The European Parliament has passed the Corporate Sustainability Reporting Directive (CSRD) by 525 votes to 60.
Due to the legislation, all large companies in the EU will need to disclose data on the impact of their activities on people and the planet and any sustainability risks they are exposed to.
The CSRD will make businesses more publicly accountable by obliging them to regularly disclose information on their societal and environmental impact. This would end greenwashing, strengthen the EU’s social market economy and lay the groundwork for sustainability reporting standards at a global level.
According to the European Parliament, these rules address shortcomings in existing legislation on the disclosure of non-financial information (NFRD), perceived as largely insufficient and unreliable.
The CSRD introduces more detailed reporting requirements on companies’ impact on the environment, human rights and social standards, based on common criteria in line with EU’s climate goals. The Commission will adopt the first set of standards by June 2023.
To ensure companies are providing reliable information, they will be subject to independent auditing and certification. Financial and sustainability reporting will be on an equal footing and investors will have comparable and reliable data. Digital access to sustainability information will also have to be guaranteed.
For nearly 50,000 companies in the EU, collecting and sharing sustainability information will become the norm, compared to about 11 700 companies covered by the current rules.
The Council is expected to adopt the proposal on 28 November, after which it will be signed and published in the EU Official Journal. The directive will enter into force 20 days after publication. The rules will start applying between 2024 and 2028.
Copyright © 2022 FinTech Global