It is a fact that until quite recently, managing and executive directors believed that Corporate Sustainability/ESG matters, and the Corporate Sustainability Responsibility at large, were more of a trend than the core basis on which businesses now operate.
It is suggested, without further delay, to reconsider and reassess their business models effectively because of embracing a sustainable, updated model.
The recent preliminary agreement between the European Council and the European Parliament on adopting the revised Corporate Sustainability Reporting Directive (CSRD) will be the new corporate accountability guide regarding all Sustainability issues.
The agreement stipulates that an extensive number of companies must be accountable for all matters falling within the concept category of Sustainability, namely the Environment, Society and Human Rights and Corporate Governance.
The CSRD also requires that sustainability reports be certified by an accredited independent consultant or auditor, easily accessible and available digitally to all stakeholders, be it investors or ordinary consumers.
The Directive should be implemented by all large companies and all listed companies.
Now, with the new amendment, even Small and Medium Enterprises (SMEs) will also be responsible for evaluating information at the level of their subsidiaries.
The implementation of the CSRD will take place in three stages:
- January 1, 2024, for companies already subject to the Non-Financial Reporting Directive (NFRD).
- January 1, 2025, for companies not currently subject to the Non-Financial Reporting Directive.
- January 1, 2026, for listed Small and Medium Enterprises (SMEs), small and non-complex credit institutions and affiliated insurance companies.
The CSRD is one more tool with which the European Union and its Member States aim to raise more private investment funds, tackle climate change and support the 2016 Paris Agreement while aiming to achieve the United Nations 17 Sustainable Development Goals (SDGs).
It is recalled that the EU has committed through the European Green Deal to direct one-third of the Next Generation EU recovery package of €1.8 trillion towards its implementation.
The EU’s aim is for significant Funds from the private sector to step up the effort towards a climate-neutral and efficient environment, with respect for natural resources and a fair distribution of economic benefits.
On this aspect, about a year ago, the European Commission published additional clarifications on its policy context on sustainable finance to support economic growth while reducing pressure on the environment and taking into account social and governance aspects, i.e., financing the transition to a Sustainable Economy.
In Cyprus, most companies will not be required to submit the relevant report until 2026.
However, in the eyes of consumers, their partners, associates, and investors, organisations will still be accountable to the same regulations and obligations.
“Greenwashing is over,” Bruno Le Maire, France’s finance minister who chairs the Council, stated boldly.
Even though the risk of Greenwashing may not exist legally yet, in terms of reputation and good name, the damage it can cause is manifold.
By Nicole K. Phinopoulou, Lawyer, Banking & Financial Services, Corporate Sustainability Compliance & ESG, LLB. LLM (UCL), LPC, CISL, University of Cambridge
