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EU Sets New Rules For Tackling Corporate Greenwashing

EU Sets New Rules For Tackling Corporate Greenwashing
04 July 2022
 

From 2024, large companies will need to publicly disclose information on the way they operate and manage social and environmental risks.

 

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In February 2022, the carbon reduction targets of 25 of the world’s largest companies were scrutinised in the Corporate Climate Responsibility Monitor report.

All of the 25 companies pledged some form of zero-emission target. But in reality, they only committed to reducing their emissions by 40 per cent on average, not 100 per cent as suggested by their published plans.

The new Corporate Sustainability Reporting Directive (CSRD) will make businesses more accountable by obliging them to disclose their impact on people and the planet. This aims to end greenwashing and lay the groundwork for sustainability reporting standards at a global level.

 

New EU Sustainability Standards

 

The new EU sustainability reporting requirements will apply to all large companies (with over 250 employees and a €40 million turnover, as defined in the Accounting directive), whether listed or not. Companies will have to report on their impact on the environment, human rights, social standards and work ethics, based on common standards.

The information companies provide on their impact on the climate or human rights will be independently audited and certified. Financial and sustainability reporting will be on an equal footing and investors will finally have access to reliable, transparent and comparable data.

 

What About Non-EU Companies?

 

MEPs successfully insisted that non-EU companies with substantial activity in the EU market (€150 million in annual turnover in the EU) will have to follow equivalent reporting rules.

Pascal Durand, who led the negotiations for the Parliament, said: “Today, information on a company’s impact on the environment, human rights and work ethics is patchy, unreliable and easily abused. Some companies do not report. Others report on what they want. Investors, consumers and shareholders are at loss. From now on, having a clean human rights record will be just as important as having a clean balance sheet”.

“The European extra-financial audit market will be standardised, much more rigorous and transparent. Parliament succeeded in securing an opening of the audit market by member states in order to make room for new certified players to become major players and not just leave it in the hands of the financial auditors, notably the big four”, added Pascal.

Picture: a photograph of a person holding a leaf. Image Credit: Unsplash

Article written by Ella Tansley | Published 04 July 2022

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