In the first week of August, the EU Commission published new environmental, social and governance (ESG) reporting rules, confirming the previously outlined softened requirements.

In June, the Commission published a draft of the rules that will apply to approximately 50,000 European Union companies, aiming to improve the information they provide regarding 12 standard requirements, including labour-related issues such as collective bargaining and adequate remuneration.

Meanwhile, in March, Commission President Ursula von der Leyen promised to cut reporting requirements for companies by 25% to boost competitiveness, in light of competition from the US and China in the field of clean technology, for example.

The Dutch Federation of Pension Funds and other influential business and civil society groups, including the European Fund and Asset Management Association (Efama), the United Nations Environment Programme Finance Initiative (UNEP FI), as well as 93 asset managers, had called on the Commission to “maintain the integrity of the standards”, yet this was not taken into account in the Commission’s final proposal.

Many reporting requirements that were mandatory in the previous draft have now been made voluntary. Examples include reporting on climate, biodiversity and transition plans. This means that companies can decide for themselves whether a requirement is “material” to them—in other words, whether their operations affect nature. Civil society organisations and investors have warned that this will reduce the consistency of reporting.

Corporate reports will still have to be audited by private accounting firms, such as KPMG or Deloitte, but critics of the new rules are concerned that this will not be enough to ensure reliable reporting standards.

“The climate change and social standards are not mandatory in the final text, which, unfortunately, leads to a greater reliance on the quality of audits,” Vincent Vandeloise, a senior policy analyst at the financial NGO Finance Watch, stated.

The rules will still be reviewed by the EU Parliament and member states, who may reject them entirely but cannot amend them.
https://euobserver.com/green-economy/157322