The EU is arguably the world leader in sustainability legislation with the European Green Deal being at the forefront of global ESG regulations. However, passing and implementing environmental policy has not come without a political cost. This summer, right-wing candidates campaigned on an anti-Green Deal platform and made substantial gains in the EU Parliament at the expense of the Greens. Efforts are now underway to roll back existing Green Deal legislation, specifically the Corporate Sustainability Reporting Directive (CSRD). Responsible Investor recently wrote about the mounting pressure campaign to roll back parts of the law stating:
“One person close to sustainable finance conversations in Brussels said the push for deregulation from member states is being ‘resisted’ by the Commission, ‘but we understand at some point the pressure will be released’. They add that there are reports that around half of EU MEPs sympathise with the deregulation narrative, so there is a chance that the policy objectives of the legislation are at risk.”
Just how the CSRD might be altered is unknown but changes could include a reduction in the number of mandatory data points or even a revisiting of double materiality in favor of financial materiality. Member states have had a notoriously difficult time transposing the CSRD to national law with seventeen member states facing potential consequences in mid-November if they fail to do so. This political pressure in Parliament, combined with the unpopularity of the CSRD among member states, could spell change for the law. The movement has already seen successful results in delaying the EU Deforestation Regulation by twelve months and similar delays could come to the CSRD, even if the substantive text is not changed.
Despite the mounting pressure the EU’s incoming Commissioner of justice, consumer protection and the rule of law at the European Commission has publicly stood by the existing text and timeline for implementation of the CSRD. Stating instead that the government should be looking to produce guidance to support firms in complying with the current rules as they exist. It’s unclear whether the CSRD will remain in place as is, or if the government will ultimately give way to political pressure.
However, for the time being, nothing has changed. If you are expected to comply with CSRD, continue working towards compliance. If rollbacks to the law do occur, you’ll be ahead of the curve rather than behind it.
Our members can learn more about disclosure laws in the EU here.
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Image Credit: Ajdin Kamber – stock.adobe.com
