Management Systems

The EU Takes Sustainability Reporting To the Next Level

Recently, European Commission (EC) published a proposal for a directive on sustainability reporting.  The proposal is aimed at overhauling the current European Union (EU) framework for corporate disclose on environmental and social issues. This proposed report will now be called Corporate Sustainability Reporting Directive (CSRD). In this article at EURACTIV, Benjamin Fox, in conversation with Pascal Durand, the European Parliament’s rapporteur, explains the report in detail.

The Highlights of Commission Proposal

The CSRD proposal aims to bridge the identified gap between sustainability information disclosed by Non-Financial Reporting Directive (NFRD) and the users’ need for comparable and reliable information. EU law demands many large companies to disclose how they operate and manage social and environmental challenges. This information will help civil society organizations, investors, consumers, policy-makers, and other stakeholders evaluate large companies’ non-financial performance. Additionally, this also encourages organizations to develop a responsible business approach.

“Standards are just a tool, but that will shape internal reporting systems by moving away from a purely content-based approach,” says Durand. Furthermore, standards also help companies take the overall environmental and social context more into account.

Weaknesses in the Detail

Though the draft directive represents a substantial improvement, it lacks detail on critical issues. For example, the draft is vague on how reporting standards will be developed. The standards set by the body must embrace the information stakeholders need. Experts also believe that the information currently reported by companies on their human rights policies is not clear.

What Does the Directive Aim At?

The EU (along with many other countries, including the UK) aims to become net-zero by 2050. The union has also agreed to reduce 55% of greenhouse gases by 2030. Achieving these goals is possible when vast amounts of capital are raised and redirected towards sustainable activities. This means investors demand more and better information to make informed investment decisions. In fact, these suggested standards’ architecture builds on the companies’ experience in Europe.

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