ESG compliance is not optional, lessons from Croatia’s lithium plant controversy
- 10 March 2026
- Posted by: Mikki Hall
- Categories: energy, energy excellence, ESG
Understanding ESG requirements is becoming essential for governments and investors alike. Projects that fail to properly assess environmental and social impacts increasingly face regulatory delays, financing challenges and public opposition.
Recent developments around a proposed lithium processing plant in Croatia illustrate why this matters.
The project, planned in the Gospić region, initially progressed without a full environmental impact assessment after authorities determined that such an assessment was not required. However, following public scrutiny and political pressure, Croatia’s Ministry of Environment and Green Transition annulled the earlier decision and confirmed that the project must undergo a full environmental impact assessment before it can proceed.
The decision immediately created uncertainty for the project and raised an important question. When environmental assessment requirements are misunderstood or incorrectly applied, who is responsible?
Environmental and social impact assessments
Under European Union legislation, including the Environmental Impact Assessment Directive (EIA), certain industrial projects must undergo environmental assessment before they can proceed. These regulations exist to ensure that potential impacts on ecosystems, public health and natural resources are identified and addressed before construction begins.
In many jurisdictions, large scale projects must also conduct a Social Impact Assessment (SIA). These assessments evaluate how projects may affect local communities, livelihoods, land use and social stability. Together, environmental and social impact assessments form a critical part of responsible project development.
As an EU member state, Croatia is required to apply these standards consistently across major industrial developments. The lithium project controversy illustrates what can happen when environmental and social compliance requirements are not clearly assessed at an early stage. For investors operating in sectors such as mining, chemicals and energy, these assessments are not simply procedural requirements in the permitting process. They are fundamental elements of project risk management.
Why regulatory clarity matters for governments
For policymakers, cases like this highlight the importance of regulatory clarity and consistent enforcement.
If environmental and social assessment requirements are applied inconsistently, several risks emerge. Public trust in the permitting process can erode, political pressure on regulators increases and investors face greater uncertainty when approvals are later challenged or reversed.
Effective ESG governance therefore requires coordination between ministries, regulators and local authorities so that compliance requirements are clear before projects move through the permitting process.
Why this matters for Africa
The lessons from Croatia are particularly relevant for African economies seeking to attract investment in sectors such as mining, energy, mineral processing and large-scale infrastructure.
Across the continent, governments are promoting industrial development linked to natural resources and critical minerals. At the same time, international lenders, development banks and institutional investors are applying increasingly strict environmental and social governance requirements when evaluating major projects.
For investors, ESG compliance is no longer simply a reputational consideration. In many cases it is a prerequisite for securing international financing.
Large scale infrastructure and extractive projects are now routinely assessed against environmental impact regulations, social impact assessments, community engagement requirements and broader sustainability criteria before financing can be approved.
Where regulatory frameworks are unclear or poorly enforced, projects can face delays, legal challenges and financing constraints.
Recent examples illustrate this trend. The East African Crude Oil Pipeline project has faced sustained international scrutiny over environmental and social concerns, contributing to several global banks withdrawing from financing discussions. Similarly, major renewable energy and hydrogen projects in Namibia have required extensive environmental studies and community consultations before investors were able to secure international funding.
For African governments seeking to attract long term investment, strong ESG governance and clear environmental and social regulation are therefore essential.
Developing ESG capability
The Croatian lithium project highlights a broader global reality. Environmental and social compliance is no longer a secondary administrative issue. It has become a central component of modern industrial development.
Governments, regulators and investors must increasingly understand how environmental and social regulations interact with investment decisions, financing requirements and long-term project viability.
On 26 – 27 March in Kampala we will host the fifth cohort of our Environmental, Social and Governance (ESG) workshop. The programme is designed for board members, C-suite leaders and senior decision makers seeking to strengthen ESG governance, integrate sustainability into enterprise risk management and align long-term investment decisions with evolving regulatory and investor expectations. You can register for the workshop below
References
Croatian Ministry annuls decision exempting lithium processing plant from environmental study, HINA news agency. hina.hr
Jedro Lithium project overview and production capacity, company information. Jedro Lithium
Environmental Impact Assessment Directive https://environment.ec.europa.eu/law-and-governance/environmental-assessments/environmental-impact-assessment_en
Banks distance themselves from financing East African Crude Oil Pipeline due to ESG concerns.
https://ieefa.org/resources/banks-distance-themselves-east-african-crude-oil-pipeline
Reuters reporting on financing withdrawals and ESG pressure around the project.
https://www.reuters.com/world/africa/banks-rule-out-financing-east-african-crude-oil-pipeline-2023
Climate Accountability Institute / NGO coalition tracking financial institutions withdrawing from the project.
https://www.stopEACOP.net
European Parliament resolution highlighting environmental and human rights concerns linked to the pipeline.
https://www.europarl.europa.eu
Government of Namibia and Hyphen Hydrogen Energy project documentation confirming environmental and social impact assessment requirements for the Tsau Khaeb Green Hydrogen Project.
https://hyphenafrica.com