If 2021 and 2022 have been the years in which a multitude of sustainability measures have been proposed and debated within the EU, 2023 and 2024 will be the years in which we will see many of these new regulations approved or come into force.
Corporate sustainability reporting: new EU regulations
One of the most striking legislative changes to be made in the coming months at EU and, in some cases, national level, is the requirement for certain companies to report and measure their environmental impact.
At EU level, companies will have to start complying with the new Corporate Sustainability Reporting Directive (CSDR) in the coming years.
What is CSDR and which companies have to comply with the directive?
Currently this new regulation would affect all banks, listed and insurance enterprises and all companies that are designated by authorities as being in the public interest and have more than 500 employees that are currently complying with the Non-Financial Reporting Directive (NFRD). Currently, 11,700 EU companies already have to comply with the NFRD, which will remain active until the CSDR takes over. According to the European Commission, the CSDR will affect around 50,000 large companies and some small and medium-sized enterprises (SMEs).
These companies will be obliged to report on the basis of stricter ESG standards that will be developed by an independent body in line with EU policies. The reported information will be subject to mandatory auditing by an independent body and some companies will have to start implementing the new standards in 2024 and publish their first report in 2025. The reports will also have to include a range of environmental, social and governance data. Companies will have to report on several factors related to emissions, including their Scope 1 (direct emissions), Scope 2 (own indirect emissions) and, where applicable, Scope 3 (own indirect emissions).
France and Netherlands lead the way
In addition, some countries require specific forms of reporting. For example, in the Netherlands, companies with 100 or more employees will have to report on all commuting and work-related travel by their employees. The rule is expected to come into force in July 2023.
Another regulatory change that has been widely supported among the population has been the Climate and Resilience law adapted by France. This new decree focuses on recognising and limiting greenwashing. The law prohibits companies from claiming the carbon neutrality of their products or services unless they publish evidence of this. Companies will have to make public their GHG emissions and the process by which they have avoided, reduced, or offset them. They will also have to publish their plan to achieve carbon neutrality and their methods for offsetting their residual emissions. Failure to comply could result in a fine of up to 100,000 euros for the company.
As more and more countries adopt the circular economy approach, reporting appears to be leading this transition. As the famous consultant Peter Drucker said, “If you can’t measure it, you can’t manage it” and it seems that both countries and the EU have taken note of this phrase and decided to implement it. Once companies measure their emissions, it stands to reason that new rules and requirements will be put in place to reduce and offset them in order to reach the goal of carbon neutrality by 2050.
If you believe that your company may be affected by these new regulations and you would like to receive more information, please do not hesitate to contact our team of experts for advice on the topic. We invite you to fill this form or get in contact at email@example.com.