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EU to finally require businesses' transparency on their harmful environmental impacts

15 July 2022
by WWF -- last modified 15 July 2022

The European Parliament's Legal Affairs Committee (JURI) voted on 14 July for a strong Corporate Sustainability Reporting Directive (CSRD), which would require companies to commit to science-based sustainability targets and tangible plans to reduce their greenhouse gas emissions.


These elements significantly improve on the Commission's proposal for this directive, which is designed to make it mandatory for businesses to report their impact on people and the planet while giving investors and the public access to comparable, reliable and easily accessible information on sustainability.

"When it comes to holding businesses accountable for harmful practices, knowledge is power. This new agreement is an essential step toward improving EU businesses' transparency. Citizens and financial institutions will be able to track and compare reliable data on companies' transition plans, how they impact biodiversity and ecosystems and if they make profits from fossil fuels. However, it should be applied to SMEs in high-risk sectors and without delay by Member States," said Julia Linares Sabater, Senior Sustainable Finance Policy Officer at WWF European Policy Office.

This vote endorses the provisional agreement reached by the EU Parliament, the Commission and the Council on 21 June 2022. Compared to the Commission proposal, the final text contains more detailed reporting requirements. Notably, companies will now be required to publish short, medium and long-term science-based sustainability targets, submit a plan to lower greenhouse gas emissions and achieve climate neutrality by 2050.  In addition, the Directive mandates the development and adoption of mandatory corporate sustainability reporting standards, making the EU a front runner on how to report on sustainability impacts. WWF believes that if properly implemented and transposed, this Directive will improve the quality of information companies disclose on sustainability.

The Directive will apply to all large companies and also to small and medium-sized enterprises (SMEs) that are listed on the stock exchange. However, due to an opt-out clause, those SMEs will report on sustainability issues voluntarily until 2028. Worryingly, however, the Directive leaves out all non-listed SMEs, including those in high-risk sectors, despite their severe impacts on the planet. SMEs account for 99% of EU companies, and most of them are not listed on the stock exchange. It has been proven that voluntary disclosures are not effective. This means that there is little hope for SMEs to be more transparent about their damage to the environment until 2028.

When will the Directive enter into force? The agreement reached by co-legislators proposes a delayed application in 2024 for the companies already covered by the current EU Non-Financial Reporting Directive. The other large companies will get until 2025 to comply.  

While the initial proposal was set to be integrated into national law by the end of 2023, the new deal now includes an 18-month transposition period. WWF calls on Member States to urgently implement it for all large companies. The information that will be disclosed as a result of the implementation of the Directive is crucial, both for citizens and financial institutions to make informed decisions and for the application of other EU sustainable finance legislations.

The Council adopted the agreement on Wednesday, 29 June and in the Parliament, the final vote will take place in the plenary session in autumn.

WWF is an independent conservation organisation, with more than 30 million followers and a global network active through local leadership in over 100 countries. WWF's mission is to stop the degradation of the earth's natural environment and to build a future in which humans live in harmony with nature, by conserving the world's biological diversity, ensuring that the use of renewable natural resources is sustainable, and promoting the reduction of pollution and wasteful consumption. The European Policy Office contributes to the achievement of WWF's global mission by leading the WWF network to shape EU policies impacting on the European and global environment.