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Sustainability

February 2024

Highlights

  • EP and Council reached provisional agreement on ESG ratings
  • EP and Council reached provisional agreement on sustainability reporting standards delay
  • EP adopts new rules banning greenwashing and misleading product information
  • Platform on Sustainable Finance published report on market practices
  • IESBA consults on proposed ethical standards for sustainability reporting and assurance
  • IFRS Foundation and GRI publish GHG emissions interoperability considerations

Feature story

European Corporate Governance Conference 2024 – Good Governance and Sustainability: An Aligned Path

EY is organising its European Corporate Governance Conference 2024 under the auspices of the Belgian Presidency of the Council of the EU on 20 March. Accountancy Europe is partnering together with BusinessEurope, ecoDa, EuropeanIssuers, Guberna and VBO-FEB for this event. The conference will bring together decision-makers, academics and key business, as well as civil society, experts from EU and beyond.

Speakers will engage in discussions on the benefits and challenges to integrating sustainability, as well as strong risk management and internal controls into business strategies.

With the adoption of the Corporate Sustainability Due Diligence Directive, the EU would introduce a new way for companies to do business inside and outside Europe. What kind of guidance do companies need? How are other countries and regions addressing this agenda? These and other questions will be on the table during this all-day conference. The conference is livestreamed.

Accountancy Europe CEO will moderate the panel – Sustainability reporting and assurance – what are audit committees seeing?

The conference program and the registration link are available here

EU developments

EP and Council reached provisional agreement on ESG ratings

On 5 February, the European Parliament (EP) and the Council agreed on a proposal to increase transparency and comparability of environmental, social, and governance (ESG) rating activities. The provisional agreement:

  • clarifies the scope of the regulation, including details on applicable exclusions
  • foresees a possibility to provide separate E, S, and G ratings
  • requires ESG rating providers obtain authorisation from the European Securities and Market Authority (ESMA)
  • requires ESG rating providers from outside the EU willing to operate in the EU to be endorsed by an EU-authorised ESG provider
  • allows small-sized ESG suppliers enter a three-year-long optional registration regime under ESMA
  • allows ESMA to exempt an ESG rating provider from certain obligations in some cases if the conditions are met

The EP and Council must still endorse and formally adopt the provisional agreement. The regulation will start applying a year after its entry into force.

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EP and Council reached provisional agreement on sustainability reporting standards delay

On 7 February, the Council and the EP reached a provisional agreement to postpone the adoption of sustainability reporting standards for certain sectors and certain third-country undertakings by two years, amending the Corporate Sustainability Reporting Directive (CSRD). The agreement aims to reduce the administrative burden on companies by giving them more time to prepare and implement the first set of the European Sustainability Reporting Standards (ESRS). It also suggests that the European Commission (EC) publishes eight sector-specific reporting standards before the new deadline on 30 June 2026.

The Council and the EP still need to formally adopt the agreement.

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EP adopts new rules banning greenwashing and misleading product information

The EP gave its green light to the directive banning greenwashing and misleading product information and marketing practices. The new rules make product labelling clearer by banning the use of general and vague environmental claims such as, for example, ‘nature’s friend’, ‘climate friendly’. The directive prohibits such statements when the environmental performance cannot be assessed. Labels must be either based on official certification schemes conducted by independent experts or established by public authorities to ensure transparency and fairness.

As next steps, the Council still needs to give its final approval. Member States will have 24 months to transpose the directive into national law.

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EFRAG released first set of ESRS technical Explanations

EFRAG’s first set of ESRS explanations respond to questions received from stakeholders via its ESRS Q&A Platform. These ‘explanations’ are non-authoritative and cover cases in which the content of ESRS already provides an appropriate answer. Explanations are not exposed for public feedback and are considered as final.

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EFRAG launched public consultations on sustainability reporting standards for SMEs

EFRAG launched two public consultations on:

  • ESRS for Listed SMEs Exposure Draft (ED)
  • voluntary ESRS for non-listed SMEs ED

Stakeholders can provide their feedback via tailored questionnaires by 21 May 2024.

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EFRAG launched public consultations on XBRL Taxonomy for ESRS set 1 and Article 8 disclosures

EFRAG is consulting on two digital taxonomies on ESRS:

  • draft XBRL Taxonomy for ESRS Set 1, and
  • draft XBRL Taxonomy for the EU Taxonomy Article 8 disclosures

Stakeholders can provide feedback via tailored questionnaires by 8 April 2024.

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EC recommendations to achieve climate neutrality by 2050

On 6 February, the EC issued an impact assessment on how to achieve the EU climate neutrality goal by 2050. The EC recommends a 90% net greenhouse gas emissions reduction by 2040. To achieve the 2040 climate target, it is necessary to:

  • ensure full implementation of existing regulations to cut emissions by 55% by 2030
  • develop a global carbon price strategy to help European industry meet emission reduction objectives. Carbon pricing must promote investments in clean technology while generating capital for climate action and social support throughout the transition
  • promote social policies to support the most disadvantaged in adapting to climate issues
  • foster structured dialogue with stakeholders to prioritise employment, reskilling, and upskilling opportunities

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Platform on Sustainable Finance published report on market practices

The Platform on Sustainable Finance report explores how the EU Taxonomy and overall sustainable finance framework are helping financial and non-financial actors transition to net zero. It includes case studies based on the contributions from seven stakeholder groups, including large corporates, credit institutions, investors, insurers, public institutions, auditors and consultants, and SMEs. It focuses on three areas:

  • EU Taxonomy and the broader EU sustainable finance framework use for business strategy, transition plans and target setting to achieve net zero by 2050
  • EU sustainable finance tools and frameworks that are being adopted when structuring sustainable or transition finance solutions for financial products and instruments
  • status of reporting by financial and non-financial actors and the processes in place for data collection and verification

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European Scientific Advisory Board on Climate Change recommendations to achieve climate neutrality

In its report, the European Scientific Advisory Board on Climate Change shared its findings that all sectors need further effort to achieve the EU climate objectives from 2030 to 2050.

The Advisory Board outlined 13 key recommendations for more effective implementation and design of the EU climate policy framework. The report also calls for greater national commitment to implement their national energy and climate plans to secure EU emission reductions of 55% or more by 2030 and stick to the Green Deal ambitions.

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International developments

IESBA consults on proposed ethical standards for sustainability reporting and assurance

The International Ethics Standards Board for Accountants (IESBA) launched a public consultation on the Exposure Draft (ED) on ‘International Ethics Standards for Sustainability Assurance (including International Independence Standards)‘ and ethics standards for sustainability reporting.

The set of standards puts forward a framework of expected behaviours and ethical provisions for all practitioners, including accountants involved in sustainability reporting, to reduce greenwashing and elevate the quality of information on sustainability.

IESBA also issued the ED on ‘Using the Work of an External Expert’ proposing an ethical framework to guide practitioners in assessing whether an external expert has the competence and objectivity to use that expert’s work for its intended purposes.

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IFRS Foundation and GRI publish GHG emissions interoperability considerations

The International Financial Reporting Standards (IFRS) Foundation and the Global Reporting Initiative (GRI) jointly published an interoperability analysis and mapping on GHG emissions disclosures for GRI 305 (emissions) and IFRS S2 Climate-related Disclosures.

Both organisations agree that requirements on GHG emissions are highly aligned. They also state that companies already providing these disclosures under GRI will be well positioned to comply with IFRS S2.

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Other news

Events

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This curated content was brought to you by Vita Ramanauskaité, Accountancy Europe Manager, Head of Sustainability, since 2015. You can send her tips by email, follow her on X and connect with her on LinkedIn.