23 Jun 202614 min read
On 1 May, the Trade Agreement between MERCOSUR and the European Union (EU) entered into force, gradually eliminating EU tariffs on 92% of MERCOSUR exports and providing preferential access to a further 7.5% through quotas and other access arrangements. However, some companies may encounter a barrier when introducing their products into Europe.
The EU has several directives relating to environmental, social and governance (ESG) criteria, under which companies within the bloc are required to submit reports containing information on sustainability, human rights and suppliers.
“Europe is increasing its sustainability requirements in terms of traceability and supporting documentation,” comments Alejandro Chiappe, Advisory Services Lead Partner at Grant Thornton Argentina. “Although these requirements do not affect non-European companies or those without a direct relationship with the EU, the rules for Latin American companies are being redefined, and those that are part of the European value chain will face greater requirements and will need to provide supporting evidence in order not to lose market access.”
Since 2019, with the launch of the European Green Deal to transform the economy, energy, transport and industries into socially responsible sectors to ensure a more sustainable future, sustainability legislation and regulations have become more stringent. Through various directives and regulations, the European Commission requires companies and Member States to demonstrate traceability and commitment to the environment.
In recent years, there has been growing demand to simplify requirements and reduce the reporting burden associated with sustainability disclosures. In February 2025, the Omnibus Package was presented to the European Parliament (EP) to address this demand for simplification, and in November a revised position was approved, resulting in significant changes to sustainability reporting.
“The Omnibus Package does not replace the regulations; rather, it simplifies who must report, when and what,” highlights Marcelo Pinto, Advisory Services Partner at Grant Thornton Argentina. “It should also be borne in mind that each Member State must transpose every regulation approved by the European Parliament into its domestic legislation and has up to one year from the entry into force of the Directives to do so.”
The Corporate Sustainability Reporting Directive governs the disclosure of sustainability information, focusing on corporate transparency. The Directive elevates sustainability reporting to the same level as financial reporting, requiring sustainability information to be reported with the same degree of rigour and in accordance with the European Sustainability Reporting Standards (ESRS). It replaces the 2014 Non-Financial Reporting Directive (NFRD), strengthening reporting requirements and scope.
The CSRD entered into force in 2023 and is being implemented progressively. First-wave entities reported for the first time under this directive in 2025, while fourth-wave entities will do so in 2029.
The objective is to provide greater transparency in sustainability disclosures, enabling comparability so that investors, banks, suppliers and clients can make better-informed decisions. In the long term, it aims to reduce climate risk and, together with the European Green Deal, improve overall sustainability in the EU.
“Complying with CSRD is not simply about filling in a template,” notes Chiappe. “Companies must have real and auditable data. It is no longer enough to say, ‘I comply, I am sustainable’; this must be demonstrated through data, methodologies and criteria, and that is the most challenging aspect of the Directive.”
CSRD reports must follow the principle of double materiality, requiring disclosure of both the impact on sustainability issues and the impact these may have on the organisation’s finances. Twelve ESRS standards must be reported:
The Omnibus Package limits the information requests that entities within the scope of the CSRD may require from value-chain partners that fall outside the scope of the Directive, preventing them from requesting information that exceeds the requirements established by voluntary standards.
The European Council agreed to establish a digital portal containing templates, guidance and supporting documentation to facilitate information disclosure. In addition, a review clause was included, allowing for a possible future expansion of the scope.
The Corporate Sustainability Due Diligence Directive aims to ensure that companies operate with a responsible approach to human rights and the environment. It seeks to ensure that companies contribute to sustainable development by identifying, preventing and remedying adverse impacts caused by their own operations, subsidiaries and business partners.
The Directive applies to companies established within the European Union with more than 5,000 employees and revenues exceeding €1.5 billion, as well as franchises generating more than €75 million in royalties and worldwide turnover exceeding €275 million. It also applies to companies established outside the European Union with net turnover exceeding €1.5 billion in the EU, or with franchise or licensing agreements in the EU generating more than €75 million in royalties and worldwide turnover exceeding €275 million.
The CSDDD establishes seven due diligence obligations:
“The CSDDD seeks to ensure that companies integrate due diligence into their policies and risk management systems and have appropriate measures to identify, assess and eliminate or remedy actual and potential adverse impacts arising from their own operations,” explains Pinto. “It also encourages companies to use their leverage to ensure business partners remedy adverse impacts.”
The deadline for transposition into national legislation has been postponed by one year to 26 July 2028, and mandatory compliance will apply from July 2029. It is no longer mandatory to implement a climate transition plan for climate change mitigation that is compatible with the Paris Agreement.
The Omnibus Package introduced a risk-based approach, establishing that entities are only required to request information where there is a reasonable expectation of an adverse impact arising from the activities of their business partners, rather than systematically requesting all the information required by the Directive.
The Carbon Border Adjustment Mechanism is a border levy based on the difference between the carbon tax applied and the tax that would have applied had the product been manufactured within the European Union. Its purpose is to address the risk of carbon leakage that occurs when companies relocate production to other countries because of costs arising from climate policies, or when imports replace equivalent products with a lower greenhouse gas (GHG) footprint.
The industries affected by the CBAM are cement, steel and iron, aluminium, fertilisers, hydrogen and electricity. “Importers of these products must declare each year the quantity of goods imported into the EU during the previous year, as well as the embedded GHG emissions, and surrender the corresponding CBAM certificates, thereby paying the carbon price through emission allowances,” explains Chiappe. “The cost of the certificates is based on the average closing prices of allowances under the EU Emissions Trading Scheme (EU ETS).”
The Mechanism was adopted in 2023, from which date importers and customs representatives began reporting embedded GHG emissions on a quarterly basis. In 2026, the CBAM definitive phase and declaration requirements entered into force, and the first surrender of CBAM certificates will take place in 2027 for imports made during 2026.
“Although payments will not be made until 2027, imports carried out from 1 January of this year onwards are already binding,” Pinto explains. “For this reason, it is important for MERCOSUR exporting companies to be prepared to facilitate the collection of data required by importers, enabling them to calculate CBAM costs and avoid penalties.”
Regulation (EU) 2025/2083 introduces a new single threshold based on the cumulative net mass of all products imported during a calendar year from the iron and steel, aluminium, fertiliser and cement sectors. The threshold is set at 50 tonnes per importer per year. Imports of hydrogen and electricity are not covered by the de minimis exemption and must always be declared. Where annual imports remain below the threshold, companies are not required to purchase CBAM certificates.
The EU Deforestation Regulation places particular emphasis on the origin and due diligence of products and derivatives from seven commodities: cattle, cocoa, coffee, palm oil, rubber, soy and wood. The objective is to ensure that products entering the European Union originate from areas that have not been subject to deforestation after 31 December 2020.
“The European Union defines deforestation as the ‘conversion of forest to agricultural use, whether human-induced or not’, including natural disasters as a cause of deforestation,” explains Alejandro Chiappe. “For example, a forest that suffered a fire after the cut-off date and was subsequently converted into agricultural land would be considered deforested. However, if that forest regenerates and wood is subsequently harvested from it, this would not be considered deforestation.”
The EUDR was adopted in 2023 and will enter into force on 31 December of this year for large and medium-sized companies, while micro and small operators outside the wood industry will begin reporting from 30 June 2027.
“The Deforestation-Free Products Regulation repeals the European Union Timber Regulation (EUTR). However, for timber products produced before the EUDR was enacted on 29 June 2023, the EUTR will continue to apply until 31 December 2027,” explains Pinto. “For products manufactured after the EUDR was enacted, the EUTR will be repealed once the EUDR enters into force.”
Products covered by the Regulation must demonstrate through geolocation all plots of land from which the relevant raw materials originate, including those through which the materials may have passed during production. In the case of products from the cattle supply chain, if livestock were fed with plant-based products, those products must also originate from non-deforested lands.
Operators placing a relevant product or raw material on the market must submit a Due Diligence Statement (DDS) and demonstrate traceability. The due diligence process consists of information gathering, risk assessment and mitigation where there is a likelihood that the product does not comply with the Regulation.
“In Argentina, SENASA provides information on production sites, but for EUDR purposes it is necessary to establish a polygon for each production site, which requires an additional verification platform,” comments Marcelo Pinto. “Nevertheless, the Secretariat of Agriculture, Livestock and Fisheries created the Register of Agro-Industrial Differentiation Schemes, which, among other objectives, seeks to support compliance with the EUDR. There are currently two registered schemes that make it possible to obtain evidence regarding the non-deforested origin of the relevant products.”
In May 2026, the European Commission published a series of simplifications, including a change in scope. Leather hides, retreaded tyres, product samples, used and second-hand products, waste and packaging materials that are not intended for commercialisation and enter the EU solely to protect other products are excluded from the scope of the Regulation.
The Packaging and Packaging Waste Regulation is the framework governing packaging and its management, with the objective of reducing by 2030 the environmental impact caused by packaging waste and increasing the use of recycled materials in packaging production. The Regulation was published in January 2025 and entered into force on 12 February 2025. Following an 18‑month transition period, the PPWR will become mandatory on 12 August 2026 for all packaging used to market or transport products within the European Union.
The PPWR establishes new requirements and repeals the Packaging and Packaging Waste Directive (PPWD – Directive 94/62/EC), which allowed Member States to interpret provisions individually and implement national legislation, thereby harmonising requirements across all 27 EU countries.
The Regulation covers the entire value chain and establishes roles and obligations for producers, manufacturers, importers and distributors. “With this Regulation, packaging design can no longer be conceived solely from a marketing perspective; compliance must also be taken into account, giving packaging a dual role in market access,” highlights Pinto. “When designing packaging, companies must consider the technical specifications required to enter the market while ensuring that it remains attractive and functional in order to stay competitive.”
From August 2026 onwards, all food packaging must contain concentrations of perfluoroalkyl and polyfluoroalkyl substances (PFAS, synthetic chemical substances that do not decompose in nature or the human body) below 25 ppb and packages must not contain more than 40% empty space unless technical reasons make this unavoidable. The Regulation also introduces recyclability performance grades, which determine the fees payable by any entity placing packaging on the EU market as part of Extended Producer Responsibility (EPR).
The PPWR also includes medium- and long-term measures that will be introduced progressively. Some of these include:
“Preparing now for future requirements is vital in order to remain in the market and respond to demands without delays or difficulties at the border,” says Chiappe.
Failure to comply with these regulations and directives entails economic consequences, including fines which, depending on the legislation of the relevant European country, may reach up to 4% of the annual turnover of the European importing company. It may also result in reputational impacts, commercial risks and loss of access to financing.
The MERCOSUR–EU agreement facilitates trade, but remaining in the European market depends on compliance with the applicable regulations and on how companies respond to information requests from importers and reporting entities. Traceability, environmental compliance, labour conditions and sustainability are part of the requirements for entering and remaining in the market. They are no longer merely differentiating factors but have become a fundamental part of doing business, even outside Europe.
“A MERCOSUR company does not usually submit declarations directly to the European Union, but it may be required to provide information that enables the European operator or importer to substantiate declarations with supporting evidence, and the costs of placing products on the market may increase,” comments Chiappe.
“For example, the manufacturer is not always the producer responsible under Extended Producer Responsibility (EPR) within the PPWR, nor the authorised CBAM declarant responsible for paying the corresponding certificates. However, this does not mean that it has no documentary responsibility or that it will not bear the costs. Those costs may ultimately be transferred through pricing and contractual arrangements and may even translate into a loss of competitiveness compared with suppliers that have a lower carbon footprint or packaging with greater eco-modulation,” he adds.
Beginning preparations and measuring KPIs as early as possible is key to maintaining market access. A narrative commitment is no longer sufficient. It is now essential to be able to substantiate claims with comparable evidence and to assign responsibility for each data point. Non-European companies that act in time and view these reporting requirements not as a bureaucratic burden but as a sustainability commitment will not only achieve compliance and gain a competitive advantage but will also operate more effectively and become more competitive. It is important to understand the level of commitment expected by customers, the sector and the supply chain in order to anticipate requirements and respond with agility.
“It is crucial to get started and prepare, even for the more distant directives. Some companies may need time to establish processes that enable compliance in a practical and viable way,” concludes Pinto. “With regard to information requirements, a good starting point may be to become familiar with the Voluntary Standards for SMEs (VSME), developed by the European Financial Reporting Advisory Group (EFRAG). New rules should not be viewed as an obstacle but rather as an opportunity to improve processes and production.”
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