The discussion surrounding ESG (Environmental, Social, and Governance) is critical in drawing attention to the essential transition to a sustainable world. But, beyond the buzz, what does ESG mean for businesses? In this article, we will examine what companies need to do to comply with existing and future laws in Greece and what the future holds for the Greek market.
Existing Laws
Currently, three key laws Greek companies need to comply with are: (a) the Greek Environmental Law of 2022, (b) the Sustainable Finance Disclosure Regulation, and (c) the Taxonomy.
For companies in the energy or automobile sector, Greek legislation mandates critical changes to phase out petrol-fueled heaters and vehicles emitting harmful emissions. The target dates for these changes are in 2026, 2028, and 2030. Achieving these goals will require financing, which leads us to our next point.
For financial services firms, the categorisation of financial products is crucial. Categorisation ranges from grey/brown to dark green, depending on the level of sustainability incorporation. Large listed companies or financial services firms need to report a vast number of key performance indicators (KPIs) under the Taxonomy, which is an onerous task.
Most market players claim that their products promote ESG. However, the technical criteria for ESG compliance in Europe are challenging to meet. Therefore, the majority of financial products in Greece are grey/brown, with some light green ones and no dark green ones, to the best of our knowledge.
Greek companies with a strong international presence strive to comply with ESG requirements. However, many other companies fall behind. This is partly because Greece has mostly small and medium-sized enterprises that find it difficult to interpret the complex Taxonomy requirements and comply with the cost of ESG reporting. This creates a spillover issue for larger institutions that rely on those reports.
Future Laws
There are two significant laws that companies need to prepare for: (a) the new EU Green bond legislation and (b) the Disclosure Regulation and Due Diligence Directive on Corporate Sustainability. These laws will come into effect between 2024 and 2028 in a staggered manner.
For companies issuing green bonds under the new green bonds regime, the definition of green bonds will become narrower. EU green bonds will have to invest in green projects fulfilling the very detailed requirements of the Taxonomy. These investments will require independent verification and a series of reporting requirements and controls.
For listed entities, sustainability disclosures will start applying from 2024 in a staggered manner. Sustainability concerns will need to be incorporated in due diligence, and company directors will be liable to ensure performance in this respect.
Where is the Greek Market Heading?
It is unlikely that Greek firms will be at the forefront of the new EU green bond standard. Green bond issuers will be primarily reliant on institutional funding as small and medium-sized enterprises may find it harder to quantify the economic benefit of green investments. Regulators, who have stated that the standard is voluntary, will start getting stricter and cracking down on greenwashing.
Conclusion
Companies need to use their resources wisely when it comes to ESG compliance by focusing on the mandatory requirements and those that are coming. The focus should not be on creating numerous products that look great on social media but do not meet the ESG legal requirements. Regulatory scrutiny of ESG statements for greenwashing has increased in the rest of Europe, and the reputational risk is substantial. Members of public bodies or advisors need to focus on simplifying the requirements for SMEs to help the industry improve.
For more information on our track record capabilities and legislation on Environmental, Social, Governance please visit our dedicated page here.
This Briefing is intended to provide general information and is not meant to constitute a comprehensive analysis of the matters set out herein or to be relied upon as legal advice. It is not meant to create a lawyer-client relationship. Legal and other professional advice should be sought before applying any of the information in this Briefing to a specific situation.
Bernitsas Law Firm is a partnership of attorneys regulated by Presidential Decree 81/2005 and Law 4194/2013, as currently in force, with its registered address at 5 Lykavittou Street, Athens 106 72, Greece.
