Corporate sustainability reporting directive - a BusinessEurope position paper
- The business community is fully committed to global sustainability and to driving investment more into sustainable activities. More and more companies take an active role in this by integrating sustainability in business strategies and practices. We also understand the needs and expectations of stakeholders for more transparency and communication on business activities and impacts. Reporting is one of the key tools for achieving this, as well as creating trust between companies and stakeholders.
- The development of appropriate, proportionate and workable tools, including in the area of reporting, can help support this. This is only possible, if the costs/administrative burdens are well balanced with benefits, if tools provide adequate flexibility to companies to tailor reporting to their specific situation and stakeholders, and if reporting obligations allow companies to retain their global competitiveness and continue to generate wealth and create jobs. Frameworks must also ensure quality reporting, which meets the needs of information users whilst being feasible for preparers.
- We support the objective to have clearer and more coherent reporting obligations at EU level, in particular given the multitude of existing and forthcoming reporting obligations scattered across different frameworks. This creates complexity and confusion for companies. We also agree on the need to reduce the increasing demand for information from companies coming from many different stakeholders.
- Unfortunately, we do not believe that the proposed directive meets all of these criteria. We have therefore proposed changes, which we believe would lead to improvements. In particular, we are concerned about the maximum approach taken, with the cumulative obligations on companies, i.e. a disproportionately large scope combined with extensive aspects which companies need to report on, further detailed requirements provided through mandatory standards, and mandatory assurance. A more balanced approach needs to be found between the scope, the overall level of detail of the requirements and the need for flexibility.
- We are also concerned about the costs of the proposal, as estimated by the Commission, which we find disproportionate to the objectives, as well as the feasibility of the ambitious timeline. Companies need to have enough time to implement the requirements, which will require in some cases major changes to internal reporting systems, especially for those newly covered by such obligations. This is crucial not only to make them feasible, but also in ensuring quality reporting. However, companies would only have two months to implement the final standards before the first year of application (2023) starts. This outlined timeline for the introduction of the additional reporting requirements and European standards does not allow for a proper implementation at company level.
- It is paramount that a proper and transparent due process is set up for the establishment of EU standards for sustainability reporting. Proper consultation periods need to be guaranteed so that preparers can contribute to the development of the standards. The IFRS due process as established for financial reporting could serve as a role model. Only a transparent standard setting process will lead to the general acceptance of EU standards.
- If this directive aims to be the authoritative sustainability reporting requirement for companies at EU level, it is crucial to take time to ensure that it meets the needs not only of information users, but critically those that will have to comply – real economy companies. We encourage the EU institutions to find a balanced approach, taking account of our proposals.