Members of the European Parliament voted to back the European Sustainability Reporting Standards (ESRS), rejecting a resolution that sought to limit the measure.
The sector-agnostic sustainability reporting rules will apply to around 50,000 companies starting in January 2024. However, sector-specific reporting was delayed amid private sector concerns of excessive disclosure requirements.
“Amid international backlash to corporate sustainability reporting and a growing anti-ESG movement, Europe held the fort for sustainable businesses today. Standardised, transparent, and comparable data will not just guide companies in their transition but inform investors and consumers,” said E3G senior policy advisor Tsvetelina Kuzmanova.
More than 40 lawmakers mainly representing the Parliament’s largest party, the EPP, tabled the motion which called for a rejection of the ESRS. The motion claimed the ESRS put a “high administrative burden” on companies and moved to reject the proposed standards.
The ESRS mandates businesses, banks and insurance companies to adhere to sustainability-related impacts, opportunities and risks under the EU’s upcoming Corporate Sustainability Reporting Directive (CSRD). The commission adopted the ESRS rules in July despite concerns over requirements being watered down. From 2028, non-EU companies operating in Europe will be required to report their sustainability impacts and risks according to the ESRS, affecting thousands of US firms.
“The endorsement of the ESRS by MEPs is welcome because it signals the transition from political debate to practical implementation for these new rules – which are a game changer for corporate accountability, in the EU and globally,” said Global Reporting Initiative (GRI) CEO, Eelco van der Enden.
Simplyflying sustainability standards
The number of sustainability reporting disclosures has grown to a dizzying level; the CSRD, the Task-Force on Climate-related Disclosures and the GRI to name but a few. The GRI is finalising tools to include a digital taxonomy and multi-tagging system in order to simplify ESRS and GRI reporting standards within a single sustainability report.
Concerns remain over the robustness of the standards, however. Sustainable finance association Eurosif expressed disappointment the commission decided to move away from mandatory core sustainability disclosures.
Aleksandra Palinska, executive director of Eurosif, reiterated previous calls for an ambitious ESRS.
“We regret that the investors’ calls to retain key ESG indicators as mandatory have not been heard. Investors need specific corporate disclosures to allocate capital in line with EU climate law and green deal objectives,” she said.
Lawmakers, who voted 359 for and 261 against the motion to reject the ESRS, will now shift their focus on the commission’s newly published work programme for 2024. Proposals in the plan include launching the new climate package which includes a minimum target of at least 90% net greenhouse gas emissions reduction by 2040.
Also included in the work programme are two amendments to the commission’s strategy, the first being a postponement of adopting certain sector-specific standards from June 2024 to June 2026 in order to reduce the reporting burden by 25%. The sector-specific standards refer to mining, oil and gas businesses, road transportation and agriculture, farming and fisheries.
The European Financial Reporting Advisory Group, which is charged with providing technical advice on the ESRS, is currently concentrating on the non-financial sector, but has noted that financial sector standards related to capital markets, investments, insurance, lending and banking will be developed at a later stage.
The second amendment adjusts the monetary size criteria for companies (micro, small, medium-sized and large) by around 25% to reflect the impacts of inflation.
This page was last updated October 24, 2023
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