Opening remarks by Commissioner McGuinness at the European Parliament's Committee on Legal Affairs
Dear Chair, thank you very much, and good evening colleagues. Good to see you here.
I hope you all had a nice summer break and that we all move into this next phase of the legislative process at least rested.
I just want to open by reminding us that in February of last year, we discussed the negotiations on the Corporate Sustainability Reporting Directive.
Later that year, you reached agreement with the Council on the CSRD – and this was a landmark achievement.
I think it's worth recalling that.
So now we are at the next step, if you like: the European Sustainability Reporting Standards.
The Commission submitted the delegated act on these standards for your scrutiny on August 21st, as the Chair has said.
The standards meet the mandate set in the CSRD as agreed by the co-legislators.
And these standards are a vital tool in the fight against greenwashing.
They will also bring coherence for companies that up till now have had to cope with many overlapping and competing sets of voluntary standards.
Multiple standards led to additional reporting costs for companies and information that was not comparable.
So today and briefly, I want to outline the Commission's proposed draft delegated act; also to look at global alignment; and the next steps then in the sustainability reporting process.
So as you know, the Commission made changes to the drafts that were prepared by EFRAG.
We struck a balance: maintaining the policy objectives set out in the CSRD while also making sure that these standards are proportionate.
In striking this balance, we protected the integrity of the standards, and all twelve standards are being adopted at the same time, covering the full range of environmental, social and governance issues.
There are three categories of modifications that the Commission made.
First, we introduced additional phase-in provisions for some of the most challenging reporting requirements.
They come on top of the phase-in provisions already proposed by EFRAG.
And they apply mainly to smaller companies within the scope – those with fewer than 750 employees.
Second, we gave companies more flexibility to decide exactly what information is relevant to their specific situation.
And this will avoid costs associated with reporting information that may not be relevant.
Third, we made a limited number of the reporting requirements voluntary instead of mandatory.
Again, the focus is on the most challenging and costly reporting requirements.
The Commission worked to align European and global standards as much as possible.
Specifically, we aligned as much as we could with the International Sustainability Standards Board, the ISSB, and the Global Reporting Initiative.
The aim is that companies using European standards automatically comply with ISSB standards.
So now to the next steps.
Companies need additional guidance on how to apply the standards.
I have asked EFRAG to focus on developing guidance on assessing materiality and reporting on value chains.
EFRAG expects to publish draft guidance for public consultation shortly.
EFRAG will also shortly set up a dedicated section of its website for technical questions that companies or other stakeholders have about the application of the European standards.
Where appropriate, the Commission may provide information around the legal interpretation of the European standards.
Looking ahead, we have asked EFRAG to prioritise work on standards for SMEs.
First are the proportionate standards for listed SMEs that fall under the scope of the CSRD.
Second are the separate, simpler standards for non-listed SMEs.
I think as a lot of you in this room know, most SMEs do not fall under the scope of the CSRD.
But they may be asked for information by banks, by larger company customers and other stakeholders.
These simpler standards will help SMEs deal with those requests – so that they can play their part in the transition to sustainability.
But a key point: these simpler standards will remain voluntary for SMEs.
Finally, you know that the Commission's efforts overall to reduce the reporting burdens.
As part of this work, we are preparing a proposal for a decision to postpone the deadline for sectoral standards from 2024 to 2026.
This will mean that companies can concentrate on applying the first set of European standards.
This will also free up EFRAG to concentrate on supporting companies as they apply the first set of European standards.
And because this is a first, I think our companies need as much support as we can provide for them.
In closing, I want to again thank colleagues, and the rapporteur of the CSRD, Pascal Durand, for their work to get us to this stage, which has been exceptional.
And again I really want to thank you for your continued commitment to putting sustainability reporting on an equal footing with financial reporting.
And if we look at what we've done together, this is an enormous step forward.
Because traditionally we look at figures only when we analyse companies.
Now we will need to take account of sustainability matrix as well.
Companies in the EU will soon be preparing their sustainability reporting according to these standards.
And I believe they will make a real difference on the road to a more sustainable economy.
So thank you for this opportunity. I look forward to both your questions and your comments.
Thank you Chair.
