EU agrees new disclosure rules for large businesses

BRUSSELS – From 2024, large fashion retailers will have to publicly disclose information on the way they operate and manage social and environmental risks after MEPs and EU governments struck a provisional agreement on new reporting rules. The Corporate Sustainability Reporting Directive (CSRD) will aim to make businesses more accountable by “obliging them to disclose their impact on people and the planet.” An EU statement said, “this aims to end greenwashing and lay the groundwork for sustainability reporting standards at global level.”

As well as impacting large European fashion groups, the new rules will also hit foreign fashion retailers selling into the European market. This is because MEPs insisted that non-EU companies with substantial activity in the EU market (€150m in annual turnover in the EU) will have to follow equivalent reporting rules. Member states will supervise compliance with the help of the European Commission.

The new EU sustainability reporting requirements will apply to all large companies (with over 250 employees and a €40m turnover, as defined in the Accounting directive), whether listed or not. Companies will have to report on their impact on the environment, human rights, social standards and work ethics, based on common standards.

The agreement stipulates that the information companies provide on their impact on the climate or human rights will be independently audited and certified. Financial and sustainability reporting will be on an equal footing and investors will have be allowed to request, “access to reliable, transparent and comparable data.”

A handful of SMEs listed on public markets will be subject to lighter reporting standards but MEPs secured the possibility for them to opt out of the new system until 2028.

Parliament and Council will have to formally approve the agreement before it is published in the EU Official Journal. It will enter into force 20 days after publication and its provisions will have to integrated into member states’ national laws after 18 months.