EU aims to ‘end greenwashing’ with climate impact reporting
On Tuesday, MEPs and EU governments reached a provisional agreement on new, compulsory reporting rules. From 2024, large companies will need to publicly disclose information on the way they operate and manage social affairs, governance and environmental risks.
The Corporate Sustainability Reporting Directive (CSRD), the European Parliament says, will make businesses more accountable by obliging them to ‘disclose their impact on people and the planet’. The legislation aims to end greenwashing and lay the groundwork for sustainability reporting standards at a global level.
The new reporting requirements will apply to all large companies, defined as having ‘over 250 employees and a 40 million euro turnover’, whether listed or not.
Companies will have to report their impact on the environment, human rights, social standards and work ethics based on common standards. The aim of the CSRD is to initiate a move towards sustainability as ‘a pillar of businesses’ performance’, and away from short-term profits.
The agreement requires that the information provided by companies on their impact on the climate or human rights be ‘independently audited and certified’. As well as this, reports on finance and sustainability will be on ‘an equal footing’ – investors will have access to ‘reliable, transparent and comparable data’.
Non-EU companies with substantial activity in the EU market (‘150 million euro in annual turnover in the EU’) will also have to follow equivalent reporting rules. Member states will supervise compliance with the help of the Commission.
Small and Medium-sized Enterprises (SME) listed on public markets will be subject to lighter reporting standards. However, MEPs secured the possibility for them to opt out of this new system until 2028.
MEPs also put guarantees in place so subcontractors can only be asked to prove information by their contractual partners, according to a lighter version of reporting standards.