EU implements requirement for companies to release sustainability reports to accelerate Green Deal agenda
03 Aug 2023 --- The EU has adopted the European Sustainability Reporting Standards (ESRS), requiring large companies and listed small- and medium-sized enterprises to publish regular reports on their social and environmental risks and how their activities impact people and the environment. The rules fall under the EU’s Corporate Sustainability Reporting Directive (CSRD).
“The standards we have adopted are ambitious and are an important tool underpinning the EU’s sustainable finance agenda,” comments Mairead McGuinness, commissioner for Financial Services, Financial Stability and Capital Markets Union.
“They strike the right balance between limiting the burden on reporting companies while at the same time enabling companies to show the efforts they are making to meet the Green Deal agenda.”
Followingly, personal care companies based in the EU, such as Symrise, L’Oréal, Beiersdorf, Henkel and Brenntag, will have to release their sustainability reports.
The EU explains it is requiring transparency to help stakeholders, such as “investors, civil society organizations and consumers” evaluate the sustainability performance of companies.
The first selected companies must apply the new rules for the first time in the 2024 financial year for reports published in 2025.
The EU will now make companies reveal their treatment of the environment.“With the EU’s groundbreaking new reporting regulation, the CSRD, now agreed, CDP (Customer Data Platform) A List companies are showing they are ahead of the game – taking clear action to reduce emissions and to address environmental impacts throughout their value chains,” Maxfield Weiss, executive director, CDP Europe previously stated.
“This is the type of environmental transparency and action we need economy-wide to prevent ecological collapse.”
New rules for holding companies accountable
Investors will be able to assess financial risks and opportunities arising from climate change and other sustainability issues. The reporting costs will be reduced for companies over the medium to long term by harmonizing the information to be provided.
Companies subject to the CSRD must report according to ESRS, adopted on July 31 this year.
The standards were developed by the European Financial Reporting Advisory Group (EFRAG), an independent body bringing together various stakeholders. The measures will be tailored to EU policies while building on and contributing to international standardization initiatives.
Modifications made by the EFRAG to create the CSRD fall into three main categories: Phasing in specific reporting requirements, giving companies more flexibility to decide exactly what information is relevant in their circumstances and making some of the proposed requirements voluntary.
Beauty companies based in the EU need to prepare for the ESRS legislation.
The rules introduced by the Non-Financial Reporting Directive (NFRD) will remain in force until companies officially apply the new CSRD rules. Under the NFRD, large companies have to publish information related to environmental and social matters and treatment of employees, respect for human rights, anti-corruption and bribery and diversity on company boards.
Spotlight on sustainability reports
Personal care companies have been releasing sustainability and ESG-related reports on their own accord. With the implementation of the CSRD, publishing such reports will no longer be an option but a requirement.
Last month, Marks & Spencer released its sustainability report revealing that the retailer removed over 100 million units of plastic from its products and supply chain between April 2022 and April 2023. The retailer launched Plan A in 2007 to streamline its environmental sustainability goals.
Recently, Procter and Gamble removed its pledge not to buy wood pulp from degraded forests or contribute to forest degradation. The company announced the reversal at a recent ESG presentation for investors.
As the industry accelerates toward actualizing global net-zero GHG by 2050, Brenntag provides Product Carbon Footprint data to its customers. This is part of the chemical company’s sustainability strategy to promote and enhance transparency.
By Sabine Waldeck
