EU Corporate Sustainability Reporting to become mandatory in fiscal year 2024
17 Oct 2023 by The Water Diplomat
The reporting of non-financial information (information on environmental, social and governance impacts) is to become mandatory in the European Union for large, listed companies in the fiscal year 2024. The new sustainability disclosure requirements will apply to companies with a turnover of more than € 40 million per year and a balance sheet total of more than €20 million, or companies with more than 250 employees which also fall under one of the above criteria. The Corporate Sustainability Reporting Directive (CSRD) is an effort to achieve so-called ‘triple bottom line accounting’, whereby sustainability reporting is brought to the same standard as financial reporting.
The CSRD stems from the European Green Deal which strives to reduce emissions and decouple economic growth from resource use within an inclusive and efficient economy. It contains an initial set of twelve European Sustainability Reporting Standards (ESRSs), of which five are environmental in character, four are social, one relates to business conduct, and the remaining two are general reporting obligations. Beyond carbon disclosure, in which companies need to monitor and report on their performance on emissions reduction, the new standards will include other environmental targets. These areas are water and marine resources, resource use and the circular economy, pollution and biodiversity and ecosystems.
Of particular interest perhaps from a water perspective is the Water and Marine Resources standard, labelled as the European Sustainability Reporting Standard 3 (ESRS E3) on wastewater and marine resources. As the name suggests, this standard is intended to assess how a company’s activities affect water and marine resources, both in terms of actual and potential impacts. Companies need to report on actions taken to counter potential negative impacts on the quality of water and marine resources, as well as on their own water consumption. Companies need to explicitly link their policies to the ambitions of the EU Green Deal to maintain clean water as well as indicate how its strategy will be adapted to align with the preservation of water and marine resources globally.
Although the CSRD has been passed and entered into force in January 2023, much debate has taken place since that time on the contents of the standards themselves. Business representatives were wary of the extra administrative burden placed on their companies, and in October this year the largest party in the European Parliament , the European Peoples Party, made a push to weaken corporate disclosure standards. This represented a second attempt this year to lower the bar on sustainability reporting.
Under the new rules it is expected that the number of companies performing monitoring and reporting on environmental and social standards will quadruple to over 50,000.