Product evaluation cards could save the European Green Deal.
Brian Hill: Director of Research at the French National Center for Scientific Research (CNRS), is a professor of decision sciences and the academic director of the Comprehensive Economics Center at HEC Paris.
The future of the European Green Deal appears bleak. The anticipated vote on the European Commission’s “comprehensive” package—expected in the coming days—threatens to affirm the rollback of the disclosure pillar that underpins the Green Deal, or the directive concerning Corporate Sustainability Reporting (CSRD).
The lines of battle are familiar. On one side stand those primarily focused on promoting Europe’s growth and competitiveness, responding to the warning from former European Central Bank President Mario Draghi that “inaction” in these areas threatens the sovereignty of the European Union. On the other side are those committed to environmental protection and human welfare—goals supported by the overwhelming majority of EU citizens and companies. In other words, this is a clash between prosperity and principles.
However, things need not be this way. As a new policy paper from HEC Paris shows, Europe can achieve sustainability goals without sacrificing competitiveness. The key to this is shifting the focus of disclosure regulations from companies to products.
The logic is straightforward. If disclosure standards apply to what is sold, rather than who sells it, every product—whether made in Boston, Berlin, or Beijing—will be subject to the same rules. At a time when the U.S. is pushing for exceptions for American companies regarding sustainability reporting, this ensures a level playing field, where European companies will no longer have to bear heavier compliance burdens than their foreign competitors.
Critics may argue that implementing this scheme would be nearly impossible due to the current lack of adequate sustainability information at the product level. However, the HEC Paris research paper, based on interdisciplinary expertise and input from a range of stakeholders, proposes a solution: a unified digital performance card for each product that includes key sustainability indicators such as carbon footprint, biodiversity impact, and human rights record.
Similar to nutrition labels, product sustainability cards will provide clear, objective information that facilitates direct comparisons. Navigating through a performance card system will be much easier compared to the current jungle of sustainability labels—over 450 of which exist today, each with its own vague rules. Ultimately, this product sustainability system will achieve what coordinated billing information has done for electricity markets: provide clarity that the existing Corporate Sustainability Reporting Directive claims to enhance in corporate reporting.
Thus, performance cards will contribute to more sustainable decision-making by regulators, policymakers, companies, and consumers alike. Moreover, by leveraging primary data, the performance card system will alleviate the reporting burden on companies. Many major companies already request more product-level data from suppliers. A standardized performance card would automate and generalize information exchange in this regard, allowing sustainability data to flow freely along supply chains. Once integrated into accounting, payroll, and inventory programs, reporting becomes nearly seamless.
Companies will not face any legal obligation to report, making the proposal politically viable at a time when the U.S. is experiencing strong opposition to reporting requirements. Yet the design of the system ensures that a refusal to comply will not protect a company from scrutiny. The performance card will clearly indicate where information is lacking and will instead display the grade range from best to worst for the product and type, which will be visible to end consumers.
Decades of behavioral research show that when transparency deficiencies are presented clearly, people interpret this negatively. If a company refuses to share information about its human rights record, consumers will assume its record is poor. In a market where these consumers can easily see the records of the company’s competitors, silence will not only be a clear signal but will also be costly. Consequently, companies, regardless of their location, will quickly learn that disclosing their record puts them in a better position.
While Europe’s concerns about competitiveness are understandable, we must not forget that failing to address social and environmental challenges also incurs significant economic costs. According to the European Environment Agency, extreme heat, flooding, and other severe weather events cost the EU €44.5 billion ($51.8 billion) in economic losses annually from 2020 to 2023. Instead of succumbing to the temptation to stifle the emerging disclosure system, the bloc can enjoy both competitiveness and sustainability through the innovation of a new system based on product evaluation cards. With the right design, this would enable the EU not only to maintain its standards at home but also to promote them globally.
