There’s nothing new about climate change or the regulatory shifts this global challenge has triggered. The EU Green Deal and CSRD (Corporate Sustainability Reporting Directive) are central to these shifts. Regardless of industry or sector, most companies today are required to comply with certain ESG regulations and report on their progress. Some industries, however, have felt this impact more than others. In particular, in 2025, the European Green Deal and CSRD will be at the center of this transformation. Legal professionals must navigate these frameworks to ensure not only compliance but also to help position their organizations for sustainable growth.
What does this mean for legal departments in the energy sector? Let’s explore the regulatory landscape and how legal teams can successfully manage these evolving requirements.
Understanding the Regulatory Landscape
Before we get to exploring the direct impact on legal teams’ work and how to handle it, let’s review what the EU Green Deal and CSRD initiatives’ goals are and their role in the energy sector.
The EU Green Deal’s Implications for the Energy Sector
To cut it short, the European Green Deal is the EU’s roadmap to achieving climate neutrality by 2050. It’s a bold goal, and in order to achieve it, there’s a series of legislative packages aimed at reducing greenhouse gas emissions and promoting sustainable energy practices. Some of its key components include the Fit for 55 package and the Energy Efficiency Directive.
Fit for 55 Package
The Fit for 55 package encompasses all the target goals of the EU Green deal. Overall, it aims to reduce emissions by 55% by 2030 in comparison to the 1990 levels. One of the latest updates in this legislation established a focus on reducing methane emissions. This gas, with an atmospheric lifespan of 12 years, is present in the production of oil and fossil gas. The amendment aimed to fill in certain gaps and to target “the production of oil and fossil gas, but also those from the gathering and processing of fossil gas, the transmission, distribution and underground storage of gas, and liquid gas terminals operating with fossil and/or renewable methane.”
These kind of updates are frequent, in the Fit for 55 package legal teams will also find revisions to the Emissions Trading System among other regulations impacting the energy industry.
Renewable Energy Directive (RED III)
The Renewable Energy Directive (RED) is the European Union’s main legal framework for promoting renewable energy across all sectors. It sets binding targets and rules to increase the use of renewable energy sources, such as wind, solar, and bioenergy, throughout the EU. The RED has set high expectations… As of November 2023, the renewable energy target for 2030 is set to at least 42.5%, with hopes to actually reach 45%.
This comes with challenges but also opportunities for the energy sector, as the directive includes measures simplifying Power Purchase Agreements (PPA’s) within the European Union. Indeed, RED has introduced procedures to streamline the process and encourage the use of PPAs – for both producers and consumers.
Overall, the RED aims to support the EU’s transition to a cleaner, more sustainable energy system, reduce greenhouse gas emissions, and enhance energy security by decreasing dependence on imported fossil fuels.
Energy Efficiency Directive (EED)
The Energy Efficiency Directive (EED) complements these efforts by setting binding targets to reduce energy consumption by 11.7% by 2030, compared to 2020 projections. It introduces obligations for both public and private sectors, including the requirement for public bodies to reduce their energy use by 1.9% each year and renovate at least 3% of their buildings annually.
The directive also establishes the “energy efficiency first” principle, pushing organizations to prioritize efficiency in all investment and operational decisions. For legal teams, this means navigating new compliance requirements while helping their organizations balance operational needs with the EU’s energy-saving ambitions.
Legal teams must interpret these directives, assess their implications, and guide their organizations in implementing necessary changes to meet these ambitious targets.
Understanding the CSRD and Its Impact
Whereas the EU Green Deal focuses on providing a structured framework and provisions to reach specific climate goals, the CSRD expands to include reporting requirements. It’s worth noting that, as of today, approximately 50,000 companies are subject to detailed ESG disclosures. Furthermore, within these 50,000, we also count non-EU entities with significant operations in the EU.
Double Materiality
Double materiality is a key component of the European Sustainability Reporting Standards and is required by many companies due to the CSRD. To sum it up, double materiality is the concept that aligns financial activity with sustainability goals. As a result, companies must assess and report not only on how sustainability issues impact their business performance but also on how their activities affect people and the environment. This dual perspective expands reporting far beyond financial risk, requiring legal teams to manage reputational, operational, and regulatory exposures.
European Sustainability Reporting Standards
This reporting framework isn’t all new. It introduces standardized reporting frameworks to ensure consistency and comparability across disclosures. Among the key elements we note environmental, social, governance and general standards. Double materiality is, in fact, part of the ESRS. What’s yet to come are industry-specific standards applicable for companies operating (not necessarily based) in the European Union. So far, certain sectors aren’t concerned with these reporting standards, including oil, gas and energy production. However, the energy industry must stay alert, since these specific components won’t take long to arrive.
Third-Party Assurance
The CSRD mandates external verification of sustainability reports, increasing the accountability and reliability of disclosed information. This is to avoid greenwashing and false claims, external reviews have long been recommended, the CSRD makes it a legal obligation. Rather than seeing it as an additional challenge, it’s also the opportunity for legal teams to actively participate in the reputational control of the business.
Legal departments are responsible for ensuring that these disclosures are accurate, comprehensive, and compliant with the new standards, thereby mitigating potential legal and reputational risks.
Challenges for Legal Teams in the Energy Sector
The EU Green Deal & CSRD both have extensive provisions, guidelines and strict norms that companies in the European Union must follow. For legal teams in the Energy Sector both pose particular challenges that add to their everyday work. Let’s uncover some of the main challenges.
Compliance with Enhanced Reporting Standards
Reporting is not new for legal teams; legal professionals are accustomed to strict reporting guidelines and have a great attention to detail. The biggest difficulties legal teams can face regarding adherence to the EU Green Deal and CSRD are:
- Cross-team collaboration to ensure compliance, and collect the necessary accurate ESG data to align with the CSRD requirements
- Handling an increased administrative workload, specially as the CSRD has yet to apply industry specific standards for the energy sector as far as companies operating in the EU are concerned.
These aspects open the door to non-compliance risks. For the energy sector, it’s particularly high as not only the industry is one of the core focuses of the EU Green Deal & CSRD enforcement, but there might appear to be blurry lines: EU companies are concerned, yet non-EU companies operating in the jurisdiction still have different reporting obligations.
Legal professionals must establish robust frameworks to ensure timely and accurate reporting. Furthermore, they must guide cross-functional teams in preparing reliable disclosures that meet both legal and operational expectations.
Adapting to the Clean Industrial Deal
Following up on the EU Green Deal, the Clean Industrial Deal aims to outline concrete actions to turn decarbonisation into a driver of growth for European industries. It specifically focuses on energy-intensive industries (chemicals, for instance) that need bigger support to decarbonize, and on the clean-tech sector. The latter is of particular interest, as the Clean Industrial Deal views clean-tech as a lever for growth.
The EU’s Clean Industrial Deal mobilizes over €100 billion to support the decarbonization of industry and promote clean technologies . Legal teams must navigate the complexities of state aid frameworks, assess eligibility for funding, and ensure compliance with the associated regulatory requirements.
Understanding the nuances of these incentives is crucial for leveraging financial support while maintaining adherence to legal obligations.
Strategic Legal Responses and Best Practices
Integrating ESG to Corporate Governance
Integrating ESG considerations into corporate governance is essential. This may come in the form of internal policies that reflect regulatory requirements and align with sustainability goals. Of course, it shouldn’t hinder business objectives, and here’s where legal professionals can act as strategic advisors to handle both.
However, internal policies themselves don’t suffice if the rest doesn’t follow. This is where legal teams can also champion the understanding and enforcement of internal policies, fostering a well-thought communication with the board and pushing them to act on the policies. Education plays a critical role in this effort, ensuring that all stakeholders understand both the substance and the intent of ESG governance.
Anticipating Regulatory Changes
Staying ahead of regulatory changes enables organizations to adapt swiftly and maintain compliance. Anticipating such shifts requires legal professionals to monitor evolving legislation closely and translate those developments into proactive measures. This forward-looking approach allows businesses not only to react but to strategically plan around emerging ESG expectations.
To succeed, legal teams must develop internal tracking systems, contribute to scenario planning, and participate in industry discussions to stay current with upcoming legislative trends.
Leveraging Technology for the EU Green Deal & CSRD Compliance
Leveraging technology is a critical enabler for legal teams aiming to meet expanding ESG obligations efficiently.
As far as governance goes, there are different tools to put in place. For instance, contract lifecycle management (CLM) systems help legal teams identify, negotiate, and enforce ESG-related clauses across supplier and client agreements, reducing exposure to non-compliance and reputational risk. Entity management tools centralize governance records and compliance obligations across jurisdictions, creating a single source of truth for corporate ESG alignment. Moreover, board management platforms facilitate informed, transparent decision-making by providing directors with timely access to ESG performance data and legal updates. Together, these technologies enable legal departments to evolve from compliance gatekeepers to strategic drivers of ESG transformation.
Moving forward
In 2025, legal departments in the energy sector are at the forefront of navigating complex regulatory frameworks like the EU Green Deal and CSRD. By embedding sustainability into governance, anticipating regulatory changes, and leveraging technology, legal professionals can ensure compliance and drive strategic transformation.
Engaging proactively with these challenges positions organizations to achieve sustainable growth and resilience in an evolving energy landscape.
