EuropeanIssuers: Statement on Corporate Sustainability Reporting Directive
23 April 2021
EuropeanIssuers welcomes the European Commission’s proposal published yesterday for a Corporate Sustainability Reporting Directive, revising the Non-Financial Reporting Directive (NFRD).
EuropeanIssuers agrees that the EU needs harmonised standards
for environmental, social and governance (ESG) information to enhance
transparency and promote sustainable investments. Clear ESG standards
for companies are necessary to ensure that reliable, comparable and
relevant information is disclosed.
EuropeanIssuers also welcomes the fact
that the proposal is keen to respect the principle of proportionality in
order to avoid imposing unnecessary administrative burden on companies,
especially SMEs, and to leave enough flexibility for companies to
report on issues such as sustainability governance or targets in a way
which suits them best, without adopting an overly prescriptive approach.
However, EuropeanIssuers considers that
the proposed extension of the scope of sustainability reporting
obligations raises two major concerns:
1. EuropeanIssuers welcomes the
proportional approach vis-à-vis SMEs inclusion, but opposes the
asymmetric reporting requirements for listed and non-listed SMEs.
To ensure that the EU reaches its
objective of being carbon neutral by 2050, there is a need to reorient
capital towards sustainable activities. EuropeanIssuers therefore very
much welcomes the Commission’s intention to extend the scope of the
former NFRD beyond today’s requirements to include all large
undertakings (including non-listed entities). This is a sensible
approach as disclosures should apply to companies with comparable
footprints, whenever they operate in the EU, independently of being
listed or not.
At the same time, EuropeanIssuers understands the
Commission’s approach introducing reporting requirement for small and
medium-sized enterprises, as they account for a significant proportion
of all listed undertakings in the Union. In this regard, considering the
dimension and potentiality of these companies, in particular with
regards to reporting obligations, EuropeanIssuers welcomes the
Commission’s proposal to extend the Directive’s scope to SMEs in a way
that is proportionate to their capacities and characteristics.
Nevertheless,
EuropeanIssuers is concerned about the distinction drawn by the
Commission according to which listed SMEs on regulated markets would
report according to the Directive, while non-listed SMEs would not be
subject to the same obligations. This risks disincentivising companies
from going public and could increase de-listings. EuropeanIssuers
further believes that the Commission’s plan would privilege private
equity compared to public markets. The aim should be increasing the
number of listed companies to enable everyone, including retail
investors, to participate in and benefit from economic growth creation.
In light of this, SMEs should all be subject to voluntary guidelines, as
it would improve transparency, while placing a proportionate cost
burden on SMEs.
2. EuropeanIssuers calls on the
Commission to introduce identical reporting obligations for non-EU
companies operating in the EU, regardless of their listing on a
regulated market in the EU.According to the Commission
proposal, non-EU companies would only be subject to ESG-reporting
requirements if they are listed on a regulated market in the EU or if
they have subsidiaries established in the EU. This would create an
unfair level playing field with regard to non-EU companies offering
their products or services in the EU, when they are not listed on EU
regulated markets or when they do not have subsidiaries established in
the EU.
EuropeanIssuers is concerned that such non-EU companies would
be less accountable for their environmental and social impacts,
although they are direct competitors of European companies in the EU, if
not obliged to disclose their sustainability policies, targets and
results by their respective jurisdictions. EuropeanIssuers believes that
non-EU companies operating in the EU should be subject to the same
sustainability reporting obligations as their EU competitors.
An
appropriate eligibility criteria could be whether these companies have a
level of global turnover exceeding a pre-determined threshold; and
whether they supply goods or services in the EU – be it by way of a
branch office or through internet platforms – generating a turnover
within the EU exceeding a pre-determined amount.
EuropeanIssuers
© EuropeanIssuers
