Members of the European Parliament and representatives from EU Members States agreed new sustainability reporting rules that aim to end so-called “greenwashing” and lay the groundwork for a common set of global standards. Pascal Durand MEP (Renew Europe, France), who led the negotiations for the parliament, said:
“Today, information on a company’s impact on the environment, human rights and work ethics is patchy, unreliable and easily abused. Some companies do not report. Others report on what they want. Investors, consumers and shareholders are at loss. From now on, having a clean human rights record will be just as important as having a clean balance sheet.”
The new EU sustainability reporting requirements will apply to all large (public and private) companies with more than 250 employees and a €40m turnover. Non-EU companies with substantial activity in the EU market (€150m in annual turnover in the EU) will have to follow equivalent reporting rules.
The Corporate Sustainability Reporting Directive (CSRD), which amends the 2014 Non-Financial Reporting Directive (NFRD), will introduce detailed sustainability reporting disclosures for large companies, prepared according to European Sustainability Reporting Standards (ESRSs) currently being developed by EFRAG.
Legislators believe that the new reporting rules will make businesses more accountable by requiring them to disclose their impact on people and the planet, including the environment, human rights, social standards, and work ethics.
The agreement also requires companies to have the information on their impact on the climate or human rights to be independently audited and certified, allowing investors to have access to reliable, transparent and comparable data.
The rules will apply from 1 January 2024 for companies already subject to the NFRD. From 1 January 2025 for companies that are not presently subject to the NFRD and from 1 January 2026 for listed SMEs, small and non-complex credit institutions and captive insurance undertakings.
Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets Union, said: “This is a landmark in the development of company reporting, a significant step forward in the area of disclosures, covering many sectors of the economy. Sustainability reporting will now be on an equal footing with financial reporting.
“The Corporate Sustainability Reporting Directive will help drive the transition to a sustainable economic system built on innovation and investment opportunities. It will enable companies to communicate and manage their sustainability performance more efficiently. Citizens will be able to measure the success of companies not just in financial terms but also in terms of how they impact people and the environment.”
The EU Parliament and Council now has to formally approve the agreement before it is published in the EU Official Journal. It will be effective 20 days after publication and member states will have to integrate its provisions into national laws after 18 months.
Download BEERG Newsletter Issue #22 2022 as a PDF