The Socialists and Democrats welcome the agreement between the Parliament and EU governments to ensure companies are more transparent about their environmental and social impact. The agreement reached Tuesday night on the Corporate Sustainability Reporting Directive (CSRD) will introduce a single set of mandatory reporting standards for all large EU and non-EU companies, as well as listed small and medium-sized enterprises. Companies will have to disclose public information not only on their annual financial statements, but also on their efforts to reduce CO2 emissions, to be more sustainable and to protect biodiversity. In addition, companies will have to publish more detailed information on their employment policies, like on objectives to increase gender equality and diversity in their company or on cooperation with trade unions.
Lara Wolters, S&D negotiator on the Corporate Sustainability Reporting Directive, said:
“The EU’s current reporting rules for companies are substandard. To meet today’s reporting requirements, companies only have to provide the bare minimum of information about how they achieve their sustainability targets. This makes it very difficult for companies to be held accountable. When it comes to setting social and environmental standards in the EU, there is no more room for pretenders. The new rules mean companies will have to be more transparent and report in the same way. When it comes to their green credentials, companies often talk a big game, but now it will be much easier to see which company walks the walk, instead of just talking the talk.”
Note to editors
In April 2021, the Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD) to amend the Non-Financial Reporting Directive, which outlines the obligations for large companies to report on environmental issues, social and labour matters, respect for human rights, anti-corruption and diversity on company boards. In response to the Commission proposal to enlarge the scope of the Directive, the Parliament voted in March 2022 to strengthen reporting requirements on companies even further.
The main achievements in the negotiations with the Council on the CSRD include:
- Non-EU companies have been added to the scope of the directive;
- Listed SMEs have been kept in the scope of the directive;
- Workers’ representatives will have a greater role in the reporting process;
- Companies will have to be transparent about specific information on the risks and impact from individual subsidiary companies;
- Regarding audits on sustainability report, measures have been put in place to attempt to reduce the concentration of the auditing market;
- As part of the final agreement, and as result of amendments tabled by the S&D Group to the Parliament report, companies will also be forced to disclose information about schemes that link a part of company executives’ pay to sustainability targets;
- The European standard setting body (EFRAG), which is given a key role in the Directive, will be properly funded to guarantee its independence and will include a balanced representation of stakeholders. Parliament will play a role in holding this body accountable;
Sector specific standards need to be developed in a way that takes into account the specific risks and impacts of each sector.