Sustainability reports will be compulsory in the EU from 2025
The Council of the European Union has approved proposals for compulsory reporting by companies of their corporate sustainability performance. The Council is an essential decision-making body in the European Union, comprising government ministers from each member state, who meet to discuss and approve new policies.
In 2024 at the latest, companies are now going to have to compile detailed information on how their business models affect sustainability, and on how external sustainability factors (including climate change and human rights issues) influence their activities. In 2025 companies are going to have to start presenting annual reports, showing the information for the previous year.
According to the Council, this will help investors and other stakeholders take informed decisions about companies on sustainability issues.
This newly approved proposal, the corporate sustainability reporting directive (CSRD), will affect all large companies active in the European Union and their subsidiaries. The rules will also apply to listed smaller and medium enterprises (SME), although an opt-out will be possible for listed SMEs during a transitional period, exempting them from the application of the directive until 2028.
Non-European companies are also going to have to comply if they have a net annual turnover in the EU of €150 million or more or if they have a branch or subsidiary in the EU.
“Markets need access to environmental, social and governance (ESG) information that is reliable, relevant and comparable if private capital is to be channelled into financing the green and social transition,” the Council said in a statement. “Disclosure of sustainability information could attract additional investment and funding to facilitate the transition to a sustainable economy, as described in the Green Deal.”
The Green Deal, which includes the EU’s Circular Economy Action Plan, has the aim of encouraging manufacturers and consumers to choose to make and buy products that have a long life and are, from the outset, upgradeable, repairable, reusable, recycled and recyclable.
Mike Costello, who leads on ESG for leather chemicals group Stahl, described the new corporate sustainability reporting directive as “a great opportunity for companies that are committed to reducing the impact of climate change”.
Image: Spoor.
