After three sessions of interinstitutional negotiations (trilogues) on the Corporate Sustainability Reporting Directive (CSRD), the European Parliament and the Council of the European Union reached a provisional political agreement on the evening of Tuesday 22 June.
“It is an ambitious text, a first in the world, because the EU is, for the first time, making demands of companies”, said Pascal Durand (Renew Europe, France), European Parliament rapporteur on this text, at a press conference on Wednesday 22 June. “This is a major step forward, as other parts of the world are trying to set standards for sustainability”, he added.
“This is a historic moment in the development of company reporting: for the first time ever, sustainability reporting will be on an equal footing with financial reporting”, said European Commissioner for Financial Services Mairead McGuinness, as she stood alongside him.
So, a European company with more than 250 employees and an annual turnover of €40 million, whether listed on the stock exchange or not, will have to make public a variety of information, including the impact of their actions on the environment, human rights, social standards and ethics, and all in accordance with common standards.
The inclusion or otherwise of small and medium-sized enterprises (SMEs) was discussed at length to ensure that future EU rules remain proportionate (see EUROPE 12973/4). Under the agreement, only a handful of listed SMEs will be subject to reporting standards, but these will be less onerous.
MEPs have managed to secure the fact that they will only take part in the system only from 2028. They also included safeguards to ensure that subcontractors are only required by their business partners to provide information, according to a simplified version of the information standards.
“We have managed to avoid heavy red tape for European companies”, said Daniel Buda (EPP, Romania).
The issue of reporting by group subsidiaries also required lengthy discussions to take place. It was agreed that their reporting would be consolidated with that of the parent companies. But if there are significant differences between the practices of the subsidiary and those of the parent company, these should be notified.
This is an “intermediate” and “pragmatic” solution, said Mr Durand.
Another important point is the inclusion of non-EU companies. “This represents a major change”, said the European Parliament rapporteur. “Europe also speaks to the world and the EU agrees to set its own standards and assert itself”, he added.
Once the directive is finally adopted, the European Financial Reporting Advisory Group (EFRAG) will be responsible for setting the reporting standards. It will work in two sequential periods. A first phase to establish general standards will run until June 2023. “This first package is very important so that we can table general standards and discuss them with the International Accounting Standards Board (IASB)”, explained Mr Durand (see EUROPE 12924/20). The second phase will be completed in June 2024 and will address more specific points of the directive, including risky enterprises.
The French Minister for the Economy, Finance and Industrial and Digital Sovereignty, Bruno le Maire, welcomed the agreement. “This agreement is excellent news for all European consumers. They will now be better informed about the impact of business on human rights and the environment”, he said in a statement. (Original version in French by Anne Damiani)