The European Commission today published a proposal that, if approved, would water down environmental transparency rules for corporations. Green groups have decried the move which ignores expert advice and lets big companies off the hook for the majority of their emissions, says T&E.
Last November, the EU’s advisory body EFRAG endorsed a set of uniform environmental, social and governance (ESG) standards that companies would need to disclose in a bid to help investors and consumers make more informed decisions. If comprehensive, these standards could make Europe a global leader in sustainability reporting.
Lifetime emissions – otherwise known as Scope 3 – are all the emissions that come from the up and down the value chain of a certain product. In the case of oil companies and car manufacturers, the majority of their emissions come from Scope 3 – primarily the use of oil-powered cars. EFRAG had among other things recommended that the EU make reporting of these emissions mandatory, in line with existing requirements for investors. The advisory body also suggested getting all companies to report about their decarbonisation plans, and their strategies and actions to address biodiversity loss.
However, under industry and political pressure, the European Commission refused to make these key disclosure requirements mandatory. Instead it decided to leave them all subject to the companies’ materiality assessments and to delay the application of disclosure on Scope 3 emissions of one year for companies with less than 750 employees. This represents a major risk of greenwashing and underreporting by companies, says T&E, and it would make it harder for banks and investors to access quality data for their own reporting requirements.
Giorgia Ranzato, sustainable finance manager at T&E, said: “The European Commission must change course and adopt ambitious sustainability reporting standards. Leaving it up to companies to decide whether they’ll disclose key environmental and social information will let corporate polluters off the hook. Sustainable investors and consumers currently struggle to get a clear picture of companies’ impacts on the people and planet. Backtracking on sustainability reporting would seriously undermine the European Green Deal”.