The ‘E’ of ESG: Understanding New EU Ecodesign Rules on Unsold Consumer Products

The European Union is implementing new stringent regulations under the EU Ecodesign Regulation for Sustainable Products (ESPR), aiming to enhance environmental sustainability by addressing the treatment of unsold consumer products. These rules form a critical part of the "E" in ESG (Environmental, Social, Governance) criteria, emphasizing transparency and a ban on product destruction.

Key Highlights of the New EU Ecodesign Measures

Scope and Timing

• The ESPR rules affect all enterprises placing products on the EU market, regardless of their location.
• Audited disclosure obligations begin from 2026 (reporting on data from 2025).
• A ban on the destruction of certain unsold consumer goods will take effect from 19 July 2026.
• Initially, large enterprises are targeted, with medium-sized enterprises coming under the scope in 2030. ### Objectives
• To prevent the systematic destruction of unsold consumer products, viewed as an environmental threat and a waste of valuable economic resources.
• To harmonize rules and eliminate market distortions caused by varying Member State regulations on product destruction.

Disclosure Requirements (Article 24 ESPR)

Enterprises must annually report:

• Quantity and weight of unsold products discarded, broken down by product category.
• Reasons for discarding and any applicable exemptions.
• Waste treatment methods used (reuse, recycling, recovery, disposal).
• Measures to prevent destruction, both current and planned.

Disclosure Format and Verification

• Information must be disclosed via a dedicated, easily accessible webpage or within a corporate sustainability report per the EU Accounting Directive.
• Parents can disclose consolidated data for subsidiaries.
• The upcoming implementing act (anticipated by Q3 2025) will standardize the disclosure format to improve data comparability.
• Large enterprises must secure a limited assurance opinion by statutory auditors or accredited providers to verify disclosure accuracy.

Ban on Destruction and Exceptions (Article 25 ESPR)

• The EU Commission will finalize delegated regulations detailing justified exceptions to the destruction ban.
• Member States must set penalties for non-compliance, with examples like Germany’s potential fines reaching €50,000 per incident under earlier directives.

Practical Implications for Businesses

• Companies active in the EU market must prepare for early compliance with transparency and destruction ban rules.
• Adequate systems for tracking unsold inventory and reporting environmental impact need establishment.
• Failure to comply risks hefty fines and reputational damage, emphasizing the need for proactive sustainability strategies aligned with EU legislation.

Conclusion

The EU’s new Ecodesign rules represent a pivotal advance in sustainable product lifecycle management, directly targeting waste reduction and resource efficiency. Enterprises, especially large and medium-sized ones, should closely monitor regulatory developments, adopt transparent reporting mechanisms, and develop prevention measures that align with the EU’s environmental ambitions under the ESG framework.

Sources: EU Commission draft regulations on ESPR 2024/1781, Freshfields blog analysis by Jonas Köster and Tobias Klatt, and official EU sustainability reporting guidelines.

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