EU policymakers strengthen rules for companies’ sustainability disclosures with mandatory ESG standards, but delay its implementation

On Tuesday 21 June, the trilogue negotiations between the European Commission, Parliament and Council concluded with an agreement for the EU Corporate Sustainability Reporting Directive (CSRD). The reformed rules will tackle major problems on the quality, consistency and comparability of sustainability information disclosed by companies under existing EU legislation, as evidenced in the studies published by the Alliance for Corporate Transparency.

The CSRD clarifies transparency obligations for large companies operating in the EU on their sustainability impacts, risks and opportunities – including their decarbonisation plans and performance -, and mandates the development and adoption of mandatory ESG corporate sustainability reporting standards.

This reform is the bedrock to ensure the success of the European sustainable finance agenda, the EU Green Deal and the REPowerEU plan: relevant and comparable sustainability data is a prerequisite to direct finance flows in support of the transition to an EU net-zero economy. It is also essential to ensure financial market participants fulfil their own obligations as well as monitor progression to achieve EU objectives and commitments on climate, biodiversity and human rights, and cut down the EU’s dependency on fossil fuels, and thus Russia.

5 key changes & missed opportunities:

  1. The scope of the legislation is expanded to all large listed and non-listed companies with more than 250 employees.
  2. Companies’ reporting obligations have been specified.
  3. The key measure of the CSRD is the development and adoption of mandatory ESG standards based on double materiality.
  4. In terms of timeline, the agreement reached by co-legislators proposes a delayed application to 2024 for those companies already covered by existing legislation and 2025 for other large listed and non-listed companies.
  5. An assessment of the implementation of the Directive and adoption of standards by SMEs is requested of the European Commission before 2028, which is far too late considering that voluntary measures have proven to not be effective and a major portion of companies in highly polluting sectors are not covered by the CSRD.

The organisations of the Alliance for Corporate Transparency welcome the above developments, in line with NGO policy recommendations, and regret the missed opportunities.

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Image credits: @markusspiske / unsplash