top of page

Are IPAs Ready to Help Firms Navigate ESG ‘Tsunami’?

New EU supply chain rules pose challenges for developing countries, sparking calls for investment promotion agencies to bolster ESG compliance support. While some IPAs are embracing this role, others struggle with the complexity, by Danielle Myles, FDI Intelligence

Warnings that strict new sustainability rules will force developing countries out of EU firms’ supply chains has sparked calls for investment promotion agencies (IPAs) to step up their role in environmental, social and governance (ESG) compliance.

But while some larger IPAs have embraced the challenge, others feel ill-equipped to guide investors on complex regulatory compliance.

Speaking at the Aftercare Forum in Florence on May 30, Martin Kaspar, an FDI expert and head of business development at a German Mittelstand automotive company, stressed that stringent reporting regarding suppliers under the Corporate Sustainability Due Diligence Directive (CSDDD) and Carbon Border Adjustment Mechanism (CBAM) will reroute global trade and investment away from emerging markets. 

“[European] businesses are taking this very seriously and are looking at these in great detail,” he said at the event, organised by Cities & Collaboration and Invest in Tuscany. “You will have small and medium-sized enterprises [and] less developed countries dropping out of supply chains because they are considered too big a risk.”

CSDDD requires large EU firms to address ESG risks in their supply chains or risk being fined up to 5% of net turnover. Under CBAM, each EU import valued at €150 or more requires the reporting of 300 data points to determine if a carbon tax is applicable. Echoing comments from sustainability professionals, Mr Kasper said EU firms cutting ties with suppliers that can’t meet these requirements “is one of the inevitable outcomes of this tsunami of [ESG] regulation”.  

Are IPAs Ready to Help Firms Navigate ESG?
Are IPAs Ready to Help Firms Navigate ESG ‘Tsunami’?


bottom of page