The European Commission responds to NGO statement on corporate sustainability reporting

Valdis Dombrovskis, Vice President of the European Commission replied this March to a statement signed by 27 leading NGOs calling on EU policy-makers to clarify the legal framework for company disclosures on Environmental, Social and Governance (ESG) issues.

The letter sent by Mr Dombrovskis makes reference to the consultation and evaluation process that the EU Commission is undertaking to assess the implementation of the Non-Financial Reporting Directive (NFRD), as well as the update of the non-binding guidelines on climate related disclosures. In this regard, the results of the initial research carried out by the Alliance for Corporate Transparency project provide evidence on the most important gaps in the quality of corporate disclosure and suggest priorities for the future development of the legislation. It is essential that the Directive provides more specific rules if the EU Commission wants to succeed in its efforts to create a sustainable financial framework and ensure corporate transparency concerning businesses impacts on the environment and society.

The reality is that most companies have taken a very flexible approach to the new requirements introduced by the NFRD, missing the legislation’s objective and disregarding the non-binding guidelines. As a result, the vast majority of companies’ reports don’t provide useful nor comparable information on salient ESG issues that would allow investors and other stakeholders to understand these companies’ development, performance, position and impact of their activities.

The project will expand the scope of its research in 2019 to analyse the information disclosed by 1000 companies covering all main industrial sectors and European regions. The objective of this initiative is to provide evidence-based recommendations to policy-makers and companies in order to develop the corporate sustainability reporting framework and specify baseline mandatory requirements and metrics. The project will simultaneously organise a discussion process among various stakeholders (including civil society, investors, professional associations and standard-setters) in order to build a consensus on how the legislation should specifically look like.

You can read Mr Dombrovskis response here. The original statement signed by 27 NGOs is also available here.

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