency and reporting, requiring companies to gather and report accurate data on environmental claims, and mandating honest marketing practices. For instance, a clothing retailer claiming their products are “100% sustainable” must have concrete evidence, like third-party certifications or lifecycle analyses of their products, to back up these claims. The legislative procedure is still ongoing and companies are expected to comply with the regulations in 2026/2027.

The GCD’s aims to promote transparency and consumers’ trust in sustainability-related claims align with other EU initiatives, like the EU Digital Product Passport. The product passport requires businesses to publish key product information regarding sustainability and circularity. This allows consumers to search and compare the sustainability information in these passports. 

By aligning marketing practices with these standards, companies can build stronger, more credible brands. For example, food and beverage businesses can use transparent, verifiable claims like “locally sourced ingredients” to appeal to environmentally conscious consumers while aligning with GCD requirements. By incorporating transparent sustainability information into their products and communication, businesses can guide eco-conscious choices while building trust.

EU Deforestation Regulation (EUDR)

The EUDR requires companies trading in commodities like beef, chocolate, coffee, palm oil, rubber, soy, leather and wood to prove that these goods are not linked to deforestation⁶. The EUDR can lead to business disruption and supply chain adjustments since non-compliance could result in restricted EU market access and substantial fines. For example, a chocolate manufacturer must verify their cocoa is sourced from deforestation-free farms, potentially leading to changes in suppliers and higher sourcing costs.

Supply chain disruptions are anticipated, impacting profit margins, business strategies, brand value, and overall reputation. Companies need a good overview of their supply chain and might face additional costs for due diligence and compliance checks to verify that commodities are deforestation-free. For example, sustainably sourcing rubber and leather requires new supplier audits and compliance checks, affecting production timelines and costs.

However, this regulation also offers companies the chance to lead in sustainable sourcing, aligning their operations with consumer demand for ethical products. By investing in traceable and transparent supply chains, businesses both comply with EUDR and strengthen their market position sustainability.

EU grants focusing on sustainability

In addition to regulations and levies, EU programmes like LIFE+⁷ and Horizon Europe⁸ are driving sustainability innovation across industries. These programmes could provide financial support for innovative projects reducing packaging waste, enhancing recyclability, and developing biodegradable materials, particularly within the food and beverage sector. By leveraging these grants, companies can build financially viable business cases to align with circular economy principles and explore sustainable solutions that reduce environmental impact and meet consumer demands. 

The evolving EU sustainability regulations present challenges and opportunities for consumer markets companies. By aligning legislation and business models, businesses can both achieve compliance and leverage sustainability as a competitive advantage to drive innovation and transformation. This approach could increase brand value, attract eco-conscious consumers, and build long-term loyalty. Optimising supply chains and the use of scarce resources, like energy, can unlock additional value while aligning with sustainability goals. To navigate this new regulatory environment effectively, companies can focus on three strategic pathways.

Investing in a comprehensive data strategy

Companies must prioritise data availability and accuracy. Investing in a robust data strategy is crucial to create a single source of truth across the organisation. This involves centralising data governance to maintain consistency and implementing traceability systems to track the origin and sustainability credentials of all materials. Such measures streamline compliance, enhance transparency and accountability throughout the supply chain and provide the C-suite with reliable, data-driven insights to drive strategic decision-making and continuous improvement.

For one global consumer goods companyOpens in a new window, the need for accurate sustainability reporting led them to seek independent data verification across operations worldwide. By conducting detailed audits, the company confirmed the integrity of its sustainability metrics, strengthening stakeholders trust and reinforcing its commitment to transparency.

Enhancing transparency and communication

Transparency is key to building consumer trust and meeting compliance requirements. Companies must establish effective reporting systems to collect clear sustainability metrics. Effective communication of sustainability efforts is equally important, requiring businesses to articulate product benefits using credible data and reporting standards while avoiding greenwashing. This approach helps build trust and differentiates brands in a competitive market.

Rethink business model, product design and value chain ecosystem

Adapting to new regulations requires companies to rethink their supply chains from the ground up. Companies must verify that every component, from raw materials to finished products, comply with sustainability standards. This transformation often puts pressure on traditional supply chains: KPIs like cost, cash, and time to market are impacted by resilience challenges and sustainability regulations. Such rules and upcoming standards may seem complex, an additional burden or cost. Yet, “first movers” create tangible additional value by integrating sustainability into their businesses. 

To unlock these value sources, we need to rethink combinations of product design, business models and value chain ecosystems. Sticking to the current solutions often hides new solutions and their respective value potential. Although the transformation effort is significant and multifaceted, making a major strategic shift becomes important once sustainability data is transparent and combined with business intelligence.

Early movers are already taking control of key strategic areas, like systems where materials are reusedOpens in a new window and recycled, enabling technologies or customer access and branding.

Embracing compliance as a strategic opportunity can reduce cost, improve margins and increase brand value, resulting in sustainable top-line growth. By aligning environmental responsibility with business success, companies can position themselves as leaders in an increasingly interconnected market. Start preparing today to navigate this regulatory environment and build a thriving, future-ready business.