With the proposal for a Corporate Sustainability Reporting Directive an increasing number of companies will be obliged to disclose non-financial information to the public.
(Image source: Beatriz Perez Moya, Unsplash)
‘’It’s not about how much it would cost to do something, it’s about the cost of not acting.’’
Aiming to bring sustainability reporting on par with financial reporting, on 21 April 2021, the European Commission presented its proposal for a Corporate Sustainability Reporting Directive (CSRD). This proposal is a revision of, and strengthens the rules introduced by the Non-Financial Reporting Directive (NFRD) from 2019. To shed a light on this topic, on 26 October 2021 eolos hosted its second Circular Club* event. In the panel session Club members were given the chance to receive great insights around this topic directly from Thomas Dodd, Head of Sustainability Reporting at the European Commission and Michael Beutler, Director of Sustainability Operations at Kering.
Under the NFRD all large listed companies, banks and insurance companies having over 500 employees are obliged to publish information about their social and environmental impacts. The proposed CSRD extends the mandatory sustainability reporting to all large companies and all companies listed on regulated markets (expect listed micro-enterprises), meaning an increase from 11 000 to ~50 000 companies that will be subject to the requirements. Proportional standards are proposed for SME’s, which can be used by non-listed SME’s on a voluntary basis.
The aim of the CSRD proposal is to homogenise and simplify sustainability reporting, and to boost responsible business and decision making. Up until now the information disclosed by companies differed in content and in way of reporting, making it difficult for stakeholders to assess the data’s reliability as well as comparability. Ensuring that companies report reliable and comparable data will also trigger stakeholders such as investors to make sustainable investment decisions. The reporting criteria and indicators as mentioned in the proposal are in line with the environmental objectives of the EU Taxonomy regulation. The commission through its delegated acts is setting grounds for defining economic activities that fall under the category of ‘environmentally sustainable activities’. By closely knitting different initiatives at the European level, the commission aims to introduce a standardised format of reporting which will provide credible and comparable non-financial information to the public.
Being subject to the new requirements, means it is key to understand your business with its flows of processes and related data. Mapping these flows can be a way to obtain your company blueprint and enabling you to have a clear view on the data needed to report. An excellent benchmark example is Kering’s Environmental Profit & Loss tool, which was developed to measure and quantify the environmental footprint of its activities.
In its mission to direct finances towards realisation of the Green Deal, the EU is expected to publish the CSRD by later next year. This will be accompanied by the publication of delegated acts of the Taxonomy regulations and further amendments and the introduction of other environmental initiatives. The first set of standards are expected to be adopted in October 2022, resulting from the collaboration between the Global Reporting Initiative and the European Financial Reporting Advisory Group Project task Force.
Henri CUIN | eolos Co-founder & Environment Policy Expert
Nikhil VARGHESE | Environment Policy Expert
Aurianne MEGDOUD | Innovation Expert
* eolos CXO Circular club is an initiative from eolos to provide industry leaders with first-hand information on environmental trends, markets, competition, innovation and regulations related to the Circular Economy. Experts are regularly invited to openly discuss specific topics. If you are interested in joining the Circular Club, don’t hesitate to contact us at firstname.lastname@example.org