On June 24, 2024, the European Union adopted Regulation (EU) 2024/1991 on nature restoration, published on July 29, 2024, in the Official Journal of the European Union and effective as of August 18, 2024 (the “Regulation”).
The Regulation, introducing legally binding targets and obligations for restoring degraded ecosystems, will have a significant impact on businesses operating within the European Union.
This contribution aims to outline the main implications that the adoption of the Regulation will have for companies, while also providing an overview of the necessary actions to effectively prepare.
REGULATORY CONTEXT
The Regulation is a key element in the European strategy for the restoration of marine and terrestrial ecosystems, with gradual objectives to be achieved by 2050.
Through this, the European Union aims to address biodiversity loss, achieve climate change mitigation and adaptation goals, and ensure greater food security.
The Regulation sets out a series of ambitious objectives, including reforestation, wetland regeneration, restoration of terrestrial, marine, and peatland habitats, as well as the protection of endangered species, with specific interventions to improve water quality and reduce river barriers.
Member States must restore at least 30% of degraded terrestrial, marine, coastal, and freshwater ecosystems by 2030, at least 60% by 2040, and at least 90% by 2050, with provisions for some exceptions under specific conditions identified in the Regulation.
The Regulation also includes specific provisions for urban ecosystems, introducing targeted constraints to protect existing green areas and tree canopies, while also promoting the creation of new green spaces and green infrastructure. The objective is twofold: to make urban areas more livable for citizens and counter the negative effects of uncontrolled urbanization. The aim is to improve air quality, reduce the “heat island” effect in cities, and enhance urban resilience to climate change.
Furthermore, specific goals are set for restoring pollinator populations, agricultural and forest ecosystems, as well as an ambitious target of planting at least 3 billion new trees across the European Union by 2030.
Each Member State must develop a national restoration plan (the “National Restoration Plan”) containing the objectives, measures, and deadlines for achieving them, to be submitted to the European Commission by September 1, 2026.
The European Commission will assess the coherence and adequacy of the interventions outlined in the National Restoration Plans within 6 months of receipt and may provide comments within the same period. Member States must implement the European Commission’s recommendations within 6 months.
The results of the implementation of the National Restoration Plans will be monitored every 3 years through progress reporting mechanisms on the implementation of national restoration measures.
RISKS AND OPPORTUNITIES FOR BUSINESSES
- The Regulation will have significant impacts on businesses operating within the European Union in terms of:
Regulatory compliance: Companies will need to align with the new provisions, especially those in sectors such as agriculture, water resource management, and construction. It will be crucial to update operational practices to meet new environmental standards.
Operational limitations: Restrictions on areas to be restored could affect development projects or economic activities in vulnerable areas.
Adaptation costs: Implementing sustainable practices may involve initial adaptation costs. However, timely adoption of compliance measures can avoid penalties and reduce legal risks. - At the same time, forward-thinking companies can take advantage of the opportunities offered by the Regulation to innovate and improve their competitiveness, including:
Funding opportunities: The European Union may provide funds and incentives for companies investing in restoration and environmental sustainability projects.
Innovation opportunities: Businesses can develop new technologies and sustainable practices for ecosystem restoration and management.
Reputation and competitive advantages: Demonstrating active commitment to sustainability can enhance corporate reputation, attract investors, consumers, and clients more sensitive to environmental issues, and provide a competitive edge in a market increasingly oriented toward sustainable practices.
HOW TO PREPARE?
- While awaiting the adoption of the National Restoration Plan, businesses have the opportunity to embark on a green transition by adopting measures that will help them be ready and competitive for future requirements. Recommended actions include:
- Assessing the environmental impact of their activities on ecosystems and identifying areas for improvement;
- Developing compliance plans and internal policies to manage identified impacts;
- Organizing training sessions to raise awareness among management and employees about the new regulations and sustainable practices to be adopted;
- Integrating sustainability goals into business plans, also considering potential funding opportunities and public incentives;
- Evaluating new investments in green practices that could enhance market competitiveness.
LEXIA’s ESG Team is available to assist its clients in preparing for the new regulatory requirements, offering specific legal and tax consulting services to minimize risks and maximize the opportunities arising from the adoption of the Regulation.
