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More than 50,000 companies will have to assess the impact of their activities on the environment in the EU. The first wave began in January after lawmakers overcame right-wing opposition to pave the way for the reporting requirements that will also hit multinational companies.
The attempt by a cross-party group of 44 right-wing and liberal MEPs to block the introduction of new sustainability reporting standards was rejected by more than half of the European parliament on Wednesday.
The resistance to reducing transparency and reporting on green issues comes amid a broader backlash against environmental, social and governance investments, especially in the US but also in Europe.
“Standardized, transparent and comparable data will not only guide companies in their transition, but also inform investors and consumers,” said Tsvetelina Kuzmanova, senior policy advisor at climate think tank E3G.
Initially, more than 11,000 listed companies that must comply from the beginning of 2024, but in 2025 and 2026 the scope will expand to large non-listed companies and listed small and medium-sized enterprises, a total of around 50,000 entities.*
The sustainability reporting standards are part of wider legal proposals designed to push companies to be more transparent when it comes to their climate impact. They determine exactly what criteria companies must report to, such as pollution, water use and impact on local communities.
The framework was already relaxed at its draft stage so that companies can only report their efforts to align with the Paris Agreement’s global warming targets if they are considered “material” to their operations.
The EU has differentiated itself from markets such as the US by requiring companies to report on the impact of climate change and sustainability issues on their operations and the impact their activities have on the environment – a concept known as ‘double materiality’.
The lawmakers who urged rejection of the standards said they burden companies too heavily because they are “complex and large in size,” according to the published resolution. They also undermined Brussels’ efforts to cut red tape amid fears that environmental legislation is harming the competitiveness of EU companies, they said.
The committee said it has “worked to ensure a high level of alignment” with other international reporting standards, such as those presented by the Global Reporting Initiative (GRI) and the International Sustainability Standards Board, so that companies do not face huge different reporting requirements in different countries. Regions.
Eelco van der Enden, CEO of GRI, said Wednesday’s vote “signals the transition from a political debate to the practical implementation of these new rules – which are a game-changer for corporate responsibility, in the EU and globally” .
Tiemo Wölken, a German Socialist MEP, said that if the standards had been rejected, they would have left companies in the dark about how to apply new financial reporting rules.
“In practice, companies would have no legal certainty about how the obligations should be implemented,” he says on X, formerly Twitter.
*This article has been modified from the original to clarify the number of companies that will report from early 2024
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