With the idea and goal of putting an end to greenwashing, the European Union has set up new rules for large companies to publicly disclose information about the way they operate and manage social and environmental risks.
The information companies are currently obliged to disclose under European and national laws is arguably insufficient for investors and other stakeholders alike. Additionally, some of the data provided by enterprises can be difficult to compare or even to verify.
And so investors and civil society have a very limited vision and comprehension about the social and environmental impacts of the companies they choose to support one way or another. Making the best decision financially and environmentally speaking needs to be easier and more transparent.
It is because of this need that the European Parliament and EU member states have now made a new regulatory move in an effort to fight climate change and an increasingly misinformed society.
The Corporate Sustainability Reporting Directive (CSRD)
As mentioned above, this new Directive’s goal is to build up more responsible and sustainable companies across the Union by making it compulsory to disclose information concerning their practices’ impact on people and the planet. It could potentially become a standard framework worldwide and inspire others to follow a similar path against greenwashing and misinformation.
But what do these new rules actually imply?
What are the new rules?
- These new rules are applied as a n amendment to the 2014 non-financial reporting directive, making companies provide more detailed information about several non financial concerns including: environmental rights, social rights, human Rights, governance factors.
- The directive also implements the requirement for certification of sustainability reporting, as well as an improved accessibility to the information disclosed by having a dedicated section to it in the business’ management report.
- This newly required information will be supervised and standardized by the European Financial Reporting Advisory Group (EFRAG).
Who does it affect?
- All large enterprises inside the European Union, this is, companies with over 250 employees and a business volume of 40 million euros. These will also be responsible for assessing the information of their subsidiaries.
- Companies outside the EU with a significant activity in the European market (150 million euros of annual turnover in the Union and at least one subsidiary or branch in the EU) will also have to follow similar rules supervised by the European Commision.
- The directive will also apply to SMEs depending on their specific characteristics, although they will have a transitional period in which they can be exempted from disclosure until 2028.
How is credibility ensured?
Under the new directive company’s reports need to be certified by an independent auditor or certifier that can ensure the information given is in compliance with the sustainability standards marked by the European Union. The same applies to non European companies that fall under the rule of the directive.
Transparency across the company
We believe and work for transparency to be one of the key values driving the fight for climate action, social wellbeing and good governance as it is the only way to understand what we are doing wrong, what we are doing right and what it is that we are not doing yet.
Because being transparent is not only an externality to a company, or a given organization, to help build trust and reputation; it is in fact also a great learning and improvement mechanism. You cannot manage what you don’t understand. And so we advocate for transparency, integrity and precision as imperatives to the fight against climate change.
In DoGood we are convinced of the need to understand and manage efforts to achieve a sustainable transition inside an organization for the correct and efficient functioning of the business and the community it operates in. We alone cannot achieve the substantial changes necessary, but we work on the basis of collaboration, transparency and accuracy in order to bring light to sustainable actions.
In this regard, it is essential to our work to promote good corporate governance, meaning that the processes of disclosure and transparency are followed so as to provide regulators and shareholders as well as the general public with precise and accurate information about the financial, operational and other aspects of the company, including a more accurate definition of the ESG performance.
We have developed a corporate government tool that helps establish ESG impact objectives for employees in regards to the sustainability strategy of the company. Through our technology we are able to activate and track employees’ impact, creating engagement that translates into improved ESG metrics, reputational value and an overall positive impact for the environment and society.
If you want to know more about how we work to create a positive social and environmental impact, click here.