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Non-European tech firms that turnover more than €150m in the European Union (EU) will need to adhere to a new set of stricter sustainability reporting rules – designed to clamp down on greenwashing.
The EU Council and European Parliament-backed Corporate Sustainability Reporting Directive (CSRD) is designed to tighten up the existing rules that dictate how companies should disclose non-financial information about the sustainability of their operations.
This includes details about their environmental credentials, as well as their track record on addressing human rights, social rights and other governance factors.
Presently, 12,000 firms are required to disclose information on all these topics through the 2014 Non-Financial Reporting Directive (NFRD), but this number will rise to 50,000 once the CSRD comes into force.
All large companies and those listed on regulated markets will be within the directive’s scope, along with their subsidiaries. The rules will also apply to small and medium-sized enterprises (SMEs), although they will have the option to opt out of adhering to the rules until 2028 if they so wish.
Non-European companies will also be required to make disclosures under the CSRD if they generate a net turnover of more than €150m in the EU, and if they have at least one subsidiary or branch in its jurisdiction.
As detailed in a statement, confirming the EU Council and European Parliament have reached a “provisional political agreement” on what the CSRD should cover, the NFRD needs replacing because of concerns that the disclosures companies make through it are not detailed enough nor subject to enough scrutiny.
Under the new directive’s terms, companies within its scope will need to produce reports on the environmental, social and governance impacts of their operations, and will need to have their sustainability reporting independently verified.
They will also need to take steps to ensure their reporting is as accessible as possible to those outside of their organisations by devoting a dedicated section to sustainability in their company management reports.
“To ensure that companies comply with the reporting rules, an independent auditor or certifier must ensure that the sustainability information complies with the certification standards that have been adopted by the EU,” confirmed the statement. “The reporting of non-European companies must also be certified, either by a European auditor or by one established in a third country.”
The provisional agreement reached by the EU Council and European Parliament now needs to be approved by both parties, and the roll-out of the CSRD will progress in stages. As such, it will come into force for companies that are already within scope of the NFRD from 1 January 2024. For companies that are not, the directive will come into force from 1 January 2025, and from 1 January 2026 for SMEs.
Bruno le Maire, minister for economic affairs, finance and industrial and digital sovereignty, said the directive will bring benefits for European consumers by making it easier for them to make better-informed decisions about the companies they give their business.
“This [directive] means more transparency for citizens, consumers and investors,” he said. “It also means more readability and simplicity in the information provided by companies, who must play their full part in society.
“Greenwashing is over. With this text, Europe is at the forefront of the international race to standards, setting high standards in line with our environmental and social ambitions.”