EU, obligation of transparency on environmental and social issues for large companies

Large EU companies will be obliged to disclose data on their impact on the environment, on people, on the planet and on the sustainability risks to which they are exposed.

On 10 November 2022, in the plenary session, the deputies definitively adopted the directive on corporate reporting on sustainability, CSRD - Corporate Sustainability Reporting Directive , with 525 votes in favour, 60 votes against and 28 abstentions.

The new rules, already agreed with EU governments, will make companies more accountable to citizens by forcing them to regularly publish data on their social and environmental impact. This should reduce greenwashing , strengthen the EU's social market economy and lay the foundations for global transparency standards on sustainability.

The new European sustainability standards

The rules address the shortcomings of the current Non- Financial Reporting Directive (NFRD ) legislation, which is perceived to be largely inadequate. The CSRD introduces more detailed transparency obligations on the impact of companies on the environment, human rights and social standards, based on common criteria in line with the EU's climate targets .

The Commission will adopt the first set of rules by June 2023.

Businesses will be subject to independent audits and certifications to ensure that the data provided is reliable . The sustainability statement will be equated to the financial one, allowing investors to have comparable and reliable data. In addition, digital access to information on sustainability must be guaranteed.

"Europe is demonstrating to the world - declared during the plenary debate, the rapporteur Pascal Durand (Renew, FR) - that it is truly possible to guarantee that finance, in the strict sense of the term, does not govern the entire global economy".

The new EU transparency obligations on sustainability will apply to all large companies, publicly traded or not, including foreign companies with a turnover of more than €150 million in the EU. Publicly listed SMEs will be covered, but will have more time to adapt to the new rules.
Collecting and sharing sustainability information will become the norm for almost 50,000 companies in the EU, compared to around 11,700 covered by current rules.

The Commission presented its proposal for a directive on corporate sustainability reporting in April 2021. In 2018, the Parliament called for a revision of the CSRD and in 2020 made its recommendations on sustainable corporate governance.
The CSRD is part of the European Green Deal and the Agenda for Sustainable Finance and is part of a wider EU policy aimed at making companies respect human rights and reduce their impact on the planet.

The next steps

The Council should adopt the proposal on 28 November and it will then be published in the Official Journal of the European Union. The directive will enter into force 20 days after publication.

The rules will start to apply between 2024 and 2028:

• From 1 January 2024 for large public interest companies (with more than 500 employees) already subject to the Non-Financial Disclosure Directive, with data publication deadline in 2025.
• From 1 January 2025 for large companies not yet subject to the Non-Financial Disclosure Directive (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets), expiring in 2026.
• From 1 January 2026 for SMEs and other listed companies , expiring in 2027. SMEs can choose not to participate until 2028. (Source: Salvina Salerno, https://www.foodandtec.com/ )