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.
We are at a moment in history when we need our corporate businesses more than ever to help us cope with the challenges ahead. We, as a society, though, need to be clear in our understanding of the basis upon which society grants the privileges that now accompany the modern corporate form.
The European Coalition for Corporate Justice represented by the Environmental Law Service, the International Corporate Accountability Roundtable, and the Corporate Responsibility Coalition are proud to announce the launch of the Access to Judicial Remedy Project.
European poll shows considerable concern about EU ethics.
