In this edition, we look at major regulatory and policy changes that may affect businesses, including developments in climate and energy policy, sustainability reporting, packaging and waste management requirements, and governance reforms in Estonia, Latvia and Lithuania. We also highlight several EU initiatives aimed at balancing sustainability ambitions with competitiveness and reducing administrative burdens for companies.

We hope this overview helps you stay up to date with the evolving ESG landscape, and our team remains available to support you with practical guidance and tailored solutions for your sustainability priorities.

Legislative news and ESG initiatives in Estonia, Latvia and Lithuania

Lithuania

Draft amendments to the Lithuanian Environmental Protection Law strengthening liability for failure to meet mandatory waste management targets relating to oil waste, electrical and electronic equipment (EEE), and end-of-life vehicles have been introduced. The proposal introduces or revises penalties linked to the quantity of untreated waste and non-compliance with collection and recycling obligations, including specific sanctions for categories such as IT equipment, screens, lamps and large or small electronic devices. The amendments strengthen environmental compliance and waste management enforcement obligations for producers and importers.

Moreover, draft amendments to the Lithuanian Environmental Protection Law implementing Regulation (EU) 2025/40 on packaging and packaging waste introduce new obligations relating to reusable packaging systems, refill systems, reduction of single-use plastics, recyclable packaging, recycled content requirements, and excessive packaging in e-commerce shipments. It also introduces penalties for non-compliance and may have implications for packaging and logistics practices.

On 11 May 2026, amendments to the Procedures for the Application of Environmental Protection Criteria in Green Procurement came into effect. Among other changes, a requirement has been established to prioritise the purchase of organic food products: at least 30% of the total volume of food products purchased during a calendar year must meet organic production requirements. Stricter requirements for computers, tablets and mobile phones have been introduced, and minimum environmental protection criteria have been established for new product groups, such as cleaning products and indoor cleaning services.

Latvia

The Latvian Parliament has adopted amendments to the Law on Governance of Capital Shares of Public Entity and Management of Capital Companies Thereof, aimed at strengthening governance, transparency and the role of the state and municipalities as shareholders. The amendments introduce enhanced good governance principles, including active ownership, risk management, and expanded disclosure obligations, while improving strategic oversight, decision-making processes, and the evaluation of state participation in companies. The reform also refines financial management rules, clarifies dividend policies, and establishes mechanisms for identifying and addressing governance deficiencies. In addition, procedural updates have been introduced, such as enabling remote shareholder meetings and streamlining board selection processes. The new rules are set to take effect on 1 August 2026 and are intended to promote more efficient use of public resources, align the regulatory framework with commercial law, and strengthen public trust.

Estonia

  1. The draft Climate Resilient Economy Act (kliimaseadus) was approved by the Estonian Government on 21 May 2026 and submitted to the Riigikogu (parliament). The draft establishes a framework for Estonia’s transition towards climate neutrality by 2050, and sets binding intermediate greenhouse gas reduction targets for 2030 (9%), 2035 (29%), and 2040 (51%) – all of these percentages are in comparison to 2022 levels. Compared to earlier versions, the targets have been softened and the draft’s focus has shifted from climate mitigation and adaptation towards energy security, phasing out imported fossil fuels, reducing dependence on imported energy, and economic competitiveness. Sector-specific emission-reduction targets are detailed in roadmaps accompanying the law rather than in the legislation itself. The draft has drawn criticism from the Estonian Employers’ Confederation, which does not support the legislation in its current form, citing a lack of clarity and predictability regarding what will be required of businesses in order to meet the targets, the associated costs, and the manner in which the state intends to support these efforts.
  2. Estonia has initiated the transposition of the Omnibus I Directive (EU) 2026/470 into national law. The Ministry of Finance prepared a draft amendment to the Accounting Act and the Auditors Activities Act and coordinated it with the Ministry of Justice and Digital Affairs, the Ministry of Economic Affairs and Communications, and the Ministry of Climate. In substance, the draft significantly narrows the scope of mandatory sustainability reporting: the obligation will apply only to entities with annual revenue exceeding EUR 450 million and more than 1,000 employees, reducing the number of entities subject to mandatory reporting in Estonia from approximately 300 to around 10. The draft introduces the concept of a “protected undertaking” (kaitstud ettevõtja), i.e. an entity in the value chain with no more than 1,000 employees, which is permitted to limit the sustainability information it provides to only cover the scope of the voluntary reporting standard. The draft also expands the grounds for omitting certain information from sustainability reports and requires sustainability auditors to hold a financial auditor’s qualification.

EU-level news

EU proposes ETS reform to stabilise carbon prices

The European Commission has proposed its first reform of the EU Emissions Trading System (ETS) in response to mounting industry pressure as a result of high energy and carbon costs, while still defending the system as central to decarbonisation and energy independence. The proposal targets the Market Stability Reserve (MSR), a mechanism that regulates the supply of carbon allowances to stabilise prices, by ending the automatic cancellation of excess allowances above a set threshold and instead retaining them as a buffer to prevent price spikes. This adjustment is intended to make the carbon market more resilient and predictable without altering its core structure, as the EU seeks to balance climate goals with industrial competitiveness. The reform follows calls for relief from member states amid energy price shocks linked to geopolitical tensions, and it represents an initial step ahead of a broader ETS review planned for July 2026, with the measure requiring approval from the European Parliament and Council before entering into force.

European Commission presents “AccelerateEU” strategy

The European Commission introduced its new “AccelerateEU” strategy, setting out a range of proposed measures to tackle rising energy prices and decrease the EU’s dependence on imported fossil fuels. The European Commission’s new AccelerateEU strategy is designed to respond to rising energy costs and geopolitical instability by reducing the EU’s reliance on imported fossil fuels while protecting households and industries. It combines immediate crisis measures, such as coordinated gas storage management, fuel monitoring via a new observatory, and temporary consumer support like energy vouchers, tax reductions, and state aid flexibility, with stronger coordination among member states to manage supply risks. These steps aim to provide short-term relief amid higher energy import costs, which have recently increased significantly due to global conflicts, while stabilising energy markets and ensuring supply security.

At the same time, the strategy sets out longer-term structural reforms to accelerate the transition to clean, domestically produced energy, with a strong focus on electrification. The Commission plans to introduce an Electrification Action Plan with ambitious targets; remove a range of barriers relating to industry, transport and buildings; and strengthen grid infrastructure to support increased renewable energy use. It also emphasises mobilising both public and private investment, through EU funds and initiatives like a Clean Energy Investment Summit, in order to finance the energy transition, ultimately aiming to enhance energy independence, economic resilience, and progress on climate.

European Commission publishes new draft ESRS

The European Commission has released revised draft European Sustainability Reporting Standards (ESRS) alongside a voluntary reporting framework, advancing its effort to simplify sustainability disclosures under the Omnibus I initiative. The proposal largely follows the EFRAG’s recommendations, significantly reducing reporting complexity by cutting required data points by over 70% and introducing targeted flexibilities, while notably retaining the EU’s “double materiality” approach rather than aligning more closely with global ISSB standards. It also adjusts requirements such as greenhouse-gas-reporting methods and adds transparency obligations for companies with non‑1.5°C‑aligned transition plans. At the same time, the reform dramatically narrows the scope of mandatory reporting under the CSRD, excluding most smaller firms, and introduces a streamlined voluntary standard for others, aiming to balance a reduced administrative burden with continued sustainability transparency, with final adoption expected after consultation and legislative review.

European Commission publishes a simplification review of the EUDR

The European Commission has published a simplification review of the EU Deforestation Regulation (EUDR), confirming that recent adjustments have significantly reduced the administrative burden on companies, cutting estimated compliance costs by around 75%, largely by easing requirements for small and micro‑operators. While maintaining the core objective of banning deforestation‑linked products from the EU market, the Commission introduced targeted changes to the regulation’s scope, including adding some derivative products and excluding others, such as leather, as well as providing clearer guidance, updated tools, and simplified reporting processes. These efforts aim to ensure smoother implementation while preserving legal certainty ahead of the law’s entry into force starting at the end of 2026.

At the same time, the review highlights that the EUDR is already driving positive changes, including stronger supply-chain traceability, greater transparency, and increased investment in deforestation‑free production. Additional support measures, such as improved guidance documents, an enhanced information system, and planned trade facilitation tools, are intended to help companies meet due diligence requirements more efficiently. Overall, the EU is seeking to balance reduced compliance costs with maintaining the regulation’s environmental integrity, ensuring that it remains an effective tool to combat global deforestation while still being practical for businesses to implement.

EU issues guidance to streamline new packaging rules and boost sustainability

The European Commission has issued guidance to support the implementation of the Packaging and Packaging Waste Regulation (PPWR), aiming to ensure consistent application across EU member states and reduce compliance complexity for businesses. The guidance clarifies key definitions, such as what constitutes packaging and who qualifies as a producer, while detailing rules on single-use restrictions, PFAS in food packaging, reuse targets, extended producer responsibility, and deposit return schemes. It responds to stakeholder concerns through additional FAQs and practical explanations, addressing rising levels of packaging waste, and regulatory fragmentation. Overall, the initiative is intended to facilitate a smoother rollout of the PPWR, strengthen the single market, and advance sustainability goals by reducing waste, increasing recyclability, and lowering environmental impacts in the packaging sector.

About ESG newsletter

The Sorainen ESG newsletter presents key sustainability policy updates across the EU and Baltic states, focusing on legislative changes, new regulations, and initiatives shaping the ESG landscape. Subscribe here to receive ESG‑related newsletters directly in your inbox.

Our ESG team is at your disposal, should you need advice on any legal issues you are facing. Contact the authors:

 

Vitalija Impolevičienė
Counsel, Co-head of ESG team (Lithuania)
vitalija.impoleviciene@sorainen.com

 

 

 

 

 

Agita Sprūde
Counsel (Latvia)
agita.sprude@sorainen.com

 

 

 

 

 

Carolin Simona Laurits
Associate (Estonia)
carolin.simona.laurits@sorainen.com