Sustainable

The term “Sustainable” in law: Definition and comprehensive legal classification

Definition and origin of the term “Sustainable”

The term “Sustainable” (German: “nachhaltig”) describes, in a legal context, the ability and obligation of actions, businesses, and products to preserve and responsibly use ecological, social, and economic resources for future generations. The current usage of the term is closely linked to the principles of sustainable development (“Sustainable Development”), as first formulated in 1987 by the Brundtland Commission of the United Nations: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

In legal parlance, “Sustainable” applies to all areas where sustainable development is demanded or promoted by legislation, administration, and businesses.

Legal foundations of sustainable action

International legal foundations

The concept of “Sustainable” has become indispensable in international law. Numerous treaties and agreements are based on the guiding principle of sustainable development, including:

• Agenda 21 and the Rio Declaration (1992): Here, sustainability was elevated to the central guiding principle of international environmental and economic policy.
• UN Sustainable Development Goals (SDGs, 2015): Within the framework of Agenda 2030, 17 global goals were defined to make sustainable development binding at various levels.
• Paris Agreement on Climate Change (2015): Climate protection law fundamentally builds upon concepts of sustainable resource use.

Although these agreements are international law, they significantly influence the legal systems of individual states, for example through ratification, direct implementation, or subsequent legislation.

European legal directives

Key regulations for sustainable action can be found in European secondary law:

• Article 3 of the Treaty on European Union (TEU): Sustainable development is explicitly established here as an objective of the Union.
• EU Taxonomy Regulation (adopted in 2020): It defines detailed criteria for determining when economic activities are considered “environmentally sustainable.”
• CSR Directive and disclosure regulations: Companies are obliged to disclose sustainability-related information, in particular under the Corporate Sustainability Reporting Directive (CSRD).

These regulations are binding for Member States and must be transposed into national law.

National legislation

Sustainability principles are also increasingly codified at the national level:

• German Basic Law, Article 20a: The state shall also, “mindful of its responsibility toward future generations, protect the natural foundations of life.”
• Federal Government’s Sustainability Strategy: Pursuit of Sustainable Development Goals, annual reports and reviews.
• Special laws:

– Circular Economy Act
– Federal Climate Change Act
– Supply Chain Due Diligence Act (LkSG)
– Energy and environmental laws

These legal foundations require companies and authorities to adopt sustainable solutions as part of their due diligence and reporting obligations.

Legal requirements and consequences of sustainable action

Mandatory requirements for companies

In business law, requirements for sustainable action are becoming increasingly important:

• Reporting obligations: Companies, particularly those listed on the stock exchange, are required under the Commercial Code (HGB), CSR Directive, and other regulations to disclose sustainability reports.
• Due diligence obligations: With the entry into force of the Supply Chain Due Diligence Act, companies are required to monitor and protect environmental and social standards throughout their supply chain.
• Ban on greenwashing: Companies may not make misleading claims about their sustainability; otherwise, they risk sanctions under competition law (UWG) and marketing bans.

Sustainability in product regulation

Product law and consumer protection are also being strengthened with regard to sustainable criteria:

• Ecodesign Directive and regulations: Set minimum standards for the energy consumption and environmental compatibility of products.
• Recycling and disposal obligations: Producer responsibility for sustainable product cycles is anchored in the Circular Economy Act and Packaging Act.
• Labeling and information obligations: Products with sustainable attributes are subject to strict labeling rules (e.g., environmental labels).

Sustainability in public procurement law

The procurement law regime of the EU and the Federal Republic of Germany explicitly allows and promotes the consideration of sustainable criteria in public tenders. Contracting authorities may, among other things, use ecological and social aspects as award criteria, as stipulated in the Act against Restraints of Competition (GWB) and the Procurement Regulation (VgV).

Sustainable and liability: Legal consequences and sanctions

Civil liability

Breaches of sustainability obligations—for example, in relation to transparency or environmental impacts—can trigger claims for damages or cease and desist actions. This particularly concerns violations of information, labeling, and due diligence obligations.

Administrative offenses and criminal law

Environmental criminal law and administrative offense regimes govern sanctions for unsustainable behavior. Relevant provisions are found, among others, in the Criminal Code (StGB) (e.g., § 324 StGB – Water Pollution) as well as in specific legal sanction norms (environmental law, Circular Economy Act, Supply Chain Due Diligence Act).

Administrative consequences

Authorities may, in the event of detected breaches of duty, for example, issue prohibition orders, revoke permits, or impose enforcement measures if sustainable standards are not upheld.

Legal uncertainty and challenges in defining “Sustainable”

Although the guiding term “Sustainable” has been comprehensively implemented in law, there is still considerable room for interpretation regarding its scope, standards, and concrete requirements. Companies and institutions face challenges concerning proof, certification, and recognized standards. Efforts are being made at both national and international levels to further harmonize and clarify sustainability law to ensure legal certainty and competitiveness.

Conclusion

The term “Sustainable” has become a central guiding principle in the legal context, with international and national legal standards making it binding across various areas. Compliance with sustainable requirements influences the organization of economic activities, the design of products, the structuring of supply chains, and the disclosure obligations of companies. Violations of sustainability regulations can result in civil, administrative, and criminal consequences. Given the dynamic nature of sustainability law, continuous monitoring of legislative developments and case law is necessary.

Frequently asked questions

Which legal foundations are decisive for sustainable corporate management?

A variety of national and international legal provisions apply in the legal context of sustainable corporate management. Of central importance at the European level is the EU Taxonomy Regulation (Regulation (EU) 2020/852), which provides a classification system for environmentally sustainable economic activities. Furthermore, the Corporate Sustainability Reporting Directive (CSRD) regulates sustainability reporting obligations for companies, which go beyond the previous Non-Financial Reporting Directive (NFRD). In Germany, the Supply Chain Due Diligence Act (LkSG) has introduced specific due diligence obligations regarding human rights and environmental standards for companies. In addition, international agreements, such as the Paris Climate Agreement, are also decisive and may be implemented by national law. Companies must also observe further industry-specific environmental and social regulations, particularly in labor law, environmental law, and commercial law.

What legal consequences threaten in the event of violations of sustainability regulations?

A violation of sustainability regulations can lead to various legal consequences. Companies that breach reporting or due diligence obligations, e.g., under the Supply Chain Act or CSRD, face fines and regulatory requirements. In cases of serious violations, there may be criminal prosecution of managing directors, especially if environmental offenses or breaches of human rights due diligence obligations are proven. There is also a risk of civil claims for damages by injured third parties, such as employees in supplier companies or persons affected by environmental damages. Compliance violations can also lead to reputational damage, which may in turn have liability consequences, such as towards shareholders.

How do sustainability laws affect corporate management and corporate governance?

Sustainability-oriented laws require adjustments to corporate governance structures. Companies must implement internal processes and control systems to ensure compliance with legal requirements. This includes, for example, risk management systems, internal policies for supply chains, the preparation and auditing of sustainability reports, or the establishment of compliance departments. The duties of the management board and supervisory board are expanded to ensure they actively manage and monitor non-financial risks, particularly in the areas of environment, social matters, and corporate governance (ESG). Breaches of these supervisory duties can result in executive liability under Section 93 of the German Stock Corporation Act (obligations of management).

What requirements does the Supply Chain Due Diligence Act impose on companies?

The Supply Chain Due Diligence Act (LkSG) obliges companies with a certain number of employees (from 2024: from 1,000 employees) to comprehensive human rights and environmental due diligence obligations throughout the entire supply chain. Companies must conduct risk analyses, establish preventive measures, set up complaints mechanisms, and report on measures taken. Compliance is monitored by the Federal Office for Economic Affairs and Export Control (BAFA), which can also impose sanctions for violations. The due diligence obligations apply not only to the company’s own business operations but also, to a large extent, to the immediate and, in some cases, the indirect supplier network.

Is greenwashing legally prohibited, and what sanctions can be imposed?

Greenwashing, i.e., the misleading presentation or advertising of products, services, or companies as more environmentally friendly or sustainable than they actually are, is legally prohibited. The relevant legal foundations are found in the Act Against Unfair Competition (UWG), trademark law, and consumer protection law. Trade associations, consumer protection organizations, and competitors may issue warnings about misleading sustainability claims and seek injunctions, rectification, and damages. Regulatory measures, such as those imposed by BaFin for issuers of sustainable financial products, as well as fines, may also be levied.

What obligations exist regarding sustainability reporting?

The Corporate Sustainability Reporting Directive (CSRD) obliges large companies and listed corporations in the EU to comprehensively disclose non-financial information, such as environmental, social, and governance (ESG) aspects. The reports must be prepared in accordance with uniform European standards (European Sustainability Reporting Standards, ESRS) and verified by external auditors. In addition to these disclosure obligations, there may also be sector-specific reporting requirements, such as in the financial sector (e.g., SFDR – Sustainable Finance Disclosure Regulation). The goal is to create transparency for investors, authorities, and the public.

What legal particularities must be considered for sustainable investments?

Sustainable investments (Sustainable Finance) are subject to specific legal requirements, primarily under the EU Disclosure Regulation (SFDR) and the Taxonomy Regulation. Financial market participants must disclose the extent to which financial products consider sustainability aspects, the criteria they apply, and how they handle potential sustainability risks. This affects both product design and investor information and advice. False statements or insufficient disclosure can lead to regulatory sanctions as well as civil claims. Additionally, the supervision of climate-related risks by regulatory authorities (BaFin, ECB) is gaining in importance.