The EU Commission Publishes New ESG Reporting Rules
The EU Commission this week published new environmental, social and governance (ESG) reporting rules — confirming earlier watered-down requirements.
Draft Rules Released in June
In June, the commission published draft rules that will cover some 50,000 EU companies and are meant to improve their disclosures on 12 standards — also covering workforce-related issues such as collective bargaining and adequate pay.
Reducing Reporting Requirements
But commission president Ursula von der Leyen in March pledged to reduce reporting requirements on businesses by 25 percent, to boost competitiveness in the face of the US and Chinese clean tech competition.
Concerns of Stakeholders
The Dutch Federation of Pension Funds and other influential groups, including the European Fund and Asset Management Association (Efama), the United Nations Environment Programme Finance Initiative (UNEP FI), as well as 93 asset managers, had called on the commission to “uphold the integrity” of the standards.
Final Proposal from the Commission
But this has not been taken into account in the final proposal from the commission. And in the final proposal, many reporting requirements that were mandatory in an earlier draft have been made voluntary. These include climate, biodiversity and transition plan reporting.
Companies Decide on Materiality
This means companies can decide themselves whether a requirement is “material” to them, which means they decide whether their activities impact nature.
Concerns About Reporting Consistency
Civil society organisations and investors warned that this would reduce the consistency of the reporting.
Audit by Private Accounting Firms
Reports will still need to be audited by private accounting firms such as KPMG and Deloitte, but critics fear this will not be enough to ensure credible reporting standards.
Reaction from Financial NGO
“Climate change and social standards are not mandatory in the final text, which unfortunately puts more reliance on the quality of assurance work,” said Vincent Vandeloise, who is a senior policy officer at the financial NGO Finance Watch in a statement.
Next Steps for the Rules
The rules will now be scrutinised by the EU Parliament and the member states who can reject the rules outright but can not amend them.
