Industry welcomes EU sustainability reporting proposal to channel investment toward environment

21 Mar 2022 --- Large companies in the EU may soon need to publicly disclose detailed information on the way they manage social and environmental risks. Following this proposal from the European Parliament, which aims to increase transparency for investors and the public, Nestlé, Bioiberica and Lonza share their reactions with NutritionInsight, spotlighting the importance of clear communication.

“Across the nutrition industry, a rising number of consumers are making purchasing decisions based on products’ ethical and sustainable credentials,” notes Jaume Reguant, healthcare director at Bioiberica.

He argues this is why it’s more important than ever for manufacturers to demonstrate that the businesses with which they partner uphold the highest standards of operation across their entire supply chain.

However, the European Parliament argues that information currently disclosed by large companies across all industries is largely insufficient for investors and the public.

Therefore, its Legal Affairs Committee has voted in favor of the Corporate Sustainability Reporting Directive (CSRD). All electricity at Bioiberica’s production plant in Palafolls comes from 100% renewable sources. 

Creating comparable data
If agreed with EU governments, the bill will make businesses more accountable for their impact on people and the planet while giving investors and the public access to comparable, reliable and easily accessible information on sustainability.

“Reported data can be hard to compare from one company to the next. Investors need to know about the impact that companies have on people and the environment to meet their own disclosure requirements and be better informed on sustainability risks,” notes the European Parliament.

Such information allows money to be channeled toward environmentally-friendly activities. Problems in the quality of reporting also create a public accountability gap.

A spokesperson for Nestlé notes that one of the current challenges with reporting is the lack of a globally harmonized definition of environmental, social and governance (ESG) and what it should cover.

“There are however various voluntary or regulatory frameworks that we adhere to in order to improve transparency around our impact. In addition, we are currently involved in helping develop potential reporting frameworks on nature.”

Lonza also emphasizes that it is working to ensure transparency by reporting in line with the Global Reporting Initiative (GRI) Standards, which represent the industry standard for reporting on economic, environmental and social indicators. Last week, it was also recognized by Ethisphere as one of the 2022 World’s Most Ethical Companies.

The next step in evolution
Rapporteur Pascal Durand says that the CSDR is long-awaited by business and investment leaders and is a further step in the evolution of Parliament’s business model and investment practices.

“The balanced compromise supported by a large majority of political groups should ensure the EU is well equipped to maintain our legal, competitive, environmental and social standards and values, and to negotiate at international level so that they do not disappear or get absorbed into global systems of lower standards.”

Commenting directly on the CSDR, Lonza’s spokesperson says the company will review the European Union’s guidance once more details are available to assess additional reporting requirements. “[We can then] build these items into our sustainability reporting.”

The Nestlé spokesperson adds: “We note the publication of the European Commission’s proposal for a CSDR and continue to follow the legislative process. This includes assessing its potential implications, but we are not in a position to comment further at this stage.”Nestlé aims to halve its absolute emissions by 2030 and achieve net-zero by 2050 (Credit: Nestlé).

Potential for extra agricultural guidelines
Once the Parliament as a whole approves its negotiating position, talks with member states can begin. The new CSRD rules should cover all large companies (as defined in the Accounting directive), whether listed or not, members of European Parliament (MEPs) have already agreed. 

They have also voted to include non-EU companies operating in the internal market. At this stage, MEPs believe that small and medium-sized undertakings should be able to adhere to reporting standards on a voluntary basis.

The European Financial Reporting Advisory Group (EFRAG) would be tasked with developing the mandatory EU sustainability-reporting standards. These will cover environmental matters, social affairs, including gender equality and diversity, and governance, including anti-corruption and bribery, which the Commission would then adopt by delegated acts.

To achieve this, EFRAG’s funding should be increased and annual discussions held with Parliament urge MEPs.

The Commission has also been asked to establish additional reporting criteria for companies with relevant activities in high-risk sectors, such as agriculture and minerals. 

MEPs further propose giving companies an additional year to adapt to the new rules, with the first public reports due in 2025.

By Katherine Durrell