Some 80 investors and financial institutions have come out in support of the EU’s struggling corporate sustainability agenda today, urging policymakers to preserve the rules.
Allianz, Ircantec, KLP and Storebrand are among 194 signatories to a letter that describes the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CS3D) as “essential for achieving the EU’s wider sustainability, growth and competitiveness ambitions”.
CSRD and CS3D are both at risk of being decimated as part of a deregulation drive by Europe’s co-legislators, who want to make the EU more attractive for businesses. The Commission launched the reform process with an omnibus proposal earlier this year.
Last week, the Council of the European Union confirmed its thinking on the future of the two files, ahead of political negotiations with European Commission and Parliament later this year.
According to its final negotiating position, the Council will fight to remove all companies with fewer than 5,000 staff and less than €1.5bn in turnover from the scope of CS3D.
This will exempt all but the very largest European firms from the duty to conduct environmental and human rights due diligence on their operations and supply chains.
Council CSRD scope target
When it comes to reporting obligations, the Council will support the Commission’s proposal to cut the scope of the CSRD so that it only applies to firms with more than 1,000 employees. It wants companies to have a turnover of €450m before they’re eligible too, whereas the Commission wants this to be much lower at €50m.
The scope of the Taxonomy Regulation is determined by the CSRD, so it will be directly impacted by any cuts to the directive.
“The Council’s position reduces the number of CSRD and Taxonomy in-scope companies by ca. 90%, which is massive,” said Aleksandra Palinska, executive director of the European Sustainable Investment Forum, Eurosif, which helped coordinate today’s letter.
“This will significantly limit investor access to quality, comparable and reliable disclosures on sustainability risks and impacts,” she told IPE.
“Meanwhile, investors need ESG data to scale up investments for industrial decarbonisation and a just transition to sustainable growth and competitiveness.”
The requirement for companies to publish climate transition plans has also been put back on the negotiating table, along with auditing and assurance requirements, civil liability regimes and implementation timelines.
Companies may also be banned from requesting the sustainability information they need to comply with the rules from their smaller suppliers.
Investor stance
The investor letter claims to “call attention to the investors, banks, other financial institutions and companies across our economy that support preserving the core elements of the CSRD, underpinned by the European Sustainability Reporting Standards (ESRS), and of the CS3D”.
It notes that, while the laws are “a key foundation for achieving the EU’s economic and sustainability goals”, they do need to be improved.
It recommends applying CSRD to companies with more than 500 employees, although there could be a phase-in period of up to four years in order to give smaller firms more time to prepare.
Instead of slashing the scope of CSRD, policymakers should focus on redesigning the underlying ESRS to make compliance easier.
CS3D should retain a requirement for firms to disclose climate transition plans based on science-based targets, according to the recommendations.
Other signatories to the letter include AkademikerPension, Groupe La Française, PenSam, PKA and Plan de Pensiones de Empleados de Telefonica.
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