The Council and European Parliament have reached a provisional political agreement on the corporate sustainability reporting directive (CSRD), which aims to address shortcomings in the existing rules on disclosure of non-financial information, including environment, social and governance (ESG) issues.
The European Parliament determined that current non-financial information was of “insufficient quality to allow it to be properly taken into account by investors” which they believe is hindering the transition to a sustainable economy.
“This agreement is excellent news for all European consumers. They will now be better informed about the impact of business on human rights and the environment. This means more transparency for citizens, consumers and investors. It also means more readability and simplicity in the information provided by companies, who must play their full part in society. Greenwashing is over. With this text, Europe is at the forefront of the international race to standards, setting high standards in line with our environmental and social ambitions,” said Bruno le Maire, Minister for economic affairs, finance and industrial and digital sovereignty.
The corporate sustainability reporting directive amends the 2014 non-financial reporting directive. It introduces more detailed reporting requirements and ensures that large companies are required to report on sustainability issues such as environmental rights, social rights, human rights and governance factors.
The CSRD also introduces a certification requirement for sustainability reporting as well as improved accessibility of information, by requiring its publication in a dedicated section of company management reports.
EU rules on non-financial information apply to large public-interest companies with more than 500 employees and to all large companies and all companies listed on regulated markets. These companies are also responsible for assessing the information at the level of their subsidiaries.
The rules also apply to listed SMEs, taking into account their specific characteristics. An opt-out will be possible for SMEs during a transitional period, meaning that they will be exempted from the application of the directive until 2028.
For non-European companies, the requirement to provide a sustainability report applies to all companies generating a net turnover of €150 million in the EU and which have at least one subsidiary or branch in the EU. These companies must provide a report on their ESG impacts, namely on environmental, social and governance impacts, as defined in this directive.
The application of the regulation will take place in three stages: 1 January 2024 for companies already subject to the non-financial reporting directive; 1 January 2025 for companies that are not presently subject to the non-financial reporting directive; and 1 January 2026 for listed SMEs, small and non-complex credit institutions and captive insurance undertakings.
EU court sets limits for use of passenger flight data
The European Court of Justice (ECJ) has now set boundaries on how airline passenger data is collected and when it can be used by law enforcement. Authorities are only now allowed to access data if there is a “genuine” threat of serious crime or terrorism.
The case concerned the EU's Passenger Name Record (PNR) Directive, which was adopted in 2016. The PNR Directive 1 requires the systematic processing of a significant amount of PNR (Passenger Name Record) data relating to air passengers on extra-EU flights entering and leaving the European Union, for the purposes of combating terrorist offences and serious crime. In addition, Article 2 of that directive provides Member States with the possibility to apply the directive to intra-EU flights also.
The Court has now rule that it considers that respect for fundamental rights requires that the powers provided for by the PNR Directive be limited to what is strictly necessary.
In the absence of a genuine and present or foreseeable terrorist threat to a Member State, EU law precludes national legislation providing for the transfer and processing of the PNR data of intra-EU flights and transport operations carried out by other means within the European Union.
Read the Judgement here