February 26. 2024. 6:11

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EU sustainability reporting standards must be taken over the finish line


Set to be adopted in June 2023, the new rules adopted under the EU’s groundbreaking Corporate Sustainability Reporting Directive are raising the bar for corporate transparency globally; as such, it is important that they are upheld, writes Mirjam Wolfrum.

The European Union has shown global leadership by developing comprehensive and high-quality corporate sustainability reporting standards which show a great appreciation of the urgent need to ensure all companies measure and report comprehensively on the sustainability matters that occur in their entire value chain.

However, the number of disclosure requirements and data points in the EU Sustainability
Reporting Standards (ESRS) have already been reduced substantially compared to the first
draft.

It is therefore important that the European Commission makes these standards law without reducing their scope and member states implement them fast and smoothly. Set to be adopted in June 2023, the new EU corporate reporting rules are raising the bar for corporate transparency globally.

They are essential to delivering capital markets the comparable data needed to understand a company’s journey on sustainability matters and channel capital into greener businesses.

With disclosures throughout the value chain of companies, and which need to be further specified in the sector-specific standards yet to come, EU companies’ global environmental impacts will be made transparent.

To achieve this, the European Commission can support corporates and capital market actors by maintaining the current disclosure requirements and ensuring a timely adoption of the first set of standards to be applied by 2024/2025.

This sentiment was echoed by over 60 companies and investors who just this week sent a
letter to the European Commission urging it to swiftly make the ESRS law without reducing
their scope.

The signatory group, with $80 billion in market capitalisation and over $570 billion in assets, urged EU Commissioner McGuinness, responsible for EU capital markets, to maintain the current requirements of the standards.

These new EU disclosure rules will come into force under the EU Corporate Sustainability Reporting Directive (CSRD) and apply to around 50,000 European businesses – a major expansion to current rules that will bring ESG reporting in Europe to the same level of accountability and comparability of financial reporting.

The ESRS will help ensure a level playing field, supporting the companies that already contribute to a nature-positive and net-zero economy and setting the bar for those who don’t yet.

A key feature of this major milestone for robust corporate reporting in Europe is the concept of double-materiality, whereby a company considers not only the impact of the outside world on its business, but also the impact of the company on the outside world.

By maintaining the integrity of these standards, the European Commission will harness companies’ and investors’ influence to finance the transition to a climate-neutral nature-positive economy.

If the EU is to become a climate-neutral continent where nature is restored, approving ambitious reporting standards is a major stepping stone in making this the decade of delivery.