In the context of the European Green Deal, the European Union and its Member States share long-term efforts in building a sustainable economy. A relevant example of this policy is Directive 2022/2464 regarding corporate sustainability reporting. The Directive amends three other directives and a regulation.
In essence, the novelty introduced by Directive 2022/2464 consists of the fact that undertakings must publish reports which include data on their business model and strategy regarding sustainability, time-bound targets related to sustainability of the undertaking, the role of the administration regarding sustainability, including aspects of its expertise and skills in this field, a description of corporate policies regarding sustainability, due diligence, where it is applicable, the actual or potential adverse impacts in connection with the undertaking’s own operations and its value chain and any actions taken by the entity in order to prevent, mitigate, remediate or bring an end to actual or potential negative impacts, along with the result of such actions.
In addition, generally, undertakings must publish their plans for transitioning to a green, circular economy. The European Parliament estimates that approximatively 50 000 companies will be affected by the new framework, up from the 11 700 that were covered by the rules laid out before the Directive entered into force.
In the context whereby developed countries are gradually implementing measures aimed at making their economies sustainable, it is possible that states which do not comply with this global tendency will end up being excluded from the international commerce chain, in a “race-to-the-top” scenario. This is also the opinion of certain financial experts, who believe that non-compliance with this new wave will result in economic isolation of the states that do not adjust their policies in this sense, resulting in a negative economic impact amounting to 10-15% of GDP.
The standards that companies have to fulfil are drafted by the European Financial Reporting Advisory Group (EFRAG), under the oversight of the European Commission.
