On 30 July 2024, Directive (EU) 2024/1799 of the European Parliament and of the Council of 13 June 2024 on common rules promoting the repair of goods, and amending Regulation (EU) 2017/2394 and Directives (EU) 2019/771 and (EU) 2020/1828, entered into force across the European Union. European Union Member States are required to incorporate its provisions into national law by 31 July 2026. What impact will the incorporation of the directive into national law have on ESG?
1. What is ESG?
ESG is a term used to describe factors that assess the sustainability of investments made by companies, countries, and various organizations. ESG focuses on three areas:
E – Environment (environmental),
S – Social responsibility,
G – Corporate governance.
The environmental factor within ESG addresses environmental issues that impact a company's operations and long-term strategy. It includes assessing the following: the company's impact on climate change, the use of natural resources, emissions management, the organization of environmentally friendly production processes, and the implementation of pro-ecological activities, among others.
Social criteria address the impact a company has on its employees, communities, customers, and other stakeholders. They cover issues such as working conditions, equality, human rights, relationships with local communities, and consumer safety and health.
Governance refers to the way a company is managed and controlled. Key aspects include: governance structure, regulatory compliance, combating corruption and fraud, transparency, and accountability.
2. The importance of ESG for the company
ESG is crucial for businesses. Why? Companies that contribute to environmental protection and care for their employees, human rights, and relationships with local communities build positive brand perceptions in the eyes of consumers.
Moreover, the transparency of a company's operations, social responsibility, and environmental protection are perceived by investors as a sign of a company's focus on long-term development, and thus of its stability and brand confidence. Implementing ESG positively impacts a company's image, which can attract new investors.
Moreover, the entry into force of the Corporate Sustainability Reporting Directive (CSRD) means that preparing a sustainability report has become mandatory for some entities. Sustainability reports are published as part of a company's annual report.
3. What is the Directive on common rules to promote the repair of goods about and what challenges does it pose for businesses?
The Repair Directive aims to provide consumers with guarantees regarding the repair of products both during and after the warranty period expires. The directive aims to create an economic model focused on waste reduction by making repairing items the norm, as opposed to purchasing new products, which in turn will contribute to environmental improvement.
Under the directive, producers are obliged to:
- repair your goods placed on the market free of charge or at a reasonable price and within a reasonable time, unless repair is impossible,
- providing consumers with information about repair services and fees in a clear and understandable manner,
- providing the consumer with a refurbished product if repair is not possible,
- guaranteeing spare parts at a reasonable price,
- designate an authorised representative in the EU if the manufacturer is based in a country outside the EU.
4. What impact does the Right to Repair Directive have on ESG?
The directive will impact how companies approach production and the management of resources and products, promoting sustainable development practices that are key in the context of ESG. Its implementation into the national legal systems of member states will require the introduction of new guidelines for ESG strategies, particularly in the areas of sustainable design, transparency, and responsibility for the full life cycle of products.
In terms of environmental performance, companies can be assessed under ESG for:
- reducing the amount of waste, thanks to the expected decrease in its generation as a result of product repairs,
- introducing products to the market that are designed for easy repair,
- reducing the demand for raw materials and energy,
- possibilities of recycling and reusing materials.
In the social aspect, the implementation of the directive may have an impact on the ESG assessment in terms of:
- availability of repair and maintenance services,
- affordability of repairs,
- creating new jobs in response to the growing demand for service workers and design engineers,
- educating consumers about the benefits and possibilities of repairing products, which will have a direct impact on the assessment in the context of corporate social responsibility.
From a governance perspective, ESG assessments may include:
- compliance with rules promoting the repair of goods,
- introducing transparent information about the availability of spare parts, repair services and the possibility of product modernization,
- product lifecycle management – from production, through use, to repairs and recycling,
- cooperation with suppliers and partners to ensure the availability of spare parts and repair services.
5. Summary
Directive (EU) 2024/1799 of the European Parliament and of the Council of 13 June 2024 on common rules promoting the repair of goods will have a significant impact on all aspects of ESG by reducing waste, creating new jobs, and changing consumer habits. Companies will have to comply with legal requirements to increase transparency and align their operations with ESG. Companies that successfully implement the Right to Repair Directive can achieve higher ESG ratings, demonstrating that they are pursuing a business model based on the circular economy, which plays a key role in achieving the European Union's Sustainable Development Goals.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of March 25, 2025
author:
Be the first to receive our articles and legal alerts, straight to your inbox! Sign up for our newsletter by clicking the link or contact us at social@kglegal.pl to personalize your content.
