The European Union (EU) recently passed new regulations focused on Environmental, Social, and Governance (ESG) factors. While these laws might seem more relevant to sustainability officers or compliance teams, product managers should pay close attention too. ESG isn’t just a corporate buzzword anymore; it’s shaping how products are developed, marketed, and used. In this article I explore why this matters and how you, as a product manager, can adapt.

What Are the New ESG Regulations?

The EU passed these new ESG regulations on June 21, 2023. The rules are designed to ensure companies operate more sustainably and ethically, with stricter reporting requirements on environmental impact, social responsibilities, and governance practices. This includes everything from reducing carbon footprints to ensuring fair labor practices.

For example, large companies are now required to disclose their carbon emissions and show how they plan to reduce them over time. Additionally, there are new standards for supply chain transparency, meaning companies must prove that their suppliers adhere to ethical labor practices.

These regulations will be phased in over the next few years, with many of the key provisions taking effect in 2025. This means companies need to start preparing now to ensure compliance by the deadline.

Why Should Product Managers Care?

As a product manager, your role is not just about creating features that users love, it is also about aligning your product with the broader goals and values of your company. With these new ESG regulations, there’s a growing expectation that products should contribute positively to the environment and society.

Ignoring ESG could mean more than just a hit to your company’s reputation. Non-compliance with these laws can lead to financial penalties and loss of business opportunities. On the other hand, integrating ESG considerations into your product development can open up new markets, attract conscious consumers, and give your product a competitive edge.

How to Prepare for ESG Compliance

To get ready for these upcoming changes, product managers should start by familiarizing themselves with the specifics of the new regulations. This could involve attending workshops, consulting with legal teams, or working closely with sustainability experts within your company.

Another important step is to conduct an ESG audit of your current products. This involves evaluating how your product’s lifecycle (from design and production to usage and disposal) aligns with the new standards. Understanding where your product stands today will help you identify areas that need improvement.

You should also start integrating ESG goals into your product development roadmap. This means setting specific targets, such as reducing your product’s environmental impact or improving supply chain transparency, and tracking progress toward these goals.

Practical Steps to Incorporate ESG in Product Development

So, how can you incorporate ESG principles into your product development process? Here are a few steps to consider:

• Evaluate the Environmental Impact of Your Product: Start by assessing the carbon footprint of your product. For instance, if you’re developing a physical product, consider using sustainable materials or reducing packaging waste. If it’s a digital product, think about optimizing server usage to lower energy consumption.
  • Example: A tech company developing a new device could switch to recycled materials for the casing or design the product to be easily repairable, extending its lifespan and reducing electronic waste.
• Ensure Ethical Supply Chains: Work closely with your procurement team to choose suppliers who adhere to fair labor practices and have strong environmental policies. This might involve conducting audits or requiring certifications from suppliers.
  • Example: A fashion brand might choose to work only with textile suppliers who can prove that their workers are paid fair wages and work in safe conditions.
• Build Inclusive Features: Social responsibility is a big part of ESG. This means creating products that are accessible to everyone, regardless of their abilities. Consider how your product can serve underrepresented groups or communities.
  • Example: A software company could improve accessibility by ensuring their platform works seamlessly with screen readers, making it easier for visually impaired users to navigate.
• Transparent Reporting: As part of the new regulations, companies are required to report on their ESG initiatives. Product managers can contribute by providing data on how their products meet these standards. This transparency can boost customer trust and brand loyalty.
  • Example: A well-known food and beverage company may need to adapt its product packaging to provide clearer information about sourcing, such as using sustainably farmed ingredients, to comply with the new regulations.

The Advantages for Europe

The new ESG regulations offer significant advantages for Europe. By pushing companies to operate more sustainably, the EU is positioning itself as a leader in the global effort to combat climate change and promote social equity. For businesses, this could mean access to new funding opportunities, as investors increasingly look to back companies with strong ESG credentials.

Additionally, products that meet these high standards are likely to gain favor among consumers who are more environmentally and socially conscious. In the long run, this could help European companies stay competitive on the global stage, as demand for sustainable and ethical products continues to grow.