Tim Mohin: ESG Backlash Hits Europe, Fails. Standards Clash
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Has the ESG backlash hit Europe? After spearheading the climate and sustainability agenda for years, a proposal to block Europe’s ESG reporting rules was narrowly defeated, and another proposal to delay its implementation is moving ahead.
A cross-party group of 44 rightwing and liberal MEPs attempted to block the adoption of new sustainability reporting standards. The move was rejected with 359 votes for adopting the standards and 261 against. The vote means that the European Sustainability Reporting Standards (ESRS) has its final approval, and an estimated 50,000 companies will have to start gathering ESG data in 2024.
The motion to block the reporting standards was put forth by lawmakers mainly representing the EU Parliament’s largest party, the center-right European People’s Party (EPP), which said the rule would put a “high administrative burden” on companies and go against the EU’s goal of reducing reporting obligations and cutting red tape.
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The Commission had already watered down the proposal initially drafted by the EU accounting advisory body EFRAG, but that did not stop the move to block the standards. (A separate draft EU law, the corporate sustainability due diligence directive (CSDDD), is also facing EPP opposition).
Also this week, the Commission proposed delaying key parts of the EU’s Corporate Sustainability Reporting Directive (CSRD). Industry sector-specific reports and non-EU company reporting will both be delayed two years. The announcement was made as part of the EU’s 2024 Work Program.
Mairead McGuinness, the European commissioner responsible for the ESRS (To clarify, the ESRS are the reporting standards companies will use to report to the CSRD), said, “I did listen carefully (to concern among businesses), and what we have at the moment are very proportionate standards.”
While conservative interests in many European countries are pushing back, the bulk of the European reporting scheme is moving ahead as planned.
This Smart Read article is contributed by Tim Mohin, Global Sustainability Leader, BCG. Every week ESG News delivers smart commentary from ESG practitioners and experts to unpack issues of the week. Email here if you are interested in submitting an article [email protected]