Legislation leads to our legacy – How four EU changes will affect our sustainable future

  • 4 months ago
  • 6 Minutes to Read

New EU legislation could require up to 49,000 companies to report on sustainability commitments. These changes come after a flurry of activity from the EU, with many new and updated sustainability directives that will impact how a business operates and reports on its sustainability efforts. It’s important to know how it could affect businesses going forward.

What’s New From The EU

  • Corporate Sustainability Reporting Directive (CSRD)
  • Supply chain due diligence and reporting
  • Sustainable Finance Disclosure Regulation (SFDR)
  • The EU Deforestation Law (EUDR)

So what are the changes for EU business, how are we building this into our consultancy offering, and how can we best communicate these changes? Keep scrolling to learn about the updated legislation.

Corporate Sustainability Reporting Directive (CRSD)

What is it?

Designed to make corporate sustainability reporting consistent and standardised, such as financial accounting and reporting. It will take effect in 2024 and requires corporate sustainability reporting in 2025 (based on corporate fiscal year 2024)

A directive that requires companies to track and report their ESG activities using metrics outlined in the European Sustainability Reporting Standards (EU ESRS).

What does it mean for business?

Companies operating in the EU will need to file an annual report on their impact as a business. Depending on the business size, there are different criteria and frameworks.

Who does it affect?

  • Companies listed on regulated markets in the EU (apart from listed micro-enterprises)
  • Large companies that meet two out of the three criteria below:
    • more than 250 employees
    • a turnover of over €40 million
    • €20m total assets.
  • Listed SMEs (there will be a transitional period when SMEs can opt out until 2028).
  • Non-EU companies with a net turnover of €150 million in the EU and at least one subsidiary or branch in the EU.

Supply chain due diligence and reporting

What is it?

Parliament agreed on a provisional deal around new rules on corporate responsibility due diligence.

The due diligence directive will set obligations for large companies regarding actual and potential adverse impacts on human rights and the environment with respect to their operations, those of their subsidiaries, and those carried out by their business partners.

What does it mean for business?

Businesses will have obligations regarding actual and potential adverse impacts on the environment and human rights for their chain of activities. It covers the upstream business partners (i.e. those who supply materials) and partially the downstream activities, such as distribution or recycling.

The directive also lays down rules on penalties and civil liability for infringing those obligations; it requires companies to adopt a plan ensuring that their business model and strategy are compatible with the Paris Agreement on climate change.

Who does it affect?

  • Large EU businesses with over 500 employees with a net worldwide turnover of £150 million.
  • For non-EU companies, it will apply if they have over €150 million in net turnover generated in the EU three years from the directive’s entry into force.

Find out more about the corporate sustainability due diligence deal set up to protect the environment and human rights by heading to this link. You can also find a checklist with key questions and best practices on the updated legislation here.

Sustainable Finance Disclosure Regulation (SFDR)

What is it?

The European Commission is currently conducting a comprehensive assessment of a financial reporting framework, looking at usability and how the Regulation can help tackle greenwashing.

A framework for how financial businesses have to disclose sustainability information. It will help people make informed choices about investing in companies and projects supporting sustainability initiatives. It also enables investors to properly assess how sustainability risks are integrated into the investment decision process. The aim is to attract private funding that shifts to a net zero economy.

What does it mean for business?

Finance businesses will need to report on their sustainable investments in a standardised format.

Who does it affect?

  • Investments Fund Managers
  • Banks
  • Financial consultancy firms
  • Administrators of pension funds
  • Insurers 

Learn more about how finance businesses and advisers will have to communicate sustainability information to their investors by heading to this link.

The EU Deforestation Law

What is it?

A landmark piece of legislation. EUDR aims to curb the EU’s contribution to global deforestation and biodiversity loss. Unless strict supply chain requirements are achieved, sales and exports of products associated with deforestation will be prohibited.

What does it mean for business?

Businesses that use, sell, export and import things like coffee, cocoa, cattle, palm oil, and soy must meet the supply chain due diligence requirements.

Who does it affect?

Multiple industries, especially those that produce or sell Fast Moving Consumer Goods (FMCG).

Knowing all this, this is how we’re taking it into consultancy sessions with our clients:

  • Develop creative solutions that help engage teams to embrace compliance.
  • Identify how businesses can use compliance as communication opportunities internally and externally.
  • Create communication tools that bridge the gap between any restrictions compliance caused and trying to build engagement around sustainability.

Here are our tips for organisations looking to communicate these changes:

  • Know your audience. Using complex language can disengage readers. Try sticking to terminology that will resonate with your readers.
  • Legislation can be dull; breathe creativity into it. Whether you’re outlining the EU changes to your stakeholders, suppliers or team, consider exploring how you can use creativity to help communicate the critical updates. You could use graphic design to create infographics or create a short video to ensure any complexities are shared in an easy-to-understand format.
  • Be transparent in your comms. Remember the age-old saying: “It’s about the journey, not just the destination.” Well, this rings true when outlining your sustainability efforts with your audience. Share details with your customers, clients and community about your plans to stay compliant with the latest EU changes.

Here’s how legislation leads to our legacy.

Embracing compliance and embedding it into how you do business not only deepens your integrity and trust in your business but adds value.  This value enables you to retain staff, attract new employees, widen your customer base, build brand love, establish collaborative partnerships and so on.

Communicating the what, the why, and the how you are a better business through compliance builds credibility, and doing things before you have to means you lead the way for other companies.

Compliance is always a good thing, but it can present some challenges. Your freedom to be creative could be compromised, which might have a negative effect on how audiences engage with the report. 

Hey there, don’t be a stranger. We would love to stay in contact with you ????

If you want to discuss how your business should embrace compliance or communicate about it, then reach out to Jo, our sustainability strategist, for a chat. Email joanne@enviral.co.uk to start the conversation.

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Written by
Bonnie Middleton