3 must-know tips for an effective sustainability policy

Sustainability regulation is transforming companies, as a growing number of leadership teams are familiarizing themselves with the EU Taxonomy, CSRD and CSDDD. While the EU is looking to simplify some of the reporting requirements to support smaller companies navigate the new reality – the wheels are in motion and there is no turning back.

Many companies discover along their sustainability journey, that building an effective strategy – one that meets regulatory demands and truly delivers results – doesn’t require reinventing the wheel. More often, success hinges on getting the fundamentals right: a comprehensive, carefully crafted Code of Conduct and robust policies are among the most important strategic tools a company can have to outline its commitments, strategic priorities and sustainability targets. Unlike guidelines or procedures, policies express top-level commitment and set the overarching direction for decision-making within an organization.

For businesses experiencing rapid growth or navigating a clean transition, laying down strong sustainability governance blocks is especially crucial. Clear governance frameworks and policies foster internal alignment, ensure accountability, and provide direction – capabilities that become vital during periods of change management. With these frameworks in place, businesses are better positioned to navigate uncertainties like economic downturns or regulatory shifts without compromising their strategic goals. When pursuing growth through joint ventures or mergers and acquisitions, implementing strong sustainability governance and policies early on will help companies streamline sustainability alignment with partners and ensure a smoother integration process.

Robust sustainability policies are crucial for effective risk management. By integrating sustainability risks and opportunities into the broader enterprise risk management and scenario planning, and supporting this with strong policies, companies can future-proof their business planning and strengthen their resilience in the short, medium and long term. This foundational approach not only helps mitigate risks but also positions companies to capitalize on emerging opportunities.

While sustainability policies themselves do not set measurable targets or directly execute strategy , they establish a foundation that carries far into the future. 

As companies prepare to align with CSRD and CSDDD, or EU taxonomy , robust sustainability policies come in handy. Policies play a crucial role in all of these regulations, regardless of the Green Omnibus proposal. For example, the CSRD (Corporate Sustainability Reporting Directive) mandates that companies implement policies to address material sustainability impacts, risks, and opportunities. Similarly, the CSDDD (Corporate Sustainability Due Diligence Directive) requires companies to conduct due diligence, with policy commitment serving as the foundational first step in this process. To meet EU Taxonomy requirements on minimum safeguards, policies like Human Rights Policy and effective human rights due diligence process are essential.

By aligning policies with key international frameworks such as the Paris Agreement, OECD Guidelines for Multinational Enterprises (MNEs), and the UN Guiding Principles on Business and Human Rights (UNGP), companies can prepare for future regulatory changes better and stay ahead the competition.

Top 3 things to remember when drafting a sustainability policy:

1. Anchor it in your business strategy: make sure the policy reflects your company’s core values and long-term goals, not just compliance needs.
2. Align with international standards: referencing global frameworks like the UNGPs, OECD Guidelines, or the Paris Agreement helps ensure credibility, consistency, and future-proofing.
3. Address key risks and scenarios: make sure the policy identifies and responds to your most material sustainability risks and scenarios – this strengthens both compliance, competitiveness and long-term resilience.