With its 2026 work programme, titled “Europe’s independence moment”, the European Commission sets out its ESG agenda for the year ahead. The programme focuses on strengthening European competitiveness to achieve sustainable prosperity, taking a leading role in clean and digital innovation, and ensuring European security.
Broad ESG impact
Items of particular relevance to ESG include proposed legislation on circular economy, advanced materials and biotechnology, an Energy Union package, the revision of the EU Emissions Trading System (ETS), and updated Energy Union governance and fossil subsidies phase-out. Initiatives in the S and G categories feature gender equality and anti-corruption strategies. Pending proposals such as CSRD/CSDDD amendment directive, the End-of-Life Vehicles Regulation and the Green Claims Directive remain on the Commission’s agenda.
The following initiatives are scheduled to be launched in the coming year:
I. Environment and raw materials
The Circular Economy Act (Q3) aims to foster demand and supply of circular products and is expected to set horizontal standards for design, durability, reparability and recyclability. This goes hand in hand with updates to the rules governing products, market surveillance and standardisation, geared towards modernising conformity assessment and technical standards.
The Advanced Materials Act (Q4) is to provide a regulatory framework for advanced materials in strategic industries.
The European Biotech Act II (Q3) will update regulatory pathways for biotech applications with sustainability implications.
- The EU also plans to establish a Critical Raw Materials Centre (Q2) to improve security of supply and develop joint instruments to monitor, purchase and stockpile such materials.
Businesses should prioritise scaling up design-for-recycling and digital product passports, checking their innovation pipelines for compliance with future rules and diversifying their raw materials risk.
II. Energy Union/electrification
The Energy Union package (Q3) will lay the foundations for the CO₂ transportation infrastructure and markets and create a new legal framework for energy efficiency and renewable energies.
- The planned Energy Union and Climate Action governance update (Q4) addresses, among other things, the phase-out of fossil fuel subsidies and aims to increase synergies between national plans and the EU’s goals.
- The electrification action plan (Q1), which includes heating and cooling, focuses on grid resilience and the removal of bottlenecks.
For companies looking to invest, these plans should mean faster approval processes, clearer grid connection conditions and better planning predictability for cross-border projects.
III. Climate protection
The EU emissions trading system for maritime and aviation is to be updated (Q3), which may noticeably change allowances, compliance processes and price dynamics.
- National targets and flexibilities within the EU climate policy framework/European integrated framework for climate resilience are also to be revised (Q4), with the aim of achieving investment-relevant clarity on the sharing of burdens.
Project portfolios should be aligned with CO₂ infrastructure, flexibility options and funding mechanisms at an early stage. At the same time, however, companies should model CO₂ cost paths under various MSR scenarios, prioritise decarbonisation levers and improve the quality of data and documentation. Physical climate risks should be systematically integrated into governance and location decisions.
IV. Social
- The gender equality strategy 2026-2030 and updated strategy for the rights of persons with disabilities up to 2030 are to establish guiding principles for inclusion and participation (Q1/Q2).
- The anti-corruption strategy and review of anti-fraud architecture aim to improve prevention and the enforcement of the law. The Digital Fairness Act (Q4) is intended to protect consumers from unfair and deceptive practices.
Equality, inclusion and anti-corruption are to remain on the Commission’s agenda throughout 2026 and companies should continue to monitor them.
Summary and to-dos for companies
The focus for 2026 will be on the circular economy and innovations in materials, the Energy Union and electrification, ETS reforms and social governance strategies.
We recommend aligning product designs with circularity criteria at an early stage, establishing CO₂-robust investment paths and reinforcing data and assurance capabilities for reporting and due diligence. Anyone anticipating ETS costs, planning CO₂ transportation or investing in renewables should align their financing with the Q3/Q4 timeline. It is advisable to professionalise documentation, methods and audit trails now to reduce reputational and enforcement risk. Overall, 2026 will be a year of implementation in which making proactive contributions to public consultations and performing effective regulatory watch will improve the practicability of the upcoming provisions and secure competitive advantages.
Ongoing ESG initiatives remain central: The proposed directive amending the Audit Directive, Accounting Directive, Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive aims to clarify and potentially simplify sustainability reporting and due diligence. If the amending directive is not adopted this year as planned, it will be given top priority next year.
The Green Claims Directive officially remains on the European Commission’s agenda and is not listed as slated for withdrawal. However, sources within the Council have recently reported that the President of the Council of the EU has abandoned negotiations on the directive due to significant disagreements. That said, only the European Commission can formally withdraw the proposal. Companies should take the time now to make environmental claims methodologically robust and verifiable. Other ESG projects, such as the End-of-Life Vehicles Regulation, also remain on the agenda.
Forward
