{"id":2424,"date":"2023-09-19T09:08:11","date_gmt":"2023-09-19T13:08:11","guid":{"rendered":"https:\/\/eptura.wpengine.com\/?p=2424"},"modified":"2024-09-10T00:33:37","modified_gmt":"2024-09-10T04:33:37","slug":"european-esg-regulation","status":"publish","type":"post","link":"https:\/\/eptura.com\/discover-more\/blog\/european-esg-regulation\/","title":{"rendered":"A guide to the latest European ESG regulation"},"content":{"rendered":"

Today, expectations for companies to align their business with environmental, social, and governance (ESG) standards are higher than ever. Organizations are coming under pressure to improve their awareness of sustainability issues and their impact on economic value \u2014 with many struggling to do so.<\/span>\u00a0<\/span><\/p>\n

In response, the European Union recently passed new ESG regulations that may force some companies to restructure their business and revisit compliance efforts in a major industry shake-up.<\/span>\u00a0<\/span><\/p>\n

\"The<\/p>\n

While most organizations publish ESG sustainability reports, one of the current challenges with voluntary ESG reporting is the lack of consistency in the information shared. Businesses can choose which ESG reporting framework to use and what they want \u2014 or don\u2019t want \u2014 to disclose. This makes it harder for investors and stakeholders to compare companies regarding ESG risks and impacts.<\/span>\u00a0<\/span><\/p>\n

One of the biggest challenges is data. A recent <\/span>Dun & Bradstreet survey<\/span> found 47% of companies do not have enough data and 46% are unable to validate and trust their ESG data. These issues can have operational and financial consequences \u2014 from regulatory non-compliance, to fines, and a weakened global supply chain.<\/span>\u00a0<\/span><\/p>\n

Effective Jan. 2024, companies operating in the European Economic Area (EAA) \u2014including those based in the U.S. \u2014 must be more detailed in their sustainability reporting due to the Corporate Sustainability Reporting Directive (CSRD) policy.<\/span>\u00a0<\/span><\/p>\n

What is the Corporate Sustainability Reporting Directive ESG regulation?<\/span>\u00a0<\/span><\/h2>\n

The new CSRD regulation introduces significant changes to what companies must report regarding ESG performance, what data they\u2019ll be required to obtain, and what processes they must have in place.\u00a0<\/span>\u00a0<\/span><\/p>\n

Issues will cover environmental, social, human rights, and governance<\/a> factors. Companies must audit and disclose both the effect their business has on the globe and the impact of these concerns on their business. <\/span><\/p>\n

\"CSRD<\/p>\n

CSRD does not only require EU companies but also non-EU companies with activities in the EEA to file annual reports alongside their financial statements. These reports must be prepared according to the European Sustainability Reporting Standards (ESRS).\u00a0<\/span>\u00a0<\/span><\/p>\n

On July 31, 2023, the European Commission adopted the first set of ESRS. With this soon becoming law, it will apply directly to all 27 European member states but not to the U.K. These standards go far beyond most mandatory and voluntary ESG reporting frameworks in its scope and granularity.<\/span><\/p>\n

What are the new ESG regulations?<\/span>\u00a0<\/span><\/h2>\n

The goal of the reporting directive set by the European Commission is to achieve the <\/span>Green Deal<\/span><\/a>\u2019s target: transform the EU into a modern, resource-efficient, and competitive economy by ensuring:\u00a0<\/span>\u00a0<\/span><\/p>\n