EFAMA and Eurosif, along with non-profits including Finance Watch and ShareAction, have called on Members of the European Parliament to broaden the scope of EU corporate sustainability reporting legislation.
Their letter to MEPs comes as various committees in the European Parliament will in the coming weeks vote on their positions on the EU corporate sustainability reporting directive (CSRD).
The co-signing organisations, which also include CDP, Frank Bold, and the Investor Alliance for Human Rights, are calling for the scope of companies to be covered by the new rules to be expanded to include all listed SMEs as well as non-listed SMEs operating in high-risk sectors, “subject to proportional rules”.
After the European Parliament agrees its stance on the CSRD, its representatives, and those of the Council and the European Commission will hold so-called “trilogues” to reach an agreement on rules.
In their letter, the signatories argue that excluding SMEs from high-risk sectors “will hinder access to sustainability information on companies facing high sustainability risks and on actual or potential negative impacts of their operations, such as from energy, manufacturing, extractives, garment or transport sectors”.
“This is important to enable investors to evaluate a company’s sustainability and fight green-washing.”
The letter also notes that financial institutions, including banks, need sustainability-related information on companies to analyse their own risk exposure and to fulfil their own obligations.
The signatories cite research from the German Sustainable Finance Research Platform, according to which “hundreds of thousands of companies, which together contribute the majority of negative environmental impact in their respective sectors, are currently disregarded in the CSRD”.
Although the signatories want the CSRD to cover more companies, they are also wary of delaying the timeline further for the rules, and the reporting standards that will go along with it, which they describe as “a crucial piece of the puzzle for sustainable finance to deliver on its objectives”.
“While a balanced and proportionate approach must be found for SMEs, it is noteworthy that the CSRD proposal is broadly accepted and supported by most stakeholders,” they wrote.