20/10/23

EU: Rebellion against EU’s new sustainability reporting standards defeated

As published on: edie.net, Friday 20 October, 2023.

Members of the European Parliament this week rejected a motion aimed at scrapping the new European Sustainability Reporting Standards (ESRS), which will apply to more than 50,000 companies from 2024.

More than 40 MEPs, mainly from the centre-right European People’s Party (EPP), had tabled and supported a motion to scrap the Standards and replace them with a simpler alternative that would require more streamlined corporate disclosures.

This group had pushed for the reporting of Scope 3 (indirect) emissions, which typically account for the bulk of a large business’s total carbon footprint, to be voluntary rather than mandatory.

It had also advocated for more flexibility for companies to decide which topics are and are not material to their operations and value chain.

This motion was ultimately defeated on Wednesday (18 October). MEPs voted to implement the ESRS in the form agreed upon in July, which had already been weakened in some places including the removal of mandatory climate risk reporting.

“Amid international backlash to corporate sustainability reporting and a growing anti-ESG movement, Europe held the fort for sustainable businesses,” said think-tank E3G’s senior policy advisor for sustainable finance, Tsvetelina Kuzmanova.

WWF Europe’s senior economist Sebastien Godinot added: By standing firm against this attempt to kill the standards, MEPs have pushed back yet another indirect attack on the Green Deal, ensuring that European companies are not penalised in their critical transition towards a greener future. Backward-looking views against the green transition have once again been defeated”.

Timelines and interoperability

Large businesses will need to embed environmental disclosures, made in line with the ESRS guidance, in their annual report from 2024. The mandate will then extend to smaller businesses in phases through to 2026.

It has taken some three years to design the ESRS, which provide more detail on the Corporate Sustainability Reporting Directive adopted last year.

In re-affirming its commitment to stick to the intended structure and timeline for the ESRS, the European Parliament reiterated its intention for the Standards to align with existing and forthcoming global sustainability disclosure standards, including those from the GRI and ISSB.

“The endorsement of the ESRS by the European Parliament is welcome because it signals the transition from political debate to practical implementation for these new rules – which are a game changer for corporate accountability, in the EU and globally,” said GRI chief executive Eelco van der Enden.

Tags

EU ESG Green finance Sustainability reporting standard Sustainability