Sustainability rules are essential for European competitiveness

Accountancy Europe endorses a joint statement calling on EU policymakers to preserve the core of the EU sustainable finance framework.

Together with leading organisations including Eurosif – The European Sustainable Investment Forum, Institutional Investors Group on Climate Change (IIGCC), Principles for Responsible Investment, CLG Europe, Global Reporting Initiative (GRI) and E3G, we stress the importance of maintaining strong sustainability rules – on reporting, transition plans, climate targets, and due diligence – as part of the EU’s economic and sustainability ambitions.

Joint statement

402 signatories, including 112 investors and financial institutions, 68 companies, 76 supporting organisations and 146 service providers, are issuing this joint statement to emphasise the importance of preserving the core of the EU sustainable finance framework. Rules on sustainability reporting, transition plans, climate targets and corporate due diligence are a key foundation for achieving the EU’s economic and sustainability goals. Improving their implementation is a priority.

By promoting transparency and responsible business conduct, these rules are conducive to competitiveness and growth, as well as long-term value creation and subsequent returns for investors. Companies that implement EU sustainability rules are likely to be more resilient, better prepared for sustainability-related challenges and opportunities, and more capable of communicating these factors to investors and other financial stakeholders.

In the context of the Omnibus I simplification initiative, we call attention to the investors, banks, other financial institutions and companies across our economy that support preserving the core elements of the Corporate Sustainability Reporting Directive (CSRD) underpinned by the European Sustainability Reporting Standards (ESRS), and of the Corporate Sustainability Due Diligence Directive (CSDDD).

CSRD/ESRS and CSDDD are essential for achieving the EU’s wider sustainability, growth and competitiveness ambitions. They contribute to reorienting investment towards the technologies and sectors that support the goals of the Clean Industrial Deal. They can also reinforce harmonisation efforts for EU capital markets, as set out in the Savings and Investment Union.

The signatories of this statement consider that regulatory simplification can be achieved without compromising on the substance of sustainability rules or their significant benefits for businesses across the EU. This can be achieved via the following recommendations:

• Simplify the ESRS in a way that maintains the double materiality approach of the CSRD, covering environmental, social and governance topics, and ensuring interoperability with international standards and frameworks (including ISSB, GRI and TNFD).
• Include companies with more than 500 employees in the scope of CSRD, in line with the scope of the Non-Financial Reporting Directive (NFRD) which was adopted a decade ago. This will ensure regulatory continuity for companies reporting under NFRD and for companies that have already reported or prepared to report under the CSRD. A phase-in period of 2-4 years could eventually be applied, starting with companies above 1000 employees.
• Ensure the value chain cap allows for the constructive exchange of sustainability information between investors and companies.
• Safeguard the core elements of the CSDDD and maintain risk-based corporate due diligence, in line with the UN Guiding Principles for Business and Human Rights, and OECD Guidelines.
• Maintain a requirement under CSDDD for companies to adopt climate transition plans that include science-based targets with disclosures in line with CSRD. Clarify the requirement to “through best efforts, put into effect” these plans, which should explicitly reference an obligation of means, not an obligation of results.

For further details, see the Annex of this statement.

To conclude

Responsible businesses and investors need a clear and stable policy environment to contribute to the EU’s goals for a competitive and sustainable economy. Retaining the core elements of the EU sustainable finance rules, as set out above, is necessary for providing the transparency and certainty needed to achieve growth whilst supporting decarbonisation.