On behalf of:
CDP, Economy for the Common Good, EFAMA, Eurosif, Frank Bold, Finance Watch, Global Witness, Investor Alliance for Human Rights, Publish What You Pay, ShareAction, Transport and Environment, WWF
Dear Members of the European Parliament,
In the next couple of weeks, various committees in the European Parliament will vote on their proposals to reform the EU Corporate Sustainability Reporting Directive (CSRD). In view of that, the co-signing organisations are calling for broadening the scope of the companies to be covered by the new rules by including all listed SMEs, as well as non-listed SMEs operating in high-risk sectors, subject to proportional rules.
The reform of corporate sustainability reporting is at the centre of the EU Green Deal, the Renewed Sustainable Finance Strategy and the EU Recovery Plan. In order to successfully redirect private and public capital to support the sustainability transition of the EU economy, it is paramount to adequately measure and report on companies’ role, performance and impact on sustainability matters. The CSRD and adoption of its EU standards will help companies provide relevant and comparable sustainability-related information, responding to the needs of all users including investors, financial intermediaries, public authorities and civil society.
The German Sustainable Finance Research Platform called for the inclusion of small and medium-sized enterprises in the scope of CSRD in order to avoid major data gaps in key sectors. According to their study, “hundreds of thousands of companies, which together contribute the majority of negative environmental impact in their respective sectors, are currently disregarded in the CSRD”. Excluding SMEs from high-risk sectors will hinder access to sustainability information on companies facing high sustainability risks and on actual or potential negative impacts of their operations, such as from energy, manufacturing, extractives, garment or transport sectors. This is important to enable investors to evaluate a company’s sustainability and fight green-washing.
The CSRD and EU corporate sustainability reporting standards are a crucial piece of the puzzle for sustainable finance to deliver on its objectives. The General Approach recently adopted by the Council, includes listed SMEs in line with the Commission proposal. In view of the forthcoming vote in the European Parliament and the trilogue negotiations that will follow, the co-signing organisations call on Members of the European Parliament to ensure that all listed SMEs, as well as non-listed SMEs operating in high-risk sectors, are adequately incorporated in the legal framework.
Last but not least, the clarification of the reporting obligation and swift adoption of EU standards must not be tied to the political negotiations on the scope of companies covered by the new rules. While a balanced and proportionate approach must be found for SMEs, it is noteworthy that the CSRD proposal is broadly accepted and supported by most stakeholders.
Thank you for your consideration and we remain at your disposal to answer any questions you may have.
Yours sincerely,
[1] Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector
Image credits: Bernard Hermant / unsplash
