In light of today’s State of the Union Address by President von der Leyen and the ‘SME relief package’ presented by the European Commission yesterday, Frank Bold calls on the Commission not to disregard the political agreement reached in 2022 on the Corporate Sustainability Reporting Directive (CSRD).
The relief package should not exempt certain large companies from providing any sustainability data, including on climate or own workers. “While Europe is witnessing the enormous costs of climate-related impacts, the EU Commission proposes to cut back on its own framework that is intended to guide the transition of companies and investors to a more sustainable economy”, says Filip Gregor, Head of Responsible Companies at Frank Bold, “this is pure electioneering bluster and takes away the compass for mid-sized companies to transition”.
After the hottest summer on record, the EU has no time to stall its own initiatives and laws. The absence of a solid sustainability framework could become even more burdensome for companies because it will affect them disproportionately and could result in even higher adaptation costs and disruptions on the markets. The European Central Bank itself just called for “more decisive policies to ensure a speedier transition towards a net-zero economy in line with the goals of the Paris Agreement” last week. In fact, the EU Commission should assess the potential implications of this exemption on the credibility of democratic policy-making processes. It may risk undermining it and hinder future consensus-building efforts.
Despite being named ‘SME-relief package’, Action 9 of this recent plan seems to be less about the challenges small and medium-sized enterprises face, but reads like an attempt to curtail the ambition of the EU sustainability framework as a whole and exempt certain large enterprises from its scope. Business associations representing large companies have been trying to make the EU cut back on its ambition during the policy making processes previously.
The main goal of the new EU sustainability reporting system is standardisation, and through it simplification and cost saving. EU politicians who support this curtailing of ambition via the relief package seem to ignore the fact that the demand for sustainability data is already a business reality. Companies, large and small, are already dealing with increasing and diverging requests and forms from banks and their business partners on a daily basis. If the EU now introduces more and more carve-outs to the application of the standards, they will cease to be fit for purpose.
Furthermore, the standards play an invaluable role by providing companies with a clear framework for key ESG data as well as human rights due diligence and climate targets and transition plans. This is extremely helpful in building and understanding on how to approach sustainability in disclosures as well as in their business considerations and planning.
With concrete proposals to reduce reporting obligations and enlarge the legal definition of SMEs set to be announced by the end of the year, the European Commission sends a clear message to larger companies: “Sustainability does not matter to you, and there is no reason why you should be paying attention”. The problem is that when reality hits them, they will have to implement it anyway, but at much higher cost to their business.
The European Commission recently introduced a draft of the revised EU ETS Directive which, among other things, proposes that 100 % of ETS revenues should be used for environmental measures. We welcome this idea but we’re also sceptical about how the ETS revenues are used in the Czech Republic. Therefore, we have prepared an analysis mapping the use of ETS revenues in Czech Republic and sent it to the European Commission as an input for the recent public consultation. The main conclusions are presented below.
We have analysed hundreds of pages of technical documents and prepared a comprehensive overview of the sustainability reporting requirements under the forthcoming EU legislation. We summarise what ESG data will be critical for companies, banks, and investors in sustainability strategy and management and in the areas of climate change, environment, sustainable activities, employees and supply chains, due diligence, and anti-corruption measures.
Would you like to influence key EU developments on business, sustainability and climate change? Do you wish to combine environmental and economic perspectives? Do you want to help set European standards for transparency of corporate sustainability performance and help investors finance the transformation of our economy? Become a member of Frank Bold’s international team implementing this strategy.