From January 1, 2024, large European companies will have to be more precise about the impact of their activity on the planet. A European directive forces them to publish new indicators: greenhouse gas emissions, water volumes consumed, but also impact on human rights. By 2026, nearly 50,000 companies will be affected in Europe. The smallest of them fear the scale of the administrative task ahead.
An administrative avalanche or the end of greenwashing? This is the debate that is agitating the business world, in the broad sense, before the deadline of January 1, 2024. Because from this date, large European companies (11,700 structures; mainly companies listed in stock market, banks and insurance companies) will have to be much more precise in documenting the environmental and societal impact of their activities. And gradually, the measure will be extended, to affect SMEs listed on the stock exchange in 2026, then all foreign groups with a subsidiary in the EU and whose turnover is greater than 150 million euros per year, in 2028. That is to say nearly 50,000 companies at the end of the process.
This new system has a name, or rather, the EU obliges, an acronym: “CSRD” for “Corporate sustainability reporting directive”. In French: “Corporate Sustainable Development Reporting Directive”. A somewhat broad formulation, but which actually deals with very concrete things.
Today, information on the environment, human rights and ethics is unreliable and easily manipulated.
Today, information on the environment, human rights and ethics is unreliable and easily manipulated.
Pascal Durand, MEP
Because until now, large companies had to produce extra-financial reports in which they were supposed to describe the way in which they respond to social and environmental challenges.
That being said, not much was said and the reality of these extra-financial relationships was very diverse from one company to another. This had two consequences: it was difficult to assess whether a particular measure or policy of a large group was greenwashing or whether it had a real impact. Worse, it was impossible to compare the impact of the activities of companies in the same sector on the environment and society.
“Today, information relating to a company’s impact on the environment, human rights and ethics is partial, unreliable and easily manipulated. Some companies do not provide any. Others publish what they want“, described French MEP Pascal Durand (Renew Europe, centrists and liberals), during the debates on the text.
This is therefore what the CSRD is supposed to respond to, by forcing companies to respond precisely, in their annual report, to a whole series of indicators: greenhouse gas emissions, of course, but also volumes of water consumed, degraded natural spaces; and on a human level, impact on local communities (respect for human rights, fight against corruption, etc.). These criteria apply across the entire value chain of a company: suppliers, distributors, customers, etc. ; and transformation plans must be developed.
These must “explain how their business model and strategy are compatible with the Paris Agreement and with the objective of climate neutrality by 2050“, summarized the president of the Environment Committee in the European Parliament, Pascal Canfin, at the time of approval of the directive.
They will also have to document the impact of climate change on their activities.
In addition to reporting to its shareholders, the company will be forced to report to society, to associations, but also to potential investors. In this unprecedented effort of transparency, companies will also have to document the impacts of climate change which weigh on their activity: exposure to forest fires, rising water levels, consequences on the activity of a modification of the electricity mix, with, for example, the shutdown of coal-fired power stations, etc.
In European institutional language, we call this “double materiality”: the impacts of the company on its environment (“impact materiality”); but also the impacts of sustainability issues on the financial performance of the company (“financial materiality”).
Sanctions are planned
The system is restrictive and sanctions are provided, which vary from one State to another. In France, the first country of the Twenty-seven to have transposed the directive (all have until July 6, 2024 to do so), a “High Audit Authority” was created for this purpose, equipped with a commission of sanctions. These can range from a simple public statement indicating the nature of the offense to a monetary fine.
With this text, the EU hopes to restore confidence in businesses and make the achievement of carbon neutrality in 2050 credible. But this will not happen without effort. According to the European body which designed these accounting standards, companies could indeed have to publish up to 1,000 additional pieces of information.
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Hence the idea of a “avalanche administrative“, an expression used last September by François Asselin, the president of the Confederation of Small and Medium Enterprises (CPME). In reality, the standards for SMEs will be lighter and they will be able to deviate from the system until 2028, the time to put adequate resources in place.
Furthermore, the annual cost of this new type of reporting is estimated at 3,600 million euros, to which are added 1,200 million euros in one-off costs. But the EU assures us: in the medium and long term, companies should gain in efficiency, clarity and transparency.
To make it fully effective, however, it will be necessary to pay attention to the way in which the directive is transposed in each Member State, to the reality of control and sanctions, and to its capacity, in reality, to deploy the same indicator in sectors and sectors. very different companies.
Marianne ENAULT
2023-12-29 18:14:41
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