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"Commission’s proposal undermines transparency rules for corporate sustainability reporting", 12 June 2023
Last Friday, the European Commission published for public consultation a draft Delegated Act on the first set of European Sustainability Reporting Standards. NGOs, civil society groups and investors associations are very concerned with the significant reduction of the ambition compared to EFRAG’s technical advice and urge the Commission to introduce a robust, mandatory and consistent reporting framework and to not allow greenwashing.
We welcome the publication and the opportunity to provide feedback on the draft Delegated Act after multiple delays, lengthy debates and public announcements around the intention to simplify the corporate reporting landscape. The full set of standards proposed last November by EFRAG, covering environmental, social and governance topics, is essential for the achievement of the European Green Deal and the provision of consistent, comparable data for investors to make informed decisions. It would ensure that Europe remains a global leader in sustainability reporting by introducing a broad set of standards under a double materiality approach. Unfortunately, the Commission’s approach represents a significant step back compared to EFRAG’s technical proposal.
Firstly, the Commission introduces a delay before companies below 750 employees will have to implement half of the standards, including all social standards and the biodiversity standard. This unnecessarily adds to the phased-in approach already agreed under the CSRD as well as additional phase-ins included in the ESRS with regard to value chain data. These standards primarily require transparency on whether and how companies identify material impacts or risks in relation to the issues they cover and, if so, what policies and actions they have implemented in order to address them.
Secondly, the proposal makes the application of a number of mandatory disclosure requirements subject to materiality assessment, thus allowing companies to omit entire disclosures or, even worse, specific details within a single disclosure. This contradicts the agreement reached out within the EFRAG Sustainability Reporting Board to ensure that companies report mandatorily the information needed by investors to report on their investee companies according to the SFDR, such as GHG emissions and certain workforce data.
Thirdly, the Commissions’ proposal turns certain disclosures to voluntary, regardless of their materiality. Companies would not have to report on the use of their non-employee (i.e. primarily agency) workers. The fact that these disclosures were made voluntary, rather than phased-in, shows that the Commission was pressured to exclude this category forever, presumably because transparency would show the differences in social protection and other conditions compared to direct employees.
Similarly, the Commission turns disclosure requirements around biodiversity transition plans into a voluntary disclosure. In EFRAG advice, companies from high-impact sectors would either need to describe their plan according to the criteria listed in the standards or transparently declare they do not have a plan of such quality. The Commission proposes to delete this minimal obligation, as well as the actual criteria for transition plans developed by EFRAG, allowing companies absolute flexibility to frame what transition means and what to disclose. This change does not remove reporting burden, it merely opens doors for greenwashing.
These different changes would drive a race to the bottom where some requirements would be less demanding than both business practices and disclosure obligations for investors. This incoherence will incentivise companies to continue to take a ‘wait and see’ approach, whilst effectively preventing investors from collecting reliable data required by the SFDR and meaningfully integrating ESG into their investment strategies...
We call on the European Commission :
not to further reduce the ambition of the EFRAG standards proposal to preserve their integrity, and
to mitigate the undesired consequences of the proposed removal of the mandatory core of the standards, given the risk of misinterpretation by preparers, supervisory authoritites and consultants.
Experts from ShareAction, WWF European Policy Office, the European Coalition for Corporate Justice, the World Benchmarking Alliance and Frank Bold shared their views on the European Commission’s Omnibus proposal during a webinar co-organised by these organisations.
CSRD is key to improving access to ESG data, according to the EU banking regulator. The lack of data standardisation and comparability could present challenges to banks.
WWF argues in their press release that the Commission’s Omnibus proposal undermines key EU sustainability laws, threatening the Green Deal and creating regulatory uncertainty.
Kalpona Akter, a labour activist from Bangladesh, criticises the EU's upcoming Omnibus proposal, labelling it as corporate-driven deregulation that weakens the Corporate Sustainability Due Diligence Directive. She argues that the proposal favours big businesses over workers' rights and jeopardises hard-won protections in global supply chains.
In their analysis, SOMO found that the financial cost of complying with the CSDDD – as estimated by the European Commission – would represent only 0.13 per cent of the average shareholder payouts made in 2023.
In their statement, ECCJ argues that the leaked draft Omnibus proposal severely weakens the EU’s corporate sustainability framework and firmly reject the proposal.
The letter from 14 companies and industry associations, including Nestlé, Ferrero, MARS, Primark and Ingka Group | IKEA, says: "Investment and competitiveness are founded on policy certainty and legal predictability. The announcement that the European Commission will bring forward an “omnibus” initiative that could include revisiting existing legislation risks undermining both of these."
Some major companies like Nestlé, Unilever, and Signify oppose the European Commission's plan to weaken newly introduced green regulations, arguing that it threatens sustainability efforts, legal certainty, and a level playing field.
The EU Commission's proposed reforms to sustainability reporting and due diligence are being criticised as deregulation that weakens climate and human rights protections, reduces corporate accountability, and limits investors' access to reliable sustainability data.
Dutch businesses urge the EU to uphold and implement the CSRD, CSDDD, and Taxonomy as planned, emphasising the need for legal certainty, a level playing field, and the benefits of strong sustainability regulations.
CSOs argue that the EU must reject calls for corporate-driven deregulation and uphold sustainability laws to protect people, the planet, and small businesses from exploitation.
Frank Bold's analysis examines the positions on the Omnibus proposal, specifically the CSRD and CSDDD, from certain ministries and authorities in Germany and France.
150+ civil society stakeholders have requested in a joint letter that the European Commission does not create further confusion and uncertainty through re-opening agreed legislative texts. The letter also criticises the way in which the Omnibus process has proceeded.
240 European researchers, mainly economists, have issued an open letter warning of the dangers of the ‘Omnibus’ initiative being prepared by the European Commission.
Finnish CSOs and companies urge the European Commission to avoid renegotiating agreed sustainability due diligence rules, emphasising the need for certainty, timely transposition, and clear guidance.
Investors with a combined €6.6 trillion in assets under management have urged the European Commission to “preserve the integrity and ambition” of the EU’s sustainable finance framework.
Signatories request President von der Leyen and Commissioner Dombrovskis to "respect the principles of democratic decision-making enshrined in the Treaty on European Union, which are so important to the credibility, mandate and public trust in the EU institutions."
In their commentary, Heidi Hautala and the Resource Centre's Director Phil Bloomer argue that Europe must resist deregulation pressures and maintain strong ESG standards to uphold public trust, protect rights, and ensure legal certainty for businesses.
Alexander Burr, ESG policy lead at Legal and General Investment Management, told Bloomberg that rolling back the rules “could risk our ability to understand ESG or sustainability-related risks.” The statement has also been covered by other outlets including Forbes and FT SustainableViews.
The European Commission is convening a roundtable with major corporations, particularly from the financial and energy sectors, and civil society groups to discuss revisions to the upcoming Omnibus proposal.
The European Commission announced plans to streamline business regulations to boost innovation. CSOs have criticised this Competitiveness Compass, arguing that it steers Europe in the wrong direction.
Ten European National Human Rights Institutions (NHRIs) expressed concerns in an open letter that the EU’s Omnibus proposal could undermine progress on corporate sustainability and create uncertainty for companies.
Transition plans should be “a single, comprehensive strategic planning process that covers all regulatory requirements stemming from applicable legislation” such as the corporate sustainability reporting directive and corporate sustainability due diligence directive (CSDDD), EBA's new guidelines state.
CSOs criticise France’s push for an indefinite delay of EU legislation, including CSRD and CSDDD, warning it could undermine social and environmental justice despite the country’s prior support for the legislation.
In light of the European Commission's announcement of an 'Omnibus Simplification Package’ , a group of business and human rights experts from legal practice, consulting, academia and the business world have expressed their grave concerns regarding the approch in a letter to the Commission.
In light of the discussions around an ‘Omnibus’ law, companies like Nestlé, Mars, Mondelez, Ferrero, Hershey and Tony’s Chocolonely, as well as other chocolate sector actors, urge the European Commission to not modify any elements of the CSDDD, nor to reopen it for renegotiation by the co-legislators, but to focus on guidance and support for its implementation.
170 civil society groups, human rights and environmental defenders, trade unions and climate activists have published a joint statement "saying no" to the 'Omnibus' proposal announced by EU Commission President von der Leyen to amend three key legislative pillars of the European Green Deal: the CSDDD, the CSRD and Taxonomy Regulation
The due diligence approach allows human rights and environmental risks to be assessed in a contextualized manner. Behind what is criticized as a “bureaucratic” approach, there is therefore far-reaching trust in companies, the authors argue.
Some of France’s largest companies, including Amundi SA and Electricite de France SA, have signed a letter to European policymakers urging them to ensure the bloc sticks with its current timetable for implementing ESG reporting rules.
90+ organisations urge EU leaders to protect the sustainability reporting framework, promoting smart implementation and providing the legal certainty companies need to thrive.
The 2024 Danish Institute for Human Rights benchmark assesses the human rights policies and due diligence practices of 30 major Danish companies, measuring their alignment with global standards and contributing to discussions on responsible business conduct and the impact of upcoming EU regulations.
In their new report, frank bold shows key findings from an assessment of 100 companies’ reports in preparation for the implementation of the EU Sustainability Reporting Standards, good practice examples and recommendations to businesses, auditors and policymakers.
UNICEF’s new guidance briefs assist companies reporting under the European Sustainability Reporting Standards (ESRS) by offering insights on how to integrate children’s rights into assessments, disclosures, and reporting requirements, especially in areas such as child labor, community impacts, and protections for children as consumers.
Standardised sustainability disclosures under the CSRD are crucial for the EU's economic resilience and global leadership in sustainability, write Julia Otten and Susanna Arus of Frank Bold in Sustainable Views. Policymakers should maintain a strategic vision, focusing on long-term resilience rather than short-term expediency.
The European Commission has initiated infringement procedures against 17 EU member states for failing to meet the July 6, 2024 deadline to fully implement the Corporate Sustainability Reporting Directive (CSRD) into national law.
The agreement among EU co-legislators needs to be formally voted by the Council and EU Parliament, but is expected to be in place before the EU elections this year.
However, MEPs ensured that the Commission will strive to publish sector-specific sustainability reporting standards in eight areas as soon as they are ready before the deadline.
It of critical importance to address challenges and uncertainties currently faced by companies, as well as to ensure meaningful sustainability disclosures, the statement says.
A majority of 359 Members of the Parliament voted against a motion to reject the ESRS and its replacement with an emptied and diluted piece of legislation.
Germany is seeking to exempt thousands of Mittelstand companies from EU green reporting rules, in a move officials say risks “gutting” the bloc’s efforts to hold companies accountable for their impact on the environment.
Frank Bold calls on the Commission not to disregard the political agreement reached in 2022 on the Corporate Sustainability Reporting Directive (CSRD).
These Standards provide more detail on the Corporate Sustainability Reporting Directive adopted last year, while also updating them to align with new international climate reporting standards issued in June.
Eurosif welcomes the standards covering all Environmental, Social and Governance topics. Concerns remain over making all disclosures subject to materiality assessment.
The endorsed statement was developed jointly by the European Fund and Asset Management Association (EFAMA), the European Sustainable Investment Forum (Eurosif), the Institutional Investors Group on Climate Change (IIGCC), the PRI and the United Nations Environment Programme Finance Initiative (UNEP FI).
On 9 June, the European Commission published for public consultation a draft Delegated Act on the first set of European Sustainability Reporting Standards.
Publication by the Danish Institute for Human Rights: "How do the pieces fit in the puzzle? Making sense of EU regulatory initiatives related to business and human rights"
The European Commission will now consult EU bodies and Member States on the draft standards,
before adopting the final standards as delegated acts in June 2023, followed by a scrutiny period by the European Parliament and Council.
Sustainability reporting experts and NGOs welcome the adoption of the EU sustainability reporting standards (ESRS) by EFRAG submitted this week to the European Commission. Whilst the ambition of the ESRS remains limited in several areas, they represent a major improvement for companies as well as for users of sustainability information and address the biggest problems in quality and reliability of corporate reporting.
MEPs voted today (November 10) to confirm the agreement reached earlier this summer to strengthen companies’ obligations to disclose information on their sustainability risks and impacts, and adopt mandatory EU standards covering ESG matters
The letter, signed by 37 organisations, calls on the European Commission to uphold the legal mandate agreed in the CSRD to develop and adopt an ambitious framework to improve and standardise corporate disclosure on sustainability matters
On Tuesday 21 June, the trilogue negotiations between the European Commission, Parliament and Council concluded with an agreement for the EU Corporate Sustainability Reporting Directive (CSRD).
The EU Corporate Sustainability Reporting Directive proposal will move to the final stage of the legislative process and enter trilogue negotiations between the EU Commission, European Parliament and the Council.
NGOs together with investors and asset managers call members of the European Parliament to broaden the scope of the Corporate Sustainability Reporting Directive (CSRD) to ensure that all listed SMEs, as well as non-listed SMEs operating in high-risk sectors, are adequately incorporated in the legal framework.
The 12 signatories of this statement - who represent key users of corporate sustainability information - call on EU policymakers to promptly agree on the EU Corporate Sustainability Reporting Directive reform and support accompanying EU standards
Frank Bold's report calls on EU to strengthen Corporate Sustainability Reporting Directive to effectively address barriers to supervision and enforcement of disclosure obligations introduced by EU NFRD
Business & Human Rights Resource Centre has signed an open letter alongside Wikirate, OAR and Clean Clothes Campaign, urging EU members of Parliament and the EU Commission to adopt and incorporate open data principles into the proposed Corporate Sustainability Reporting Directive
The authors argue that respect for human rights is not just an ESG factor, but a global standard of expected conduct for all companies, including institutional investors.
The proposal presents several major improvements which are essential to help companies focus and report on meaningful information and channel finance to activities and projects needed to meet the objectives of the European Green Deal. However, it falls short on several important points, which significantly limit its desired impact.
The recommendations can successfully guide the EU standard-setting process, and significantly advance the quality of corporate sustainability transparency, says the Alliance for Corporate Transparency.
The reports set out recommendations to the European Commission for the elaboration of possible EU sustainability reporting standards and for possible changes to EFRAG's governance and funding if it were to become the EU sustainability reporting standard setter.
To contribute to a meaningful EU process for the standardisation of reporting requirements in favour of comparable, concise and relevant disclosure, the members of the Alliance for Corporate Transparency have combined their expertise and aligned on key priorities for reform of the EU NFR Directive and development of possible future standards.