Sustainable Finance: Commission welcomes political agreement on company sustainability reporting

@European Union, 2018 Photo: Mauro Bottaro@European Union, 2018 Photo: Mauro Bottaro

The Commission welcomes the political agreement reached yesterday between the European Parliament and the Council on the Commission’s proposal for a Corporate Sustainability Reporting Directive (CSRD). The new Directive, which is an integral part of EU’s sustainable finance agenda and the European Green Deal, will modernise and strengthen the rules about the type of social and environmental information that companies have to report. A broader set of large companies, as well as listed SMEs, will also now be required to report on sustainability. The new rules will ensure that investors and other stakeholders have access to the information they need to assess investment risks arising from climate change and other sustainability issues. They will also create a culture of transparency about the impact of companies on people and the environment. Finally, reporting costs will be reduced for companies over the medium to long term by harmonising the information to be provided. Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets Union, said: “This is a landmark in the development of company reporting, a significant step forward in the area of disclosures, covering many sectors of the economy. Sustainability reporting will now be on an equal footing with financial reporting. The Corporate Sustainability Reporting Directive will help drive the transition to a sustainable economic system built on innovation and investment opportunities. It will enable companies to communicate and manage their sustainability performance more efficiently. Citizens will be able to measure the success of companies not just in financial terms but also assess how they impact people and the environment.” The centrepiece of the Directive is the introduction of mandatory European sustainability reporting standards, which the European Financial Reporting Advisory Group (EFRAG) is currently developing. The CSRD will amend the existing requirements of the non-financial reporting Directive (NFRD). The reporting requirements will be phased in over time for different kinds of companies. Listed SMEs will only be obliged to report as from 2026, with a further possibility of voluntary opt-out until 2028. The first companies will have to apply the new rules for the first time in financial year 2024, for reports published in 2025.