The regulatory framework for corporate sustainability is taking shape at a rapid pace, and evolving regulations concern companies of all sizes – either directly or indirectly. Being a member of the EU, most of Finland’s ESG legislation originates from Brussels, and there was little national legislative activity regarding ESG and sustainability laws and regulations in Finland in 2023. The attention of both government and businesses has been mostly on preparing for and adapting to the EU’s regulatory tsunami, which includes the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the Taxonomy Regulation, the Deforestation Regulation, and the Green Claims Directive.

Finland had parliamentary elections in April 2023 and a new government took office in June 2023. No major legislative ESG projects were completed before the end of the year. In the current government programme, ESG issues are mentioned mostly in connection to Finland’s objective of becoming a leader in clean energy and green transition technology (Programme of Prime Minister Petteri Orpo’s Government 20 June 2023, Chapter 7) ‒ for further details, see 1.2 Environment Trends.

In 2024, the Finnish government has opened several new legislative packages that relate to ESG issues. The EU Deforestation Regulation, the CSDDD, EU regulations on greenwashing and consumer protection, the EU Carbon Border Adjustment Mechanism and other sector-specific legislation are being reviewed in order to prepare the needed changes to national legislation. A key trend is the national implementation of the CSDDD ‒ the process of which has been initiated in Finland, with a working group and a monitoring group set to evaluate and prepare the necessary legislation. Additionally, an open stakeholder meeting was held on 30 September 2024 to gather input on the national implementation. 

Government Programme: Focus on Energy Transition and Uncertainty About Achieving Emission Targets

As mentioned in 1.1 General ESG Trends, the Programme of Prime Minister Petteri Orpo’s Government (published in June 2023) contains a chapter on clean energy. The programme focuses on the opportunities that the green transition and clean technologies can offer Finland in creating jobs and economic growth. The programme also mentions a risk for the carbon sink falling short of the targets in 2021–25 and notes that, according to calculations, Finland will “inevitably accrue a significant amount of emission debt in the 2020s”. According to the programme, the government intends to “take sustainable measures to accelerate the uptake of technical solutions in this area” and “pledges to draw up a programme by the end of 2024 [to] reverse the emissions debt accumulated since the start of the decade”.

In its Growth Package, the Finnish government has set out ways to promote sustainable economic growth. The most significant of the measures proposed in the package is an investment grant under the form of a tax credit for the low-carbonisation of industrial production processes through electrification or the use of renewable hydrogen and energy efficiency measures, as well as for accelerating investment in sectors that are strategic for the transition towards a climate-neutral economy. According to the proposal, the tax credit could amount to 20% of the total amount of the investment up to a maximum of EUR150 million per project. The proposed aid scheme, which is currently in consultation, is subject to prior approval by the EC.

Climate Adaptation and Litigation

In early 2024, the National Audit Office of Finland (NAOF) commenced an audit to find out whether the government climate policy is based on scientific information and whether the measures adopted are justified. In August 2024, the Finnish Climate Change Panel ‒ a scientific and independent panel of experts ‒ warned that the current government’s measures would not be sufficient to achieve its climate targets.

In August 2024, six environment and human rights NGOs brought an action against the Finnish government for its lack of adequate climate action. The claimant NGOs argue that the government is breaching the Finnish Climate Act (ilmastolaki, 423/2022) and failing to meet its constitutional obligation to protect human rights. The case is currently pending in the Supreme Administrative Court.

A similar action was brought against the previous government in 2022, when Greenpeace and the Finnish Association for Nature Conservation took the Finnish State to court over insufficient measures to combat climate change. At the time, the Supreme Administrative Court declined to hear the case because, in Finnish administrative law, inaction does not constitute grounds for administrative appeal and because the Climate Act had only entered into force a few months earlier and the court deemed that the government had thus not had time to adopt the necessary measures yet. On that occasion, however, the court mentioned that – in theory – insufficient climate action by the government could be deemed to constitute grounds for a lawsuit.

The NGOs’ action in 2024 was also made possible by:

• an amendment made to the Climate Act in 2023, which extended the right of action to NGOs; and
• the landmark case KlimaSeniorinnen v Switzerland, in which the ECHR ruled that Switzerland violated human rights by failing to take adequate action with regard to mitigation of climate change.

Legislation: New Climate and Circular Economy Obligations Introduced

The new Building Act (rakentamislaki, 751/2023) was adopted in March 2023 and will enter into force on 1 January 2025. It will introduce new climate and circular economy obligations ‒ for instance, all new buildings and buildings that are to be extensively renovated will be required to have a climate declaration that specifies the building’s carbon footprint and handprint.

The Building Act will also strengthen circular economy in the construction industry. According to the new essential technical requirements, buildings must be designed so that they are adaptable and can be used for a long time. With regard to new buildings and buildings to be demolished, an account must be provided on materials that have been used or will be released, on soil and rock material to be removed from the building site, and on the amount of hazardous waste.

In July 2024, a project for the reform of the Waste Act (jätelaki, 646/2022) commenced. The aim is to replace the Waste Act with a new Circular Economy Act that will take into consideration, among other things, upcoming EU legislation. The reform is based on one of the objectives of the Government Programme, according to which “Finland will improve its self-sufficiency, increase value added and reduce pollution by improving the recycling and reuse of materials”.

A reform of the nature conservation legislation entered into force in June 2023. The Nature Conservation Act (luonnonsuojelulaki, 9/2023) is one of the main instruments for safeguarding Finland’s biodiversity. In the new act, the protection of biodiversity is tied to ESG responsibilities, with sections on ecological compensation. Ecological compensation allows for the harm done in one area to be offset by enhancing biodiversity elsewhere. The previous act had been in force since 1997 and, since then, plenty of new information – for example, on biodiversity and climate change ‒ has become available and other related legislation has evolved.

On 1 February 2023, the Finnish Ministry of the Environment and the Ministry of Agriculture and Forestry published a guide on good practices for the voluntary carbon market. Its aim is to improve the reliability of the domestic carbon market and prevent greenwashing in the market.

Criminal Investigation: Suspected Nature Conservation Offence

In August 2024, Finnish media reported on an incident where a forest machine destroyed thousands of extremely endangered freshwater pearl mussels by driving repeatedly across Hukkajoki River, one of the most important habitats for this protected species. In addition to directly crushing thousands of mussels, the machinery caused mud and silt to flow downstream from the crossing site, suffocating an even larger number of young mussels. The freshwater pearl mussel is a key species, vital for water quality and aquatic life. Due to habitat impacts, the species is extremely endangered and has been protected in Finland since 1955.

The police are investigating the events as an aggravated nature conservation offence. The case will probably become a key example of due diligence from the perspective of liability in the value chain – although it has been assumed that the machine operator was an independent subcontractor, the fact that the logging operation was commissioned by forestry giant Stora Enso has been widely publicised and, only a few days after the incident, the Finnish Minister of Climate and the Environment hastened to demand that the company compensate the restoration costs in full.

Human Trafficking and Forced Labour

The industrial picking of wild berries in Finland has relied heavily on foreign berry-pickers, recruited mainly from Thailand. For the past ten years, problems related to the status of these pickers have been discussed and various working groups have been working on solutions to them – an example of the results was the adoption, in 2021, of a law on the legal status of foreigners gathering natural products.

In 2023, the police conducted human trafficking investigations against three out of four of Finland’s largest wild berry companies and, in 2024, prosecutors brought charges against two Finnish companies for aggravated trafficking in human beings in cases concerning Thai berry-pickers subjected to forced labour and other conditions that violate human dignity. The alleged offences were committed in various parts of Finland in 2022. The court proceedings regarding the wild berry case are still ongoing.

In recent years, similar crimes have been suspected or found in Finland in the restaurant and cleaning industries. In October 2023, the District Court of Helsinki found a couple of restaurant entrepreneurs guilty of four cases of human trafficking and extortionate work discrimination in their restaurants. In December 2023, the police announced that they had completed their investigation on several suspected cases of human trafficking in cleaning companies; the case has been submitted to the prosecutor for the consideration of charges.

A working group established by the Finnish Ministry of Economic Affairs and Employment in February 2024 is looking into different regulatory options to improve the position of foreign berry-pickers and other foreign employees in Finland.

Food Couriers

In a ruling in May 2024, the Finnish Insurance Court ruled that two food delivery couriers working for Delivery Hero Finland Logistics Oy (Foodora) were not employees under the Employment Contracts Act (työsopimuslaki, 55/2001). This decision overturned previous rulings by the Accident Insurance Appeal Board. The court determined that, despite the couriers working under the employer’s direction and supervision via the Foodora app, they were not obligated to perform the work personally and could use substitutes or subcontractors. Consequently, the criteria for an employment relationship were not fully met. However, in another case, the Finnish Insurance Court ruled that a food courier working for the same company was under an employment contract and thus was not an independent contractor. This decision ‒ in which the Employee Pensions Act (työntekijän eläkelaki, 395/2006) was applied ‒ was based on the presence of all employment relationship characteristics, including personal commitment to the work and the employer’s direction and supervision.

The wider question of whether food couriers are employees is currently pending at the Supreme Administrative Court. In February 2024, the Hämeenlinna Administrative Court ruled that Wolt food couriers were not employees, thereby overturning a previous decision by the Southern Finland Regional State Administrative Agency’s occupational safety division. The court found that the couriers did not meet the criteria for an employment relationship under the Employment Contracts Act – specifically, because the employer did not have a right to direct and supervise the work. Consequently, the Working Hours Act (työaikalaki, 872/2019) also did not apply to their work. The occupational safety authority has appealed to the Supreme Administrative Court for a precedent, as the legal status of food couriers remains unclear and requires further clarification.

As elsewhere, in Finland corporate sustainability issues are increasingly being integrated into the policies and processes of companies in all sectors. This is mainly due to recent ESG regulation ‒ in particular, the CSRD and the CSDDD.

The CSRD requires the companies in scope to report on sustainability matters. Entered into force in 2023, its application will begin gradually. The first reports of the largest entities are due in 2025 for FY 2024, meaning that in these companies the preparations are well under way. Although the CSRD will only apply to relatively large companies (fewer than 1,000 companies in Finland), it is expected to have a spillover effect, as large companies will need to obtain information from smaller companies in their value chain and incorporate corresponding obligations into their supplier contracts. It is expected that the new legislation compels companies to pay more attention to ESG matters and be more transparent ‒ ie, communicate on sustainability issues publicly.

Diversity, Equality and Inclusion (DEI)

A new government bill (HE 60/2024) proposes amending the Companies Act (osakeyhtiölaki, 624/2006) and the Chamber of Commerce Act (kauppakamarilaki, 878/2002). The proposed law would implement the EU Quota Directive (2022/2381) on balancing the gender distribution of board members in listed companies and related measures. The proposed law is expected to come into force by the end of 2024. For further details, refer to 2.1 Developments in Corporate Governance.

In Finland, regulators and supervision authorities play a crucial role in the ESG transition by enforcing compliance with the various EU regulations.

The Finnish Competition and Consumer Authority (FCCA)

The FCCA plays a significant role in the ESG transition by ensuring competition and protecting consumer rights. By promoting competition and safeguarding consumer interests, the FCCA supports the broader goals of the ESG transition, fostering a competitive market environment where sustainable and responsible business practices can thrive.

The FCCA has already stated that the increased transparency of the supply chain as a result of ESG reporting must not result in commercially sensitive information being disclosed to competitors. The Finnish Consumer Ombudsman, which is a part of the FCCA, has increasingly focused on green claims in marketing and product packaging. The Finnish Consumer Ombudsman has emphasised that marketing communication may not contain false or misleading information; this also applies to environmental claims, which must be clear, precise, understandable, provable, and not misleading. The FCCA has already dealt with a number of ESG marketing cases (see 6.3 Greenwashing v Greenbleaching)

The Finnish Financial Supervisory Authority (FIN-FSA)

The FIN-FSA provides guidance to help financial market participants navigate sustainable finance, ensures compliance, and collaborates with EU bodies to align national regulations with broader EU standards. The FIN-FSA oversees reporting and ensures compliance, with mandatory external audits.

In overseeing the stability of financial markets, the FIN-FSA ensures that supervised entities consider sustainability risks in their operations. Notably, information provided to customers and investors about sustainability factors must be appropriate so that customers can assess the sustainability of products and services, and investors can make sustainable investments if they wish.

Environmental Authorities

In Finland, environmental compliance is primarily overseen by the Regional State Administrative Agencies (aluehallintovirastot, or AVIs) and the Centres for Economic Development, Transport and the Environment (elinkeino-, liikenne- ja ympäristökeskukset, or “ELY Centres”). The AVIs are responsible for granting environmental permits under the Environmental Protection Act (ympäristönsuojelulaki, 527/2014) and the Water Act (vesilaki, 587/2011), ensuring that operations do not cause significant environmental risks. The ELY Centres, along with municipal environmental protection authorities, supervise compliance with environmental regulations.

Supervisory Authorities for  Social Aspects of ESG

Several laws address the social component of ESG in Finland. One of the most crucial is the Occupational Safety and Health Act (työturvallisuuslaki, 738/2002) (OSHA), which aims to enhance the working environment and conditions to protect and sustain employees’ ability to work, while preventing occupational accidents, diseases, and other work-related health risks. Additionally, the Non-Discrimination Act (yhdenvertaisuuslaki, 1325/2014) (NDA), the Act on Equality between Women and Men (tasa-arvolaki, 609/1986 (AEWM), and the Consumer Safety Act (kuluttajaturvallisuuslaki, 920/2011) (CSA) are important acts related to the social aspect of ESG.

The Ministry of Social Affairs and Health (MSAH) and the occupational safety and health divisions of the AVIs oversee the implementation and enforcement of OSHA. They ensure safe and healthy working conditions and monitor compliance through inspections and guidance.

The Non-Discrimination Ombudsman and the National Non-Discrimination and Equality Tribunal are the primary authorities responsible for monitoring compliance with the NDA. They handle complaints, provide guidance, and can impose sanctions for non-compliance.

The Ombudsman for Equality and the National Non-Discrimination and Equality Tribunal supervise compliance with the AEWM. They ensure that gender equality is promoted and that discrimination based on gender is prevented.

The Finnish Safety and Chemicals Agency (Tukes) and the FCCA are responsible for enforcing the CSA. Tukes monitors the safety of consumer goods and services, whereas the FCCA oversees broader consumer protection issues.

Finnish Food Authority

The Finnish Food Authority (FFA) is the competent national authority for the EU Deforestation Regulation. The tasks of the FFA with regard to the EU Deforestation Regulation mostly derive from the text of the legal act itself, but the exact role of the authority will be gradually defined after the application of the EU Deforestation Regulation begins on 30 December 2024.

Possible New Authority for CSDDD

Finland is currently in the early stages of implementing the CSDDD and many practical questions are still to be resolved. At the moment, however, it seems likely that Finland will need a new authority for the implementation and enforcement of the CSDDD.

ESG regulation touches all sectors and industries in Finland, either directly or indirectly. Traditionally, the largest Finnish companies come from the forest industry, energy industry and technology, so they will be affected most. As sustainable finance progresses, the banking and finance sector will also be affected.

The current geopolitical landscape ‒ in particular, the war in Ukraine and the resulting tensions with Russia – has led to a shift in the Finnish government’s focus. Finland became a full member of NATO on 4 April 2023. The militarisation and heightened defence concerns have resulted in increased defence budgeting, which has somewhat diverted attention away from ESG themes.

The foregoing also concerns the Arctic region, which is crucial for the green transition. The geopolitical situation in the Arctic makes it difficult to implement and maintain ESG-focused policies. Despite the urgent need for environmental sustainability and social governance in this region, the political situation complicates the efforts to address these issues effectively.

As mentioned in 1.4 Governance Trends, a new government bill (HE 60/2024) proposes amending the Companies Act and the Chamber of Commerce Act. The proposed laws would implement the EU Quota Directive on balancing the gender distribution of board members in listed companies. The proposed law is expected to come into force by the end of 2024.

The EU Pay Transparency Directive (2023/970) entered into force in June 2023 and EU member states are required to bring into force the laws, regulations and administrative provisions necessary to comply with it by 7 June 2026. In Finland, the MSAH has appointed a working group to prepare the national implementation of the EU Pay Transparency Directive.

Besides this EU Directive, the Finnish government and central labour market organisations have also negotiated an Equal Pay Programme for 2024–27. The aim of the programme is to reduce the gender pay gap to less than 15% in the above-mentioned period. The measures focus on, among other things, pay awareness, gender equality planning at workplaces, the reconciliation of work and family life, and the dismantling of the gender-based division of labour. The Equal Pay Programme takes account of changes in collective bargaining and negotiation activities in the labour market and it also includes discussions between private sector trade unions about their possible participation in future Equal Pay Programmes.

Corporate governance requirements for listed companies are stricter than for unlisted companies. The Corporate Governance Code, which is a collection of recommendations on good corporate governance for listed companies, is applicable to all companies that are listed on Nasdaq Helsinki Ltd (Helsinki Stock Exchange). It is currently being amended to reflect the requirements of the EU Quota Directive on improving the gender balance among directors of listed companies.

In the Finnish context, the company management’s duty of care (which also covers the consideration of ESG issues) is primarily governed by the Companies Act. Under Chapter 1, Section 8 of the Companies Act, the management of a company must act with due care and promote the interests of the company. Pursuant to Chapter 22, Section 1 of the Companies Act, directors (which are specified to include members of the board of directors or the supervisory board, as well as the managing director) are liable to compensate the company for any damage that they have intentionally or negligently caused to the company in violation of the duty of care. Neglecting to pay sufficient attention to long-term sustainability and ESG factors could harm the company’s reputation, financial performance, and shareholder value and could amount to violation of the duty of care.

Violation of the duty of care recently led to criminal sanctions in a case concerning environmental crime. In case KKO 2016:58, the Finnish Supreme Court was called to decide a case concerning the liability of the managers of a limited liability company for an environmental damage. The case has value as a precedent, given that similar court cases in Finland have been very rare. The Supreme Court held that the negligence of two board members was gross, considering that they had not familiarised themselves with the content of the environmental permit and had neglected their duty to arrange and supervise matters related to the environmental permit.

In practice, the tightening of ESG requirements means that the management of a company will need to take ESG issues into account in the company’s strategy in order to ensure its long-term success. This involves identifying ESG risks and opportunities and ensuring they are addressed in the business model.

In Finland, there are approximately 1,700 social enterprises (yhteiskunnallinen yritys) – ie, enterprises whose primary business objective is to provide societal benefits and that use the majority of their profits to pursue goals associated with this objective. The legal form of business for these enterprises is not restricted; they can be limited liability companies, co-operatives, or associations or foundations engaging in business activities.

If the company management fails to take ESG issues into account as their duty of care requires, they can ultimately be held responsible for the damage this causes to the company. See 2.3 Role of Directors and Officers for more detail.

The sustainable finance framework in Finland is mainly EU-based, focusing on the EU Taxonomy Regulation and the EU Green Bonds Regulation (2023/2631) in line with European standards and practice. In addition, Finland has played an active role in sustainable finance initiatives internationally, and the Sustainable Development Goals (SDG) Finance Roadmap (Finnish Roadmap for Financing a Decade of SDG Action) provides guidelines for the Finnish operators to implement the necessary changes. The roadmap is part of the project on Developing Finland’s Sustainable Finance Ecosystems. The roadmap aims to mobilise both public and private sector investments towards sustainable development, ensuring that financial flows support the achievement of the SDGs by 2030. For further details of Finland’s sustainable finance roadmap, see 3.2 Sustainable Finance Framework.

In Finland, green transition projects are prioritised through a combination of streamlined permit procedures and targeted funding. The AVIs and the ELY Centres play key roles in this process. From 2023 to 2026, AVIs are implementing a priority procedure for processing permits related to green transition projects, such as renewable energy production, low-carbon hydrogen production, electrification of industry, carbon capture and storage, and battery manufacturing. The ELY Centres support these projects by providing guidance, streamlining environmental procedures, and offering funding for initiatives that promote sustainable economic growth, circular economy, and biodiversity. This co-ordinated approach ensures that projects critical to the green transition can proceed without unnecessary delays.

In the summer of 2023, the FIN-FSA conducted a thematic review on the current status of the management of climate and environmental risks in a few Finnish banks and credit institutions under the FIN-FSA’s direct supervision. The review concerned four areas of climate and environmental risk management:

• materiality assessment;
• impacts on the credit institution’s business model and strategy;
• impacts on governance and risk appetite; and
• impacts on risk management with regard to different risk areas, focusing on credit, business model and operational risks.

The review showed that significant improvement is needed in many areas – in particular, the assessment of materiality, risk management and disclosures – and the FIN-FSA requires credit institutions under its supervision to develop their management and reporting of climate and environmental risks. It will continue to monitor their progress and reassess them in the near future.

When raising and providing finance in Finland, companies need to adhere to several regulations and guidelines set by the FIN-FSA. Certain financial services, such as investment services, credit institutions, and mutual funds, require authorisation from the FIN-FSA. The sustainable finance framework in Finland is mainly EU-based, as discussed in 3.1 Progress in Green Financing.

When it comes to sustainable finance, the sustainable finance roadmap for Finland is a strategic plan designed to align financial activities with the UN’s Sustainable Development Goals (SDGs). As mentioned in 3.1 Progress in Green Financing, the roadmap aims to mobilise both public and private sector investments towards sustainable development, ensuring that financial flows support the achievement of the SDGs by 2030. The roadmap outlines specific goals and actions to integrate sustainability into financial decision-making. This includes promoting sustainable investments, enhancing transparency, and developing skills in sustainable finance.

To implement the roadmap, several pilot projects have been initiated. These projects focus on areas such as offshore wind power, sustainable protein production, climate-smart water solutions, and the export of vocational education. The Ministry of Economic Affairs and Employment is responsible for the national co-ordination of the roadmap, with input from various key Ministries and stakeholders.

Sustainable finance has developed rapidly in recent years. The EC’s Action Plan for Sustainable Finance, published in 2018, aims to reorient capital flows towards sustainable investment. This has had an effect across the entire financing sector, from bank finance to direct lending. It has also resulted in a vast body of new sustainable finance-related regulation in the EU.

In the light of these developments, there is a pressing need in sustainable finance for a standardised definition of “green” and a taxonomy of green activities in order to enable investors and financial institutions to make informed assessments effectively. For the time being, however, there is no generally applicable legal definition available. This is why the future EU Green Bond Standard will be based specifically on the EU Taxonomy Regulation. At the same time, the principles of the Loan Market Association (LMA) and the International Capital Market Association (ICMA) have gained in popularity and provided a widely followed, strong basis for self-regulation in the industry.

Sustainability is an increasingly important theme for financial institutions in Finland, and banks and institutional investors habitually assess their customers’ sustainability performance and ESG risks. The EU Taxonomy Regulation provides a frame of reference for investors and financiers, but even activities that are not taxonomy-eligible can access sustainable finance. Companies looking for financing should, however, be aware that the question of whether a potential investment target fulfils certain sustainability criteria has become as important as the company’s financial data for the financiers deciding on investments or funding.

In September 2024, the Finnish government submitted a bill (HE 77/2004) to Parliament proposing legislation to supplement the EU Green Bonds Regulation. Although the EU Green Bonds Regulation is directly applicable in all of the EU member states, it also requires some changes to the Finnish national legislation.

Large Finnish companies have quite comprehensively internalised the need to go green and align their operations with the Paris Agreement’s 1.5°C target, and many Finnish companies are international pioneers in their sector in this respect. By way of example, the Finnish oil company Neste has made significant investments in renewable fuels and corporate sustainability in its value chain. In Finland, the debate on just transition mainly concerns certain sectors and SMEs, as follows.

• Russia’s war of aggression in Ukraine and the subsequent changes in the market have created new challenges for the forest industry. By way of example, wood raw material is no longer available from Russia, which has put pressure on the forest industry to increase felling volumes in Finland and neighbouring areas. On the other hand, the significant carbon sink potential of forests is increasing pressure to limit logging. Around 60% of Finland’s productive forest land is owned by private individuals and forest ownership is a key source of income for many. This also contributes to the debate on a just transition.
• Finland’s previous government committed to halving the use of peat for energy by 2030 and the target was reached nine years early, largely due to the high price of emission allowances. This rapid change has posed challenges for businesses, entrepreneurs and workers in the peat sector.
• ESG requirements also affect SMEs, which are directly or indirectly subject to ESG requirements. At the same time, their resources may be limited and their ability to influence the sustainability of their own value chain may be small. There is general concern about the competitiveness of the SME sector, particularly in the context of the difficulties caused by the economic downturn.

Finland is addressing greenwashing in sustainable finance through a comprehensive thematic assessment conducted by the FIN-FSA during 2023–24. This assessment focuses on how investment funds and special investment funds consider sustainability risks and disclose sustainability information. It aims to evaluate compliance with sustainable finance regulations, gather information on greenwashing risks, and identify necessary supervisory and regulatory actions to manage these risks. The assessment covers all Finnish fund management companies and alternative fund managers, examining their consideration of greenwashing and sustainability risks.

The first part of the assessment revealed that, even though companies acknowledge greenwashing risks, their measures are relatively limited. The FIN-FSA recommends that all companies review the findings of the study, assess their operations, and implement corrective actions as needed. The second part of the assessment will be reported in late 2024.

There are no anti-ESG legislation or initiatives concerning the financial sector.

While ESG issues were previously mostly regulated by soft-law instruments, the upcoming CSDDD will be implemented nationally into hard law. All EU legislation related to ESG and sustainability will either be directly applicable in Finland or implemented through national legislation.

The impact of the CSDDD and other EU legislation goes far beyond the companies that are directly within their scope. Indirectly, the CSDDD will have a major impact on companies within the upstream and downstream value chain of the companies bound by the CSDDD. This means that there is likely to be a network of agreements between companies requiring emission reductions, due diligence on environmental issues and human rights, reporting obligations, and other ESG requirements.

While the field is still evolving, it is expected that ESG compliant partners with proof of sustainability will be prioritised, to avoid risks. Most companies also have a Code of Conduct (CoC) and a Supplier Code of Conduct (SCoC), through which they voluntarily emphasise that they expect their supply chain partners to act sustainably and comply with high ESG standards. Through SCoCs and contractual clauses, many of the legal obligations that apply to large companies are actually cascaded to smaller supply chain partners as well.

ESG due diligence reviews have become an important and critical part of M&A in recent years. It is expected that ESG due diligence will be increasingly carried out before signing and closing transactions. Vendors are eager to show proof of their sustainability and buyers will want to verify the sustainability of the target. However, even though an increase in ESG due diligence can already be seen, the market practice in Finland is still evolving.

Finnish companies that are in the scope of the CSRD are obliged to make ESG disclosures. For other companies, no requirements to disclose ESG information exist. Thus, mainly large and listed Finnish companies are affected. Under the CSRD, these companies are required to report on how their activities impact the environment and society, report on how ESG factors affect their business, set clear ESG targets, and publish the progress according to European Sustainability Reporting Standards (ESRS). The reported information must also be verified and published in a digital format for easier access and comparison.

The CSRD makes it obligatory for Finnish companies in the scope of the CSRD to publish and communicate their transition plans and sustainability targets. The CSDDD will require in-scope companies to adopt, implement and monitor transition plans.

Sustainability and green claims are regulated in Finland as marketing claims. Advertising is regulated by, for instance, the Consumer Protection Act (kuluttajansuojalaki, 38/1978), the International Code of Advertising Practice, the Unfair Business Practices Act (laki sopimattomasta menettelystä elinkeinotoiminnassa, 1061/1978) and legislation concerning competition. In general, marketing claims must not be misleading and they need to be truthful and substantiated.

Several significant amendments at EU level will affect Finnish marketing legislation. One of these amendments is the EU Green Claims Directive, and another amendment concerns the Consumer Package ‒ ie, the changes to the EU Consumer Rights Directive (2011/83) and the EU Unfair Commercial Practices Directive (2005/29) introduced by the EU Directive on Empowering Consumers for the Green Transition (2024/825). The latter EU Directive entered into force in March 2024 and EU member states are to integrate its rules into their respective national legislation by March 2026.

Once in force, these amendments mean that the use of environmental claims – such as “green”, “environmentally friendly”, “gentle for the environment” and other corresponding vague claims – will be completely prohibited, unless the marketer can demonstrate a recognised excellent level of environmental protection and thus justify the use of this kind of very general claim.

Future objectives such as “we will be carbon-neutral by 2040” need to be based on clear, objective, publicly available, and verifiable commitments in order for the marketing not to be considered misleading. The commitments should be presented in a detailed and realistic implementation plan that includes, for example, measurable objectives to achieve the improvement presented in the environmental claim (as well as a timetable for them).

The oversight of marketing claims is distributed across various administrative bodies.

The Consumer Ombudsman serves as the primary authority for consumer advertising. The Finnish Transport and Communications Agency (Traficom) is responsible for regulating radio and television advertising. The FFA oversees the advertising of food, beverages, and tobacco, whereas Fimea supervises drug advertising. Valvira is tasked with enforcing alcohol and tobacco legislation. Additionally, Tukes handles marketing supervision under consumer safety and cosmetics legislation. Beyond the Consumer Ombudsman, the AVI monitors price indications in advertising. The Office of the Data Protection Ombudsman oversees data protection issues related to marketing.

Marketing and advertising are also influenced by the rulings and decisions of the Consumer Disputes Board, the Market Court, the Council of Ethics in Advertising (mainonnan eettinen neuvosto, or MEN), the Board of Business Practice of the Chamber of Commerce, and general courts of law.

The FIN-FSA monitors ESG disclosures in Finland. The monitoring encompasses:

• risk-based selection ‒ companies are chosen based on predefined risk factors for comprehensive or partial reviews;
• thematic reviews ‒ recently, the FIN-FSA has carried out reviews focused on specific themes, such as goodwill impairment testing and corporate acquisitions; and
• responsive monitoring ‒ investigating the appropriateness of financial statements or sustainability reports based on stock exchange releases or complaints.

In case of missing or false ESG disclosures, the FIN-FSA can require the company to correct and complete the reported information. It may also impose a conditional fine to ensure compliance. Finally, the FIN-FSA can impose administrative sanctions as outlined in Chapter 4 of the Act on the Financial Supervisory Authority (laki Finanssivalvonnasta, 878/2008). These sanctions include a penalty payment, a public warning, and an administrative fine.

The first ESG disclosures for 2024 are due in 2025. Although the first year of reporting and data collection has been somewhat hard for most companies, the task will be easier in the coming years. Thus, after initial challenges, it is expected that meeting reporting obligations will become a normal part of business in the coming years.

Individuals and companies have limited options to launch ESG-related cases against a company unless they have a direct contractual relationship with it. Depending on the nature of the ESG violation, it may be possible to inform authorities of suspected infringements of ESG legislation and – in many situations ‒ authorities can investigate cases on their own initiative. In such cases, individuals do not need to start proceedings themselves.

In limited liability companies, shareholders have limited options to launch a case against the management for causing damage to the company by failing to take ESG issues into account. One or several shareholders have the right to pursue an action in their own name for the collection of damages to the company if it is probable that the company will not make a claim for damages and:

• the plaintiffs hold at least one tenth of all shares at that moment; or
• it is proven that the non-enforcement of the claim for damages would be contrary to the principle of equal treatment of the Limited Liability Companies Act.

In the future, the CSDDD will open up new options for persons suffering damage due to ESG violation to launch cases against companies.

As the ESG legislation is still evolving, the current tools are sector- and issue-specific and not necessarily regarded as ESG cases but ‒ rather ‒ as labour law cases, environmental law cases or even criminal proceedings. Individuals may also have the right to claim damages on the basis of general tort law.

Certain NGOs ‒ such as associations and foundations whose purpose is to protect nature, health or the environment ‒ were expressly given the right to appeal against government decisions regarding climate change policy plans in January 2023, as an amendment to the Finnish Climate Act entered into force. In August 2024, six NGOs brought an appeal to the Supreme Administrative Court against the government’s lack of adequate climate action (for more details, see 1.2 Environment Trends).

Among activist movements, Extinction Rebellion Finland (Elokapina) has organised street blocks, demonstrations and protests approximately once a month. This has received a fair amount of media attention in 2024.

The Finnish Consumer Ombudsman has given guidelines that are based on Section 2 of the Consumer Protection Act and on the legal practice of the Finnish Market Court and the Consumer Ombudsman. Together with the EC’s guidance on the interpretation and application of Directive 2005/29/EC of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the internal market, these guidelines lay down clear rules for lawful environmental marketing. Marketing claims are required to be clear, precise and comprehensible, and the overall message must not be misleading. Also, all claims must be supported by evidence. Marketing communications must give an accurate picture of the product or service without exaggerating its environmental benefits.

The Consumer Ombudsman has repeatedly intervened and required changes to environmental marketing claims. The most recent cases include an environmental claim on the greenhouse gas emissions of aviation fuel used in the marketing of Finnair, misleading sustainability claims on the websites of Marimekko and Stockmann, and too-vague sustainability claims on ice cream package labels by Froneri Finland.

In the Finnair case, the Consumer Ombudsman examined the following claim used in Finnair’s advertising: “We procure renewable aviation fuel, which reduces greenhouse gas emissions by as much as 80% – our aim is to be completely carbon neutral in 2045.” The advertisement was published in several marketing channels, including social media platforms and Finland’s largest newspaper. According to the Consumer Ombudsman, consumers could not know what the procurement (which was the key message of the advertisement) meant for Finnair’s total emissions. The advertisement could have been interpreted as meaning that Finnair had completely switched to renewable fuel and reduced its overall emissions by 80%, whereas in reality the percentage of renewable aviation fuel was as low as 0.2% of all fuel consumed by Finnair.

It is likely that ESG litigation will increase in the next five to ten years. Tightening regulation, increased supervision and public awareness, and ambitious ESG goals will result in more ESG-related proceedings. Climate litigation is already on the rise in Europe and in Finland, and the same trend ‒ although perhaps not as prominently – is expected to touch social and governance issues in the next few years.