European Council Approves New Sustainability Reporting Requirements

The European Council has issued final approval to a new sustainability reporting directive that expands corporate reporting requirements as well as the number of companies that will have to participate.

The corporate sustainability reporting directive aims to strengthen reporting rules introduced in the 2014 non-financial reporting directive, which the Council said "are no longer tailored to the EU's transition to a sustainable economy." Requirements in the directive include issuing reports on Scope 3 carbon emissions, which include emissions from business travel, and reports on social and governance issues, such as diversity and inclusion and labor treatment.

The directive will apply to about 50,000 companies doing business in the EU, compared with about 11,700 that were affected under the previous directive. It affects all large companies, both public and private; all companies listed on regulated markets excluding "micro undertakings"; small and midsize companies based on their "specific characteristics"; and non-European companies that have at least €150 million in net turnover in the EU and one or more subsidiary or branch in the EU meeting certain thresholds.

"The new rules will make more businesses accountable for their impact on society and will guide them towards an economy that benefits people and the environment," Czech industry and trade minister Jozef Síkela said in a statement. "Data about the environment and societal footprint would be publicly available to anyone interested in the footprint."

EU member states already unanimously agreed on the CSRD proposal in February, and the Council and European Parliament had a provisional agreement on it in June. Following final approval by the Council this week, the European Parliament president and Council president will sign it, after which member states will implement the new rules over the following 18 months. Compliance requires will be phased in over the next several years.

Companies already required to report under the previous rules must have the new reporting by 2025, for the 2024 financial year. Large companies not covered by the previous directive must begin reporting in 2026, followed by SMEs in 2027 and non-EU companies in 2029.

In a statement on Tuesday, the Global Business Travel Association said it welcomed the new directive.

"GBTA supports the CSRD and the efforts to increase both the scope of sustainability reporting and companies required to submit a report," according to GBTA regional VP for Europe, the Middle East and Africa Catherine Logan. "The expanded level of reporting will enable investors and procurement professionals to benchmark new suppliers not only [on] financial metrics, but also on a supplier's purpose, ESG policy and sustainability credentials."