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2021/0104(COD) Corporate Sustainability Reporting Directive

Progress: Procedure completed

RoleCommitteeRapporteurShadows
Lead JURI DURAND Pascal (icon: Renew Renew) BUDA Daniel (icon: EPP EPP), WOLTERS Lara (icon: S&D S&D), TOUSSAINT Marie (icon: Verts/ALE Verts/ALE), LEBRETON Gilles (icon: ID ID), STANCANELLI Raffaele (icon: ECR ECR), AUBRY Manon (icon: GUE/NGL GUE/NGL)
Committee Opinion EMPL PETER-HANSEN Kira Marie (icon: Verts/ALE Verts/ALE) Evelyn REGNER (icon: S&D S&D), Özlem DEMIREL (icon: GUE/NGL GUE/NGL), Sylvie BRUNET (icon: RE RE), Radan KANEV (icon: PPE PPE), Guido REIL (icon: ID ID), Margarita DE LA PISA CARRIÓN (icon: ECR ECR)
Committee Opinion ITRE BUŞOI Cristian-Silviu (icon: EPP EPP)
Committee Opinion ENVI PEREIRA Lídia (icon: EPP EPP) Maria ARENA (icon: S&D S&D), Pascal CANFIN (icon: RE RE), Silvia MODIG (icon: GUE/NGL GUE/NGL), Marie TOUSSAINT (icon: Verts/ALE Verts/ALE), Rob ROOKEN (icon: ECR ECR)
Committee Opinion FEMM BIEDROŃ Robert (icon: S&D S&D) Sylvie BRUNET (icon: RE RE), Kira Marie PETER-HANSEN (icon: Verts/ALE Verts/ALE), Pernille WEISS (icon: PPE PPE)
Committee Opinion DEVE MAJORINO Pierfrancesco (icon: S&D S&D) Manon AUBRY (icon: GUE/NGL GUE/NGL), Beata KEMPA (icon: ECR ECR), Caroline ROOSE (icon: Verts/ALE Verts/ALE), Marlene MORTLER (icon: PPE PPE), Barry ANDREWS (icon: RE RE)
Committee Opinion AFET KARLSBRO Karin (icon: Renew Renew) Heidi HAUTALA (icon: Verts/ALE Verts/ALE), Karol KARSKI (icon: ECR ECR), Ivan ŠTEFANEC (icon: PPE PPE), Isabel SANTOS (icon: S&D S&D)
Committee Opinion ECON POLFJÄRD Jessica (icon: EPP EPP) Bas EICKHOUT (icon: Verts/ALE Verts/ALE), Manon AUBRY (icon: GUE/NGL GUE/NGL), Gunnar BECK (icon: ID ID), Dragoş PÎSLARU (icon: RE RE), Gabriele BISCHOFF (icon: S&D S&D), Michiel HOOGEVEEN (icon: ECR ECR)
Lead committee dossier:
Legal Basis:
RoP 57, TFEU 050, TFEU 114

Events

2023/01/17
   EC - Commission response to text adopted in plenary
Documents
2022/12/16
   Final act published in Official Journal
Details

PURPOSE: to adopt a new directive on corporate sustainability reporting to improve the flow of sustainability information from companies.

LEGISLATIVE ACT: Directive (EU) 2022/2464 of the European Parliament and of the Council amending Regulation (EU) No 537/2014 and Directives 2004/109/EC, 2006/43/EC and 2013/34/EU as regards corporate sustainability reporting.

CONTENT: the Directive strengthens the existing rules on non-financial reporting introduced in the Accounting Directive by the 2014 Non-Financial Reporting Directive, which are no longer adequate for the EU's transition to a sustainable economy.

New rules for corporate reporting

The Directive introduces more detailed reporting requirements and ensures that large companies and listed SMEs are required to publish information on sustainability issues , such as environmental rights, social rights, human rights and governance factors. The requirement for companies to disclose detailed information on sustainability issues will increase corporate accountability, avoid discrepancies in sustainability standards and facilitate the transition to a sustainable economy.

In its resolution of 17 December 2020 on sustainable corporate governance, the European Parliament welcomed the Commission's commitment to revise Directive 2013/34/EU and stressed the need for a comprehensive EU framework for non-financial reporting that contains mandatory EU standards for non-financial reporting.

Scope of application

The new non-financial reporting rules will apply to:

- all large undertakings and all companies whose securities are admitted to trading on a regulated market . These companies will also be responsible for assessing the information at the level of their subsidiaries;

- listed SMEs , although they will have an additional period (until 2028) to comply;

- third-country undertakings which generate a net turnover of more than EUR 150 million in the Union and which have a subsidiary undertaking or a branch on the territory of the Union.

Sustainability information

Large companies and small and medium-sized enterprises, with the exception of micro-enterprises, that are public interest entities will be required to include in the MD&A information that provides an understanding of the company's impact on sustainability issues, as well as information that provides an understanding of how sustainability issues affect the company's business development, performance and condition. This will help investors and other stakeholders to make informed decisions on sustainability issues.

Sustainability information should be clearly identifiable in a dedicated section of the management report. It should also be available and accessible online to the public.

Consolidated sustainability reporting

Parent companies of a large group will be required to include in the consolidated management report the information necessary to understand the group's impact on sustainability issues, as well as information necessary to understand how sustainability issues affect the development of the how sustainability issues affect the business development, performance and position of the Group's business development, performance and position.

Sustainability reporting standards

The Directive provides for the adoption of mandatory common sustainability reporting standards to ensure comparability of information and disclosure of all relevant information. These standards will have to specify the information that undertakings must disclose:

- on environmental factors such as climate change mitigation, including greenhouse gas emissions, water and marine resources, resource use and the circular economy, pollution, biodiversity and ecosystems;

- on social rights (equal treatment and opportunities for all, collective bargaining) and human rights ;

- on governance factors such as the role of the company's administrative, management and supervisory bodies in relation to sustainability issues, or ethics and corporate culture, including anti-corruption, whistleblower protection and animal welfare.

The European Financial Reporting Advisory Group (EFRAG) will be responsible for developing draft European standards. The European Commission will adopt the final version of the standards in the form of a delegated act, following consultations with EU Member States and a number of European bodies.

Certification and auditing

To ensure that the information provided by companies is reliable, they will be subject to independent certification and auditing. An independent auditor or certifier will ensure that the sustainability information complies with the certification standards that have been adopted by the EU. The reporting of non-European companies must also be certified, either by a European auditor or by one established in a third country.

Transposition and application

The Directive will apply:

- in respect of financial years beginning on 1 January 2024 to companies already subject to the Non-Financial Reporting Directive;

- in respect of financial years beginning on 1 January 2025 to large companies not currently subject to the Non-Financial Reporting Directive;

- in respect of financial years beginning on 1 January 2026 to listed SMEs, as well as small and non-complex credit institutions and captive insurance companies.

ENTRY INTO FORCE: 17.12.2022.

2022/12/14
   CSL - Draft final act
Documents
2022/12/14
   CSL - Final act signed
2022/11/28
   EP/CSL - Act adopted by Council after Parliament's 1st reading
2022/11/10
   EP - Results of vote in Parliament
2022/11/10
   EP - Decision by Parliament, 1st reading
Details

The European Parliament adopted by 525 votes to 60, with 28 abstentions, a legislative resolution on the proposal for a directive of the European Parliament and of the Council amending Directives 2013/34/EU, 2004/109/EC and 2006/43/EC and Regulation (EU) No 537/2014 as regards corporate sustainability reporting.

The European Parliament's position adopted at first reading under the ordinary legislative procedure amends the proposal as follows:

Objective

The Directive aims to address the shortcomings of the existing rules on non-financial reporting. It amends the 2014 Non-Financial Reporting Directive by introducing more detailed reporting requirements and ensures that large undertakings are required to disclose information on sustainability matters such as environmental rights, social rights, human rights and governance matters, building on common criteria aligned with the EU's climate objectives.

Scope of application

The new non-financial reporting rules will apply to:

- all large undertakings and all companies whose securities are admitted to trading on a regulated market. These companies will also be responsible for assessing the information at the level of their subsidiaries;

- listed SMEs , although they will have an additional period (until 2028) to comply;

- third-country undertakings which generate a net turnover of more than EUR 150 million in the Union and which have a subsidiary undertaking or a branch on the territory of the Union.

Sustainability reporting

Large undertakings and small and medium-sized companies, with the exception of micro-enterprises, that are public interest entities will be required to include in the management report information that provides an understanding of the company's impact on sustainability matters, as well as information necessary to understand how sustainability matters affect the group's development, performance and position.

The information should include, inter alia :

- a brief description of the company's business model and strategy, including the degree of resilience of the company's business model and strategy with respect to risks related to sustainability issues and how the company has implemented its strategy with respect to sustainability matters;

- a description of the time-bound targets related to sustainability matters set by the group, including, where appropriate, absolute greenhouse gas emission reduction targets at least for 2030 and 2050, a description of the progress the group has made towards achieving those targets, and a statement of whether the group’s targets related to environmental factors are based on conclusive scientific evidence;

- a description of the principal risks to the group related to sustainability matters, including the group’s principal dependencies on those matters, and how the group manages those risks.

Sustainability information should be clearly identifiable in a dedicated section of the management report. It should also be available and accessible online to the public.

Sustainability reporting standards

The Directive provides for the adoption of mandatory common sustainability reporting standards to ensure comparability of information and disclosure of all relevant information.

These standards will have to specify the information that undertakings must disclose on environmental factors such as climate change mitigation, including greenhouse gas emissions, water and marine resources, resource use and the circular economy, pollution, biodiversity and ecosystems. They will also need to specify the information that undertakings must disclose on social and human rights factors, as well as governance factors such as the role of the company's administrative, management and supervisory bodies in relation to sustainability issues, or ethics and corporate culture, including anti-corruption, whistleblower protection and animal welfare.

The adoption of sustainability reporting standards through delegated acts will ensure harmonised sustainability reporting across the EU.

The European Financial Reporting Advisory Group (EFRAG) will be responsible for setting the European standards, based on technical advice from several European agencies.

Certification and audit

To ensure that the information provided by companies is reliable, they will be subject to independent certification and auditing. An independent auditor or certifier must ensure that the sustainability information complies with the certification standards that have been adopted by the EU. The reporting of non-European companies must also be certified, either by a European auditor or by one established in a third country.

Application

The Directive will apply from:

- 1 January 2024 for companies already subject to the non-financial reporting directive;

- 1 January 2025 for large companies that are not presently subject to the non-financial reporting directive;

- 1 January 2026 for listed SMEs, small and non-complex credit institutions and captive insurance undertakings.

Documents
2022/11/09
   EP - Debate in Parliament
2022/07/14
   EP - Approval in committee of the text agreed at 1st reading interinstitutional negotiations
2022/04/04
   EP - Committee decision to enter into interinstitutional negotiations confirmed by plenary (Rule 71)
2022/03/23
   EP - Committee decision to enter into interinstitutional negotiations announced in plenary (Rule 71)
2022/03/22
   EP - Committee report tabled for plenary, 1st reading
Details

The Committee on Legal Affairs adopted the report by Pascal DURAND (Renew Europe, FR) on the proposal for a Directive of the European Parliament and of the Council amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting.

The proposal for a corporate sustainability reporting Directive (CSRD) aims to improve the flow of sustainability information in the corporate world. Investors need to know about the impact that companies have on people and the environment to meet their own disclosure requirements and be better informed on sustainability risks.

The committee responsible recommended that the European Parliament's position adopted at first reading under the ordinary legislative procedure should amend the proposal as follows:

Scope

Given that a guaranteed level playing field and equal treatment for undertakings operating in Europe should be a guiding principle of this revision, the new CSRD rules should cover:

- all large companies, including undertakings organised as foundations, trusts or franchises;

- non-EU companies operating in the internal market;

- small and medium-sized undertakings whose transferable securities are admitted to trading on a trading venue of any Member State;

- small and medium sized undertakings carrying out high-risk economic activities.

SMEs not carrying out high-risk economic activities and non-listed SMEs can also choose to use these proportionate standards on a voluntary basis.

High-risk sectors

Certain business activities operating in ‘risky’ sectors are already subject to enhanced transparency requirements (e.g. conflict minerals) or even bans on access to the European market (e.g. timber from illegal forestry) on account of the significant and repeated impact of these activities on human rights, the environment and good governance. However, the effective implementation of these sectoral policies is hampered by a lack of access to information and unreliable information.

The text also asks the Commission to establish additional reporting criteria for companies with relevant activities in high-risk sectors. The Commission should be empowered to adopt delegated acts to establish and amend a list of activities that include economic activities in the following high-risk sectors:

- garment and footwear, including manufacturing of textile;

- agriculture, including manufacturing of food and beverage,

- extractive sector (mining, oil and gas industries);

- minerals, including tin, tantalum, tungsten and gold, as well as all other mineral resources.

EU sustainability standards

The information which undertakings currently provide about their policies is not always clear and consistent. There are many internationally developed ‘measurable, science-based indicators’ which can improve the quality of these reports. The report proposes further developing the definitions of the provisions on these measurable indicators while leaving it to the Commission, subject to supervision by the co-legislators, to reach a precise definition as to what needs to be reported.

The text clarifies reporting rules for companies by introducing more detailed reporting requirements into the revamped Non-Financial Reporting Directive, in accordance with the European Green Deal. Disclosed information should be audited, more easily accessible, reliable and comparable, according to Members.

The European Financial Reporting Advisory Group (EFRAG) would be tasked with developing the mandatory EU sustainability-reporting standards, covering environmental matters, social affairs, including gender equality and diversity, and governance, including anti-corruption and bribery, which the Commission would then adopt by delegated acts. To achieve this, Members propose that EFRAG’s funding should be increased to at least 75% and annual discussions held with Parliament.

Evaluation mechanism

According to the amended text, the sustainability reporting standards should include an evaluation mechanism, based on qualitative information and indicators, which makes the disclosed sustainability information comparable between companies and allows for the quantitative rating of corporate sustainability performance as a basis for public procurement, State aid and other policy measures.

Documents
2022/03/18
   EP - Committee opinion
Documents
2022/03/15
   EP - Vote in committee, 1st reading
2022/03/15
   EP - Committee decision to open interinstitutional negotiations with report adopted in committee
2022/03/04
   EP - Committee opinion
Documents
2022/03/04
   EP - Committee opinion
Documents
2022/03/03
   EP - Specific opinion
Documents
2022/02/28
   EP - Committee opinion
Documents
2022/02/22
   EP - Committee opinion
Documents
2022/02/14
   EP - Committee opinion
Documents
2021/12/16
   EP - Referral to associated committees announced in Parliament
2021/12/14
   EP - Amendments tabled in committee
Documents
2021/12/14
   EP - Amendments tabled in committee
Documents
2021/11/16
   EP - Committee draft report
Documents
2021/11/11
   EP - KARLSBRO Karin (Renew) appointed as rapporteur in AFET
2021/11/07
   DE_BUNDESRAT - Contribution
Documents
2021/10/19
   EP - PETER-HANSEN Kira Marie (Verts/ALE) appointed as rapporteur in EMPL
2021/10/05
   EP - BUŞOI Cristian-Silviu (EPP) appointed as rapporteur in ITRE
2021/09/17
   EP - PEREIRA Lídia (EPP) appointed as rapporteur in ENVI
2021/09/07
   ECB - European Central Bank: opinion, guideline, report
2021/09/01
   EP - POLFJÄRD Jessica (EPP) appointed as rapporteur in ECON
2021/06/23
   EP - Committee referral announced in Parliament, 1st reading
2021/06/14
   EP - MAJORINO Pierfrancesco (S&D) appointed as rapporteur in DEVE
2021/06/07
   EP - BIEDROŃ Robert (S&D) appointed as rapporteur in FEMM
2021/05/21
   EP - DURAND Pascal (Renew) appointed as rapporteur in JURI
2021/04/22
   EC - Document attached to the procedure
Documents
2021/04/22
   EC - Document attached to the procedure
2021/04/22
   EC - Document attached to the procedure
2021/04/21
   EC - Legislative proposal published
Details

PURPOSE: to create a new corporate sustainability reporting Directive to improve the flow of sustainability information in the corporate world.

PROPOSED ACT: Directive of the European Parliament and of the Council.

ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure and on an equal footing with the Council.

BACKGROUND: the Non-Financial Reporting Directive (Directive 2014/95/EU, the NFRD), amending the Accounting Directive, was adopted in 2014. It applies to large public-interest entities with an average number of employees in excess of 500, and to public-interest entities that are parent companies of a large group with an average number of employees in excess of 500 on a consolidated basis. More than 11 000 companies are subject to the reporting requirements of the NFRD. The NFRD introduced a requirement for companies to report both on how sustainability issues affect their performance, position and development (the ‘outside-in’ perspective), and on their impact on people and the environment (the ‘inside-out’ perspective). This is often known as ‘double materiality’.

CONTENT: the Commission puts forward this proposal for a corporate sustainability reporting Directive (CSRD) with a view to revising and strengthening the existing rules introduced by the Non-Financial Reporting Directive (NFRD) on sustainability reporting. It aims to improve the flow of sustainability information in the corporate world. It will make sustainability reporting by companies more consistent, so that financial firms, investors and the broader public can use comparable and reliable sustainability information.

The Commission estimates that the proposed option would result in around 49 000 companies reporting sustainability information compared to 11 600 under the current regime.

Compared to the NFRD sustainability reporting requirements, the principal novelties of this proposal are:

- to extend the scope of these requirements to include all large companies, whether they are listed or not and without the previous 500-employee threshold. This change would mean that all large companies are publicly accountable for their impact on people and the environment. It also responds to demands from investors for sustainability information from such companies;

- to extend the scope to include listed SMEs, with the exception of listed micro-enterprises. For reasons of investor protection, it is especially important that investors have access to adequate sustainability information from listed companies. Furthermore, if listed SMEs do not report sustainability information, they may find themselves at risk of exclusion from investment portfolios. This risk will grow as sustainability information becomes ever more important throughout the financial system;

- to help reduce systemic risks to the economy and improve the allocation of financial capital to companies and activities that address social, health and environmental problems;

- to make companies more accountable for their impacts on people and the environment, thereby building trust between them and society;

- to simplify the reporting process for companies;

- to reduce unnecessary costs of sustainability reporting for companies, and to enable them to meet the growing demand for sustainability information in an efficient manner. It will bring clarity and certainty on what sustainability information to report and make it easier for preparers to get the information they need for reporting purposes from their own business partners (suppliers, clients and investee companies). It should also reduce the number of demands companies receive for sustainability information in addition to the information they publish in their annual reports;

- to ensure that all information is published as part of companies’ management reports, and disclosed in a digital, machine-readable format.

The European Financial Reporting Advisory Group (EFRAG) will be responsible for developing draft EU standards on sustainability reporting, drawing on stakeholder expertise. The proposed EU standards would build on and contribute to international standard setting initiatives.

Documents

Activities

Votes

Directive sur la publication d’informations en matière de durabilité par les entreprises - Corporate Sustainability Reporting Directive - Richtlinie hinsichtlich der Nachhaltigkeitsberichterstattung von Unternehmen - A9-0059/2022 - Pascal Durand - Accord provisoire - Am 175 #

2022/11/10 Outcome: +: 525, -: 60, 0: 28
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15
8
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AmendmentsDossier
1603 2021/0104(COD)
2021/12/10 EMPL 207 amendments...
source: 702.955
2021/12/13 ENVI 316 amendments...
source: 702.994
2021/12/15 JURI 563 amendments...