The European Union's Green Deal1, an initiative aimed at making the EU the first climate-neutral continent by 2050, is driving a transformation in environmental and sustainability standards across multiple industries. This evolving regulatory landscape has direct implications for professionals operating within the construction sector, such as architects and engineers, as they are now subject to enhanced legislative scrutiny under two key instruments:
- The Corporate Sustainability Reporting Directive ("CSRD")
- The Eco-Design for Sustainable Products Regulation ("ESPR")
These measures introduce new obligations that heighten the potential for liability exposures related to design, specification and reporting. Failure to comply may result in penalties, contractual liabilities, or reputational damage. As a result, professional indemnity insurers should evaluate how the Green Deal will affect coverage, claims, and underwriting practices.
The EU Omnibus Package
Political developments following the 2024 EU elections have intensified pressure to ease environmental regulations, raising concerns about potential delays and diluted climate ambitions under the EU Green Deal. These challenges became more pronounced in 2025 with the introduction of the proposed Omnibus Package, which is a set of legislative proposals aimed at streamlining sustainability requirements by narrowing the scope of the CSRD and postponing certain reporting obligations.
On 17 April 2025, the "Stop the Clock" Directive, which forms part of the Omnibus Package, came into effect and delayed the implementation of the CSDR. Since then, progress has stalled with the European Parliament rejecting the negotiating mandate. A revised position is expected to be agreed in November. As the future trajectory of the Green Deal remains uncertain, insurers should continue to monitor these developments closely and factor them into their underwriting and risk assessment processes.
The Corporate Sustainability Reporting Directive
Adopted by the European Council on 28 November 2022, the CSRD requires "large undertakings"[1] to report on sustainability performance in accordance with European Sustainability Reporting Standards (ESRS). Large construction companies are required to report on carbon emissions from construction activities, water usage and conservation, waste management practices, use of renewable/non-renewable materials and governance and supply chain impacts.
As mentioned, the Omnibus Package could change the CSRD by reducing reporting requirements and delaying timelines but the extent of its impact remains unclear.
While the CSRD applies at the corporate level, professionals operating in the construction sector may be indirectly exposed if their work contributes to non-compliant buildings or products, leading to reputational damage or contractual penalties.
Implications of the CSRD for insurers
Professional indemnity insurers should assess how reporting obligations may affect insured professionals. Architects and engineers could face liability if their designs or specifications fail to meet sustainability standards or contribute to corporate non-compliance. In addition, directors of construction companies may face claims for breach of their duty as a director for any failure to comply with the CSRD reporting requirements.
The Eco-Design for Sustainable Products Regulation
Effective since 18 July 2024, the ESPR mandates that products and buildings be designed with sustainability in mind and that there needs to be a focus on durability, repairability, energy efficiency, and the use of low-carbon materials.
As a framework regulation, the ESPR establishes the legal foundation for future product-specific rules. The products to be prioritised have already been identified, with laws governing the use of iron, steel and aluminium expected to be in place as early as 2026. Professionals involved in material specification must ensure compliance or risk exposure to claims. In particular, they will be required to:
- Specify low-carbon materials when designing buildings
- Use digital product passports to track sustainability efforts
Implications of the ESPR for insurers
Insurers underwriting construction and product liability risks may face increased exposure where insured parties fail to meet ESPR standards. Should the materials specified in building designs fail to comply with the relevant standards, a claim could be triggered.
Conclusion
Tighter regulations invariably increase the risk of claims arising from non-compliance with sustainability directives, particularly if firms engage in green-washing practices or misrepresent ESG credentials.
Insurers may therefore wish to review policy wordings and clarify whether claims arising from failures to meet sustainability-related regulatory standards should fall within scope of cover. Insurers may also wish to integrate ESG compliance into risk profiling and pricing models and review proposal forms to ensure that appropriate enquiries are made with the insured prior to inception/renewal.
If you need advice on how the EU's Green Deal will impact your organisation, get in touch with our experts for further information.
[1] https://data.consilium.europa.eu/doc/document/PE-35-2022-INIT/en/pdf
