EU countries agree on rules for companies to report on their sustainability

The Member States of the European Union (EU) reached an agreement on Thursday on the new directive that will oblige large companies and listed companies, including SMEs, to regularly report on their social and environmental sustainability, which gives free rein to negotiate the final text with the European Parliament.

The European Commission (EC) proposed this directive in 2021, which will extend to more companies the requirements to disclose their non-financial information that already apply to banks, listed companies, insurers and other companies considered entities of public interest by their respective countries. .

Right now, this rule covers public interest companies with more than 500 employees, some 11,700 large companies across the EU that have to report annually on issues related to the environment, the treatment of their employees, their respect for the rights human rights, the fight against corruption and bribery; or the diversity in its boards of directors.

The Community Executive’s proposal proposes extending this obligation to all large companies and companies listed on regulated markets, with the exception of micro-enterprises.

It also requires that the information provided be audited, introduces more demanding disclosure requirements and that this be done in accordance with mandatory European standards, as well as that companies provide information that can be read by computer means to improve access to it.

The agreement reached today by the ministers, which may still undergo changes in the negotiation with the European Parliament, maintains these principles, but introduces some modifications with respect to the Commission’s proposal, as explained by the French Minister of Industry, Agnes Pannier-Runacher at a press conference after the Council of Industry Ministers held in Brussels.

Specifically, they propose an entry into force in three phases, so that companies already subject to the standard will have to present their first sustainability reports in 2025 (with data from the previous year), large companies that are not currently covered by the directive would have to do it in 2026 and SMEs will not be obliged until 2027.

At the same time, the countries want to “monitor the proportionality of the requirements” for which they propose an “exhaustive list” of topics on which to report and the Government is given a period of 18 months to incorporate the norm into their national legislation.

Likewise, the Twenty-seven have addressed the issue of the treatment of subsidiaries and agreed that, when the parent company is in a different country, the countries that so wish may require that the consolidated report be translated into a language accepted in their territory to improve transparency. , as Pannier-Runacher explained.

In the case of sanctions, the principle already in force is maintained that each State must establish “dissuasive, effective and proportionate” measures for cases of non-compliance.

The council of ministers took place against the backdrop of the Russian attack on Ukraine and on the eve of EU leaders discussing tonight a new package of sanctions against Moscow that would target strategic sectors of its economy, such as banking or technology imports.

However, neither the French minister nor the European Commissioner for Industry, Thierry Breton, wanted to comment on the possible impact of the measures pending approval.

“Our measures will weaken Russia’s technological position in key areas, but sanctions aside, we have to keep a close eye on our operational capacity, very important these days, and the resilience of the value chain,” Breton said.