The European Commission's Green Deal is a major policy initiative aiming to achieve a climate-neutral, zero-pollution, sustainable, circular and inclusive economy, driving both the New Industrial Strategy for Europe and the Chemicals Strategy for Sustainability. Innovative materials can help to reach these policy goals, but they need to be safe and sustainable themselves. Thus, one aim is to shift the development of chemicals to Safe- and Sustainable-by-Design, and define a new systems approach and criteria for sustainability to achieve this. An online workshop was organised in September 2020 by the Joint Research Centre and the Directorate-General Research and Innovation of the European Commission, with participants from academia, non-governmental organisations, industry and regulatory bodies. The aims were to introduce the concept of Safe- and Sustainable-by-Design, to identify industrial and regulatory challenges in achieving safer and more sustainable Smart Nanomaterials as an example of innovative materials, and to deliver recommendations for directions and actions necessary to meet these challenges. The following needs were identified: (i) an agreed terminology, (ii) a common understanding of the principles of Safe- and Sustainable-by-Design, iii) criteria, assessment tools and incentives to achieve a transition from Safe-by-Design to Safe- and Sustainable-by-Design, and (iv) preparedness of regulators and legislation for innovative chemicals/nanomaterials. This paper presents the authors' view on the state of the art as well as the needs for future activities, based on discussions at the workshop and further considerations. The case of Smart Nanomaterials is used to illustrate the Safe- and Sustainable-by-Design concept and challenges for its implementation. Most of the considerations can be extended to other advanced materials and to chemicals and products in general.