The revised rules will address key issues related to the quality, consistency and comparability of sustainability data disclosed by companies under existing EU legislation, as evidenced by research published by the Corporate Transparency Alliance.
CSRD clarifies transparency commitments for large companies operating in the EU on their sustainability impacts, risks and opportunities, including their decarbonization plans and performance, and instructs them to develop and adopt mandatory ESG corporate sustainability reporting standards.
This reform is key to the success of Europe’s sustainable fiscal agenda, the EU Green Deal and the REPowerEU plan: relevant and comparable sustainability data is a prerequisite for direct financial flows to support the EU’s transition to a net zero economy. It also monitors progress to ensure that financial market participants meet their commitments, as well as the EU’s goals and commitments on climate, biodiversity and human rights, and the EU’s dependence on fossil fuels and thus on Russia (which we need). it is important to reduce. energy consumption and production of companies, renewable energy production, etc. information about).
5 key changes and missed opportunities:
- The scope of the legislation covers all large listed and non-listed companies with more than 250 employees. The EU Commission estimates that this includes about 50,000 companies, with more than 99% excluding companies in the EU. Registered SMEs have been included in the initial proposal for mandatory reporting from 2026 to simplified standards (recommended by numerous studies and studies, including the EU Commission). The final text will allow them to opt out by 2028, which will have a major impact on SMEs’ readiness to take advantage of sustainable financial flows and their relationships with banks, public procurement opportunities or business partner requests. The European Parliament, as well as investors, civil society and academic research, have recommended an approach to identify high-risk sectors and expand coverage to cover SMEs in these industries.
- The reporting obligations of the companies are defined in relation to the disclosure of:
- Transition plans to achieve climate neutrality by 2050, including measures, investment plans and exposure to fossil fuels;
- Sustainability timelines and the progress companies have made in achieving them (including IGC emission reduction targets);
- Necessary research data on sustainability, ie transparency in the process and negative impacts identified in the company’s value chain and measures taken to eliminate such impacts.
- The main measure of the CSRD is the development and adoption of mandatory ESG standards based on double importance (ie the disclosure of the company’s impact on the planet and people, as well as the risks and opportunities for the company arising from sustainability issues).
- Following the CSRD guideline, this will cover both quantitative and qualitative data and will cover both retrospective and forward-looking data;
- Draft EU standards (agnostic sector) have been published and are open for public discussion until August. They have been developed by a multi-stakeholder team of experts to be feasible, flexible and enforceable by companies. The expert team, which is part of EFRAG’s new Sustainable Development Report column, will now proceed with technical proposals for sector-specific standards.
- In terms of timing, the agreement reached by the trade unions is for 2024 for companies already covered by existing legislation (EU Non-Financial Reporting Directive) by 2024, and for other large listed and unlisted companies (more than 250 employees) by 2025. offers a much delayed application. Although the initial proposal is expected to be integrated into national legislation by the end of 2023, the deal now includes an 18-month transposition period. Member states need to make the necessary changes to companies by January 2024.
- Evaluation of the implementation of the directive and the adoption of standards by SMEs is required from the European Commission by 2028, which is too late, given that voluntary measures are ineffective and most companies in high-pollution sectors are ineffective. CSRD coverage.
The organizations of the Corporate Transparency Alliance welcome the above events in accordance with the recommendations of the NGO policy and regret the missed opportunities.
Susanna Arus, Communications and EU Public Affairs Manager, Frank Bold:
“It is important that Member States clarify companies by making the necessary changes to national legislation by January 2024 and ensure that all large companies (not just those covered by the EU Non-Financial Reporting Directive) are required and accountable.” Fiscal year 2024. “Gradual implementation will put some countries and companies at risk of creating a fast-paced Europe that will make it difficult for them to access sustainable financial flows.”
Giorgia Ranzato, T&E Sustainable Finance Advisor, Member of the EFRAG Expert Group and Sustainable Finance Platform:
“Despite the expulsion of SMEs and the delay in their entry into force, today’s agreement confirms itself as a world leader in the EU Sustainability Report. But the devil is in the details: all special disclosure requirements still need to be defined. We saw this in the Rule of Taxonomy: first-level ambitious legislation and then weak criteria that abolished all work. I hope that the Commission and the Council will not destroy this file either. “
Mirjam Wolfrum, CDP Europe’s Director of Policy Employment, said:
“CSRD is a landmark achievement for bold corporate disclosure rules that will encourage companies to set emission and nature targets in accordance with science. Companies that make statements through the CDP are well prepared for the new requirements. We have improved and adapted our questionnaires against the background of constantly emerging new standards, priorities and rules, and will continue to do so. ”
In response to the agreement, Elisa Peter, director of Publish What You Say, said:
“We welcome the legislators’ attention to high-risk sectors. A fair transition will not be possible without full transparency in the production projects of oil, gas and mining companies. The sustainability declaration rules that will now be drafted to implement yesterday’s deal are vital to people, climate, environment and good governance in oil, gas and mineral-producing countries. ”
EU Policy Adviser Isabella Ritter comments on ShareAction on the outcome of the CSRD trilogy talks:
“The introduction of mandatory and EU sustainability reporting standards will finally provide investors with comparable and qualitative sustainability data to better assess the impact of their investments. With standards that cover the full range of ESGs and a dual-importance approach, investors will be able to direct capital inflows to more sustainable activities. In particular, the announcement of the company’s transition plans, including the goal of reducing greenhouse gas emissions, will provide investors with long-awaited information about the climate ambitions of the companies investing.
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