In many areas, America is recognized as a leader and innovator, yet sustainability remains an exception — particularly in the realm of regulatory frameworks and standards that govern reporting, compliance, and best practices. For decades, the European Union has been a pioneer in setting stringent environmental standards. Although best practices in sustainability advocate for local purchasing and promoting circular economies, the reality of the global trade network often complicates these ideals. Consequently, U.S. businesses, real estate developers, and investors are compelled to continually adapt and innovate to align with the evolving sustainability frameworks and stringent compliance regulations enforced by the EU. In the world of sustainability, everything is interconnected; changes in one area can significantly impact the entire system, reinforcing the global commitment to sustainable progress.

Meanwhile, some innovations in sustainability frameworks originate from America and are influencing global compliance and regulatory environments for businesses. Homegrown initiatives like LEED and EnergyStar appear in many local and state legislations requiring sustainable performance for buildings. LEED, along with its European counterpart BREEAM, is referenced in EU reporting standards. For businesses and real estate developers needing to meet both domestic and EU reporting or investor expectations, understanding sustainable reporting standards is more vital than ever.

A Dynamic Exchange: the EU and the U.S.

The two regions influence each other, but each has its own approach to policy. U.S. regulations are more focused on favorable incentives to stimulate innovation, while EU directives aim to control pollution and environmental risk. This results in different reasons for businesses to improve their sustainability in each region, yet the end goal remains similar.

European policies have long established benchmarks for energy efficiency, carbon reduction, and building performance, including milestone benchmarks that compel a focus on year-over-year improvements. U.S. federal initiatives have taken a different tactic: influencing behavior that drives the adoption of technologies that will produce year-over-year performance improvements. For example, the Inflation Reduction Act (IRA) has triggered clean energy investments that help companies operating in the U.S. take steps to make year-over-year improvements in sustainable performance.

The bottom line is that many companies must adhere to sustainability regulations in both countries to do business. It is interesting to note that based on investment by each in the other, there is no clear superior strategy. European-owned businesses accounted for 64% of all foreign direct investment in the U.S. in 2023. Likewise, Europe is the largest destination for U.S. foreign investment, accounting for 60% of total foreign investment during the same period.

European Leadership in Building Sustainability

Europe’s emphasis on year-over-year improvements is more relevant than ever.

Stricter Building Regulations

Key examples are the European Commission’s Energy Performance of Buildings Directive (EPBD), Energy Efficiency Directive (EED), Renewable Energy Directive (RED), Circular Economy Action Plan, and the EU Taxonomy which promote a transition to nearly zero-energy buildings (NZEB). These regulations demand improved building performance essentially requiring continuous insulation, high-efficiency HVAC systems, on-site renewables, and wiser use and sourcing of materials, all aiming to reduce carbon emissions.

The influence of such directives is evident as several U.S. states, notably Massachusetts, have introduced rigorous emissions reduction targets in its Global Warming Solutions Act, in a similar spirit. Though these rules arose independently, the EPBD was implemented well before Mass’ GWSA, both aim to drastically reduce emissions in the built environment.

Certifications and Reporting

When it comes to green building certifications, Great Britain’s BREEAM system predates — and has significantly influenced — U.S.-based certifications like LEED and WELL. While LEED and WELL are now leaders in the American and Asian markets, BREEAM’s focus on lifecycle assessment and occupant well-being set early benchmarks. The ripple effect of such pioneering European standards continues to redefine U.S. sustainability practices.

At the entity level, the EU’s Corporate Sustainability Reporting Directive (CSRD) further raises the bar by mandating extensive sustainability disclosure of environmental, economic, and social metrics. For American entities interacting with European partners and investors or doing business directly in the EU, meeting CSRD criteria may be a critical differentiator, if not a requirement to do business.

California as a Policy Trailblazer in the Built Environment

No discussion of U.S. environmental policy is complete without mentioning California. Often dubbed a testbed for progressive sustainability initiatives, the state has served as a de facto policy bridge between European standards and the rest of the U.S. Interestingly, California policy tends to mirror the EU in a restriction-based approach rather than the federal government’s incentives-based approach.  

A prime example is California’s mandate, which requires many new residential buildings to include solar panels. This approach aligns with the EU Renewable Energy Directive’s push for on-site renewables. On top of that, the state’s support for energy storage initiatives likewise echoes European decarbonization goals, propelling innovations in both commercial and residential sectors.

California’s approach to materials is similarly cutting-edge. Through its Buy Clean Act, it sets requirements for measuring embodied carbon in materials such as steel, glass, and insulation. Furthermore, it limits the global warming potential of these products that can be used in public works projects. Europe has been monitoring embodied carbon for years, with some countries mandating Environmental Product Declarations (EPDs) for construction products.

The Circular Economy in the Built Environment

One trend rapidly gaining momentum — both in Europe and states like California — is the push toward a circular economy. Rather than viewing demolition waste as landfill material, the focus is on designing for easier repair and disassembly to promote the reuse of materials and dampen the demand for extraction.

Reusing and Recycling Building Materials

European guidelines emphasize designing buildings for deconstruction. For instance, structural components might be bolted rather than welded, allowing them to be disassembled and reused. This concept is taking root in the U.S., too. Developers committed to zero-waste goals are sourcing reclaimed wood, steel, and other materials to reduce costs and environmental impact.

Lifecycle Assessments (LCAs)

Lifecycle assessments are a cornerstone of European certifications, quantifying a product’s or a building’s total environmental impact. In the U.S., LCAs have historically been voluntary or project-specific, but that’s changing fast. As more states consider incorporating LCA requirements into building codes, this European-born practice is set to become a mainstream tool in American project design. It’s been part of LEED for several years now (since the release of v4 in Beta form).

Market Pressures and Collaboration

Beyond regulations, market forces play a significant role in spurring sustainability innovations.

European investors, particularly institutional players, increasingly look for not only attractive returns on investments but also strong environmental performance before approving deals. It’s part of their risk mitigation and business continuity strategy. Given their substantial investments in U.S. assets — amounting to trillions in 2023 — American developers face mounting pressure to align with European sustainability benchmarks. Projects that meet these standards generally access capital more readily and enjoy improved long-term viability.

International Collaboration

Multinational forums like COP, the G7, the G20, and the World Economic Forum’s Annual Meeting have become prime platforms for U.S. and European sustainability experts to align policy frameworks. Through these discussions, strategies on energy efficiency, carbon pricing, and sustainable design and operations are exchanged, refined, and sometimes merged. This high-level coordination trickles down to real commercial and residential projects on both sides of the Atlantic.

A Shared Vision for the Built Environment

Europe’s rigorous building regulations, certifications, and circular economy initiatives have undeniably shaped how U.S. states approach sustainability. California often leads the pack, but other states like Washington and Colorado are also experimenting with mandates mimicking European precedents.

Still, the road ahead depends on ever-shifting political landscapes and economic priorities. Regulatory changes in Brussels can send ripples through the U.S., and vice versa. As these waves continue, forward-thinking developers and companies will seek agile partners who understand the global context of sustainability.

That’s where Emerald Built Environments, a Crete United Company, comes in. We help clients navigate the complexities of overlapping rules and certifications, translating global best practices into local, actionable strategies. By adapting Europe’s insights to U.S. markets, developers can foster projects that align with U.S. sustainability goals, benefit communities, and deliver strong returns — no matter which side of the Atlantic they operate on.