Friday

29th Sep 2023

EU to let companies self-police on green and social rules

  • Ursula von der Leyen committed to reducing reporting requirements on businesses by 25 percent to boost competitiveness in the face of the US competition (Photo: European Commission)
Listen to article

Last Friday (9 June), the European Commission published a draft set of environmental, social and governance (ESG) reporting rules.

The European Sustainability Reporting Standards (ESRS) will cover 50.000 EU companies and are meant to improve their disclosures on twelve standards.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

These include workforce-related issues such as collective bargaining and adequate pay, the impact on the environment, water, local communities and biodiversity transition plans.

"We intend to adopt the delegated act in July and have the legal act in place in the autumn," Sven Gentner, who is a top civil servant at the commission chiefly responsible for ESRS, told public and private stakeholders on Wednesday.

Since it is a delegated act, it is not subject to parliamentary approval. Instead, it goes through public consultation with civil society organisations and businesses, who now have until 7 July to weigh in on the details, spot problems and suggest possible tweaks and changes.

One of the key battlegrounds will be the level of flexibility allowed to businesses. NGOs and investor groups have warned that the commission has backtracked on ambition too much.

Many of the reporting requirements, including those for climate, biodiversity and workplace standards that were mandatory in a previous version of the rules, have been made voluntary. This means a company can decide whether a standard applies to them.

"What we have done is move those disclosures from 'you shall disclose' to 'you may disclose'," said commission policy officer for non-financial reporting Tom Dodd, adding that topics like biodiversity reporting are made voluntary because they are "so complex."

Additionally, the commission has extended the so-called phase-ins, allowing businesses one to three years to omit to provide information after applying the standards, with added flexibility for the 30.000 companies with less than 750 employees.

There needs to be "flexibility, in particular for smaller companies in the beginning," said Gentner. "Many told us it is challenging, and it is important that businesses can cope with the requirements."

Criticism

"We acknowledge the challenges preparers will face when complying with the ESRS," said Alexandra Palinska, executive director of Eurosif, an investor group representing a diverse group of asset managers and institutional investors.

"However," she added "the EU Commission should not prioritise reducing reporting requirements at the expense of the public interest and other stakeholders, including investors and financial institutions in dire need of sustainability information to comply with their own regulatory requirements."

But "voluntary" does not mean a company is "entirely free" to decide whether a standard applies to them," said Dodd when explaining the decision to move away from mandatory reporting. "That is categorically not the case. Company assessments must be audited."

These audits will be done by private accounting firms such as KPMG and Deloitte. But Pierre Garrault, a policy adviser at Eurosif, told EUobserver that the "application of voluntary assessments for almost every ESRS disclosure would put a lot of weight on external auditors to look at the process of the company assessments."

"Additionally, voluntary disclosures when a topic is considered non-material could allow companies to omit entire parts of their sustainability reporting," he said.

Competitiveness

The broader "context in which we made these changes," said Gentner, was a commitment made in March by commission president Ursula Von Der Leyen to reduce reporting requirements on businesses by 25 percent to boost competitiveness in the face of the US and Chinese clean tech competition.

"Watering down the ESRS will be counter-productive for the EU's competitiveness in the long run," Jurei Yada, who is a programme lead for sustainable finance at the global think tank E3G told EUobserver.

"What we really need is comparable information and not more fragmentation. Investors and businesses need coherence across the sustainable finance framework to better plan for and invest in the economy of tomorrow."

The delegated act will apply from 1 January 2024.

Opinion

The 'BlackRock exemption' has no place in the EU's due diligence directive

With the EU's Corporate Sustainability Due Diligence Directive, there's an opportunity to harness the power of investment for truly sustainable activities. But to do this, it must not allow the 'BlackRock exemption' and instead cover institutional investors and asset managers.

Analysis

Final steps for EU's due diligence on supply chains law

Final negotiations on the EU due diligence law begin this week. But will this law make companies embed due diligence requirements in their internal processes or incentive them to outsource their obligations to third parties?

Investors baffled by watering-down of EU sustainable reporting plan

European investors are sounding the alarm over sustainable reporting rules, which they say have been weakened by the European Commission. Many reporting requirements that were mandatory in an earlier draft have been made voluntary, including climate, biodiversity and transition-plan reporting.

IEA says: Go green now, save €11 trillion later

The International Energy Agency finds that the clean energy investment needed to stay below 1.5 degrees Celsius warming saves $12 trillion [€11.3 trillion] in fuel expenditure — and creates double the amount of jobs lost in fossil fuel-related industries.

Opinion

How do you make embarrassing EU documents 'disappear'?

The EU Commission's new magic formula for avoiding scrutiny is simple. You declare the documents in question to be "short-lived correspondence for a preliminary exchange of views" and thus exempt them from being logged in the official inventory.

Latest News

  1. Poland's culture of fear after three years of abortion 'ban'
  2. Time for a reset: EU regional funding needs overhauling
  3. Germany tightens police checks on Czech and Polish border
  4. EU Ombudsman warns of 'new normal' of crisis decision-making
  5. How do you make embarrassing EU documents 'disappear'?
  6. Resurgent Fico hopes for Slovak comeback at Saturday's election
  7. EU and US urge Azerbijan to allow aid access to Armenians
  8. EU warns of Russian 'mass manipulation' as elections loom

Stakeholders' Highlights

  1. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  2. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  3. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  4. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  5. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch
  6. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations

Stakeholders' Highlights

  1. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  2. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  3. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  4. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  5. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics
  6. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains

Join EUobserver

Support quality EU news

Join us