Regulatory evolution in Europe and growing pressure on companies – compliance as a strategic lever

Over the past decade, the European Union (EU) has consolidated its position as a global regulatory power. Recently, the EU has built a model regulated digital economy, which combines market efficiency, sustainability, and the protection of fundamental rights, known as the ‘Brussels Effect’.

This movement accelerated between 2020 and 2025 particularly in the fields of digital technology, sustainability, supply chain governance, and data management, significantly transforming corporate obligations.

While these developments pursue legitimate objectives — citizen protection, climate neutrality, fair competition, cybersecurity — they have also created a regulatory overload that can threaten competitiveness, especially for SMEs.

This is precisely what occured with the Corporate Sustainability Reporting Directive (CSRD, Dir. (EU) 2022/2464), the Corporate Sustainability Due Diligence Directive (CSDDD/CS3D, Dir. (EU) 2024/1760), and the EU Taxonomy Regulation (Reg. (EU) 2020/852).

Over 60% of the indicators contained in these Directives duplicate each other in areas such as carbon footprint data, environmental risks, supply-chain vigilance, which has resulted in  redundant audits and rising administrative costs.

In response to the corporate outcry, the European Commission presented an Omnibus Simplification Package to streamline sustainability and due-diligence requirements. The goal of the package is to reduce reporting burdens by 25% without lowering transparency standards.   

This shift encapsulates a central tension: how can the EU maintain regulatory ambition without administrative saturation?

It is within this context that compliance, traditionally seen as a defensive legal tool, is evolving into a strategic lever for governance, innovation and competitiveness.

An Expanding Regulatory Landscape: The European Model

The EU has continuously extended its regulatory framework to build a more sustainable and digital economy.
The Digital Services Act (Reg. (EU) 2022/2065) and Digital Markets Act (Reg. (EU) 2022/1925) regulate large platforms, imposing transparency, integration and interconnectivity obligations; The Artificial Intelligence Act (Reg. (EU) 2024/1689), in force since 1 August 2024, establishes a conformity-assessment regime for high-risk AI systems;  The CSRD, Taxonomy, and CSDDD form an unprecedented triptych linking reporting with governance and supply-chain responsibility; The Cyber Resilience Act (Reg. (EU) 2024/2847) and NIS 2 Directive (Dir. (EU) 2022/2555) strengthen digital security obligations.

This ‘governance by norms’ extends the EU’s tradition of a regulated market, where compliance underpins trust. Yet, built in silos, these instruments produced regulatory overlap that challenges internal coherence and clarity  readability. 

Strategic Compliance as an organisational transformation tool : from constraint to advantage

Ironically, regulatory accumulation has professionalised corporate compliance.

Companies now structure their governance  around a Chief Compliance Officer, who is on the same level as  the Chief Finance Officer or General Counsel.
Risk, audit and ESG functions are converging into cross-departmental committees.

According to the EIB Investment Survey 2025, 86 % of European firms now employ dedicated compliance staff, up from 62% in 2018.

Compliance becomes a driver of efficiency, resulting in:

• Better data management and traceability.
• Greater transparency for investors.
• Better anticipation of reputational risks.

This integration corresponds to what scholarship describes as 'structuring compliance': an internalised standard that organises markets through trust. As such, we are seeing the rise of ‘structural compliance’ - a norm internalised by firms that organise markets through trust. Indeed, leading companies increasingly use compliance as a competitive asset.

Early in tech, GDPR compliance  became a differentiator: firms offering privacy-by-design services gained market share worldwide. Today, in sustainable finance, banks rely on the EU Taxonomy to create labelled “green” products, whereas in industry, CSDDD-driven supply-chain traceability has become a selling point: suppliers able to prove due diligence gain privileged access to public contracts.

Compliance can create shared value, aligning legal conformity, ethical performance and competitiveness.

Comment

The European Union has built an ambitious, rule-based governance model, grounded in transparency, sustainability, and accountability.

Yet the  complexity  of this model has reached a critical threshold: overlapping instruments (CSRD, CSDDD, Taxonomy, AI Act, DSA, CRA) produce a cumulative effect that neither large corporations nor SMEs can absorb without major organisational adaptation and cost.

Lawyers play a central role in this transformation, assisting companies of all sizes to embrace compliance as a structuring force that serves both competitiveness and trust, rather than as a constraint.