Sustainability in 2025

At the heart of Europe, Luxembourg is often seen as a country sheltered from the direct impacts of major crises. Yet, its open and interconnected economy is directly tied to the global challenges of climate, social, and regulatory shifts. Far from being immune, the long-term viability of our economic model now depends on the ability of its companies to integrate a long-term vision: that of sustainability.

A new paradigm of risks and opportunities

This necessity is no longer just theoretical. The pressure on resources and ecosystems is translating into very real risks. Each year, the World Economic Forum confirms it: extreme weather events have become a major cause of value chain disruption in both short- and long-term perspectives, The 2025 report highlighted a set of risks related to biodiversity loss and nature resource shortages over the next decade. The summer of 2025, with its early heatwaves and forest fires ravaging parts of Europe, is a stark reminder of this. A better consideration of environmental, social and governance (ESG) risks is therefore no longer a matter of image, but a prerequisite for business continuity.

The European Union has launched the Green Deal, an unprecedented economic transformation project aimed at raising awareness and fostering market incentives for the industry to prevent and mitigate the risks to a reasonable extent. The recent regulatory simplification (via the "Omnibus" Directive) should not be misinterpreted: it aims to make regulation more efficient, not to lessen the ambition. The proof lies in the EU's commitment to mobilizing trillions of euros to support this transition, and the future review of the Sustainable Finance Disclosure Regulation (SFDR), which aims to better define and encourage "transition investments," thereby channeling capital towards companies engaged in a credible transformation.

Direct consequences for Luxembourg's businesses

This new reality is already manifesting at our doorstep, through three key dialogues:

With bankers: A partner in the transition. To grow, every company needs financing. The European Banking Authority (EBA) and the European Central Bank (ECB) have clearly stated their expectations: banks must integrate ESG risks into their financing decisions. As specified in the EBA's "Guidelines on loan origination and monitoring," banks are required to assess how ESG factors impact the borrower's financial performance. Companies’ ability to demonstrate a credible transition plan is therefore becoming a condition for accessing capital.
With insurers: A judge of adaptability. Getting insured is more expensive. Major reinsurers like Swiss Re have calculated that insured losses from natural catastrophes exceed $100 billion annually. The European Insurance and Occupational Pensions Authority (EIOPA) is concerned about the widening "climate protection gap". Insurers are thus compelled to better assess their clients' ability to adapt and reduce their own impacts. A sound sustainability strategy can become a lever to manage companies’ insurance premiums.
With stakeholders: "License to Operate". Finally, beyond finance, all stakeholders are demanding accountability. B2B clients are including complex ESG questionnaires in their tenders aimed at understanding companies’ long-term commitment. As for talent, according to the OECD Guidelines for Responsible Business Conduct, respect for human rights and proper working conditions are key factors in attracting and retaining talent. Companies’ reputation and ability to operate depend directly on it.

From constraint to strategic opportunity

While it might be tempting to see Omnibus Directive’s review of sustainability regulation like the Corporate Sustainability Reporting Directive (CSRD) as a signal to pause, doing so would be a missed strategic opportunity. In fact, it's the perfect chance to move beyond a compliance mindset — often seen as a burden — and adopt a proactive, strategic approach. Now is the ideal time to reposition sustainability: not as an annual report to be written, but as a core lever for companies’ strategy.

How to act? The beginning of a virtuous cycle

The question is no longer "should we act?" but rather "how can we act intelligently and structurally?". The answer lies in implementing a virtuous cycle within the company:

Understand

unique impacts, risks, and opportunities.
Act

by defining a clear transition plan and establishing the right governance.
Manage

by measuring progress and communicating transparently.

In our upcoming articles, we will explore in detail the concrete actions and frameworks to implement this virtuous cycle within Luxembourgish companies.