EU Reporting Standard Cut in Half

What’s in this week’s newsletter:

1. EFRAG releases a progress report on simplifying reporting standards

2. The EU Commission confirms its position on the Omnibus

3. The EU withdraws and then quickly reinstates its Green Claims Directive

4. Democrat-led states sue the Trump administration for revoking federal grants

5. Show your stripes day marked by record-breaking global heatwaves

As part of the EU’s drive to simplify its sustainability rules, the European Financial Reporting Advisory Group (EFRAG) was asked by the EU Commission to simplify the European Sustainability Reporting Standards (ESRS) it created. 

Last week, they released a progress report on what they have achieved so far. The main takeaway is that they plan to reduce mandatory data points (currently more than 1,100) by 50% using 6 levers:

1. Making double materiality easier: Simplify how companies decide what to report, focusing on what’s truly important and cutting unnecessary detail.

2. Better readability/conciseness of the sustainability statements: Make reports shorter and clearer - e.g., with executive summaries and appendices for detailed info.

3. Reduce duplication: Eliminate duplication between general and topic-specific standards.

4. Improved clarity: Separate mandatory and optional guidance to ease burdens and simplify audits.

5. Additional burden reliefs: Introduce exemptions for hard-to-obtain data and non-material activities to reduce the reporting burden, and provide clarity on how to handle acquisitions and disposals when reporting. 

6. Increase interoperability: Improve compatibility with international standards like the International Sustainability Standard Board (ISSB) and GHG Protocol to ease global reporting

Outgoing Chair of EFRAG’s Sustainability Reporting Board, Patrick de Cambourg, said, “This Progress Report reflects our commitment to ensuring that the ESRS remains both effective and proportionate.”

The next step in the process is incorporating feedback, aiming for approval by mid-July and finalization by the end of July. Then there will be a (very short) public consultation before the new streamlined ESRS is finalized in October. 

The progress report acknowledged the tight timeline, saying that they would consider extending the timeline as they “consider that a longer timeline could contribute to a more secure management of quality.”

2. EU Commission’s Omnibus Proposal

Member states in the EU Council confirmed their position on the Omnibus this week. The negotiating mandate is similar to the draft proposals released last week, with some additions. The main takeaways are:

CSDDD

• The Corporate Sustainability Due Diligence Directive (CSDDD) will apply to companies with more than 5,000 employees and €1.5 billion in turnover.

• Due diligence is limited to tier 1 suppliers unless there is verifiable risk.

• The transposition of the CSDDD to member states will be delayed until 2028.

• The harmonized EU civil liability regime is removed, leaving liability rules to be determined by member states.

CSRD

• The Corporate Sustainability Reporting Directive (CSRD) will apply to companies with over 1,000 employees, and the turnover threshold is raised to over €450 million. Small to Medium Enterprises (SME)-listed firms are exempt. 

• Climate transition plans (CTP) required by the CSDDD will be aligned with the CSRD requirements and delayed until 2030.

Adam Szłapka, Minister for the European Union of Poland, said, “Today we delivered on our promise to simplify EU laws. We are taking a decisive step towards our common goal to create a more favorable business environment to help our companies grow, innovate, and create quality jobs.”

Next up is the EU Parliament’s position, which may not be available until October. That will trigger a debate with the Council’s version, which will be overseen by the new EU Council Presidency of Denmark. The main debating point will likely be the scope of the CSRD and CSDDDD.

MEP Lara Wolters delivered an impassioned speech, railing against the ongoing Omnibus negotiations, saying, "The vision put down here would remove any serious action from companies and any serious consequence for blatantly disregarding the law."

3. A Quick U-turn on the EU Greenwashing Directive

Last week, we shared that the U.S. SEC withdrew its greenwashing rule. Then, on Friday, it was widely reported that the EU had withdrawn a similar anti-greenwashing directive. 

The EU Green Claims Directive would have required businesses to substantiate green claims, like zero waste, low emissions, etc., with evidence - thus, protecting consumers from greenwashing. But, because of its impact on small companies, it has faced fierce opposition.

After the media reported that the EU removed support, Italy withdrew its support for the Directive, depriving it of its majority and halting discussions. 

Then, on Monday, after uproar from some MEPs in EU Commissioner Ursula Von der Leyen’s coalition, it was revealed that the EU Commissioner actually did not withdraw her support for the Green Claims Directive. A Commission spokesperson was forced to clarify the situation, saying, “At no point has there been a backtrack on commitment to the Green Claims [Directive].” 

4. Climate In US Courts

Twenty-one Democratic-led states are suing the Trump administration for allegedly misusing a regulatory clause to revoke federal grants from jurisdictions with environmental policies that the administration opposes. The lawsuit claims these cuts violate congressional intent and were carried out without notice or justification, depriving states of essential public funding.

Meanwhile, oil and gas companies threatened with state-backed lawsuits are claiming their free speech is being violated through state anti-SLAPP (Strategic Lawsuit Against Public Participation) rules. SLAPPs are a legal tactic used to tie up activists in costly legal proceedings, discouraging their activism and legal challenges. SLAPPs are banned in some states, which oil and gas companies argue violates their First Amendment rights. 

5. Show Your Stripes Day

June 21st was the annual ‘Show Your Stripes’ day - a day marking the advance of climate change using the image created by Ed Hawkins, which shows the increase in global temperatures since records began. 

This year’s Show Your Stripes day was marked by heat waves around the globe. Record-breaking heat waves swept across the U.S., the EU, and China, causing energy and health issues. 

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer. 

Other Notable News:

Global Weirding

• Nearly a third of Tuvalu natives sign up for a climate-related Australian visa as the low-lying Pacific island faces sea-level rises.

Sustainability Regulations

• South Korea is set to release Asia’s first due diligence rule. The rule would require businesses with over 500 employees to identify and prevent environmental and social issues in their supply chains, while SMEs would be exempt. 

Energy Transition:

• New York State confirms it is building its first nuclear energy plant in over 15 years. Renewable energy groups condemn the decision. 

• The Greek Prime Minister also stated that his country is seeking to reverse a long-standing aversion to adopting nuclear power.

Trump 2.0

• The Trump administration reversed a rule from the Clinton Administration and opened up 58 million acres of protected land for logging and infrastructure. 

Sustainability Reporting

• The International Sustainability Standards Board (ISSB) released new guidance for reporting climate transition plans aligned with its acquisition of the Transition Plan Taskforce (TPT) framework last year. 

• The UK released the draft of its ISSB-aligned UK Sustainability Reporting Standards - the comment period will close on September 17th.

• Singapore released draft guidance on how companies can use carbon credits in their reporting - the comment period closes July 20th. 

Sustainability Research

• A new poll finds that over half of North Carolina voters want to keep the Inflation Reduction Act. The state has created 17,000 new jobs as a result of the bill.

Sustainability Articles

• In the face of sustainability headwinds, CSOs are recalibrating their role to increase their impact.

Notable Podcasts: 

• In this week’s episode of Bloomberg’s Zero podcast, the hosts ask if China’s emissions have peaked yet. According to guest analyst Lauri Myllyvirta, China’s huge deployment of renewables and electrification of everything means their emissions will peak soon if they have not already.

• This week’s episode of the Outrage and Optimism podcast showcases some of the goings-on at this year’s London Climate Week. The podcast team speaks to some of the innovative tech entrepreneurs at the event, introducing new tech from bio-based foams to paper-based electronic sensors, and from temperature-sensitive food labels to AI water management.

Notable Jobs:

• Sustainability - Strategy & Operations Enterprise Strategy & Value Senior Associate, PwC, Multiple Locations, U.S.

• Chief Resilience Officer, City of Sanibel, Sanibel, FL

• Head of Impact, Canopy Planet, Remote, Canada

• ESG Research Analyst, Pimco, Newport Beach, CA

• Director, Sustainability Communications, Citigroup, New York, NY

• Manager, Energy, We Mean Business Coalition, Remote, US

• Senior Coordinator, Sustainability, NASCAR, Charlotte, NC

• Climate Program Manager & Analyst, TIME, New York, NY

• Director, Sustainability Disclosure and Ratings, Western Digital, San Jose, CA