As much as businesses must concentrate on actually reducing the carbon footprint, there also needs to be an increasing focus on reporting. The EU Taxonomy, for example, was introduced in July 2020 and is a classification system across key criteria that establishes whether an economic activity is sustainable or not and will provide the basis for the EU to label businesses ‘green friendly’ or ‘green hostile’.
Disclosure requirements around climate change mitigation and adaptation have already come into effect (from 1 January 2022) with requirements against other criteria due from 1 January 2023.
Disclosure requirements for the following objectives apply as of 1 January 2023:
In addition, there are increasing efforts to combat ‘greenwashing’. Precise definitions vary, but in general the term describes the dishonest practices used by businesses to represent themselves as more sustainable, either by giving a false impression or providing misleading information as to the sustainability of a product or service.
To this end, the European Commission is implementing a Corporate Sustainability Reporting Directive (CSRD) requiring all large companies to publish regular reports on their environmental and social impact activities.
Effective from 2024, with reports published from 2025
The CSRD must be included in the main Annual Report for better investor visibility
Listed SMEs will have longer to implement, while for unlisted SMEs it will be voluntary
All of this runs alongside other national and regional reporting requirements, including the ESG reporting standards being developed by the International Sustainability Standards Board (ISSB), which will be the non-financial equivalent to the global financial reporting standards, IFRS.
