Corporate Sustainability Reporting Directive — Towards a new business model in the EU
By Roxana LĂZĂRESCU
The European Commission has announced a legislative proposal for the revision of the non-financial reporting Directive (NFRD). It is named the Corporate Sustainability Reporting Directive and it will ensure that companies provide information on the sustainability of their business practices in a transparent and comparable manner. Through information on taxonomy- alignment, transition investments and sustainability risks, financial companies but also civil society groups should get the information they need to evaluate the ambition and environmental performance of financed activities.
MEP Pascal Durand, (Renaissance, France) Renew Europe rapporteur on sustainable corporate governance explains why non-financial performance is too important a matter to be left to financiers.
“Looking at the bigger picture, the revision of the Non-financial reporting Directive shall contribute to shaping a new business model, an EU and sustainable one, whose transparency norms should spin-off to other parts of the world thanks to the weight of the single market.”
Although this topic appears to be technical, says Pascal Durand, it is, in fact, highly political.
It is political because it involves citizens. Owing to the urgency of climate and human rights issues, the public now requires companies to account for their environmental and social impacts. They are not merely citizens who vote; they are also customers, employees, neighbors and savers. They are stakeholders without whom companies are unable to operate, and who by dint of how they consume, work and invest, have the power to force companies to act responsibly.
It is political issue as it highlights different views of what this performance should entail — and the EU is not alone in seeking to measure it. The US is in the process of preparing its own indicators. If these were to gain traction and become international standards, sustainable development would be determined by an American vision.
“For Corporate Sustainability Reporting to work and be reliable, environmental, social and corporate governance data and forward-looking strategies must be scrutinised by an independent and objective audit”, says Durand.