The EU wants to further tighten climate targets, but according to companies, even the current ones are unrealistic
Climate targets and measures should be even stricter in the coming years than they have been so far, declares the European Union. However, according to company representatives, there are already problems with implementing the currently applicable measures, and creating even tougher conditions could further damage the economy.
The European Union plans to significantly tighten climate goals for the year 2040 in the coming years. By then, greenhouse gas emissions should decrease by 90 percent compared to the year 1990. The EU aims to ensure competitiveness and sustainability and subsequently achieve zero emissions by 2050. However, the EU's stricter approach to emissions already has many critics who label the current emission reduction system by 2030 as unachievable and harmful to the economy.
According to estimates from the International Energy Agency (IEA), half of all required emission reductions in 2050 will demand technologies that are currently still in the research and development or testing phase and are not commercially available. Companies emphasize that the development and deployment of these technologies will require significant investments and risk sharing, implying that the market cannot sufficiently finance the transition to zero-emission technologies on its own.
Government interventions in the form of subsidies, tax relief, and other forms of support play a crucial role here, enabling businesses to transition to sustainable technologies. A historical example is the development of solar panels and bioenergy, where government support allowed for scaling and cost reduction. Companies also face the challenge of the so-called “brown-to-green” transformation, transitioning from traditional fossil fuels to green energies.
The EU's ambition for stricter emission reductions by 2040 is expected to be ensured by a directive that would require companies to report on their sustainability, known as the CSRD (Corporate Sustainability Reporting Directive). This directive would expand to cover more companies, which naturally displeases many of them.
Some companies already have to create sustainability reports within the CSRD framework from this January in accordance with environmental standards and external verification. This obligation applies not only to European companies but also to foreign companies with significant business activity in the EU.
Meanwhile, businesses feel pressure from various stakeholders—from customers and employees to investors and regulatory authorities. The greatest pressure is felt by large companies with annual revenues over 1 billion euros, especially from clients and investors, while smaller companies feel pressure mainly from regulators. Some sectors, such as energy, automotive, or consumer goods, are more affected by this pressure than others, such as technology or media, which are not yet as impacted by climate issues and sustainability.
Companies need to cope with the challenges brought by new technologies, market changes, and regulatory requirements. However, these challenges also offer opportunities for innovation and the development of products and services with a smaller carbon footprint. Companies can also enhance the resilience of their supply chains and invest in renewable energy sources, which can bring new market opportunities and increase competitiveness.
The EU will thus demand further emission reductions from companies, but the ability to implement such measures depends on many other factors. According to the companies themselves, it will be challenging to implement even the current measures, let alone make them stricter. “It makes no sense to continually tighten long-term goals to cover up that the short-term ones will likely not be achieved,” said Ingbert Liebing, head of the German Association of Municipal Enterprises (VKU), in an interview with Frankfurter Allgemeine Zeitung.
