News #140 - Lowcarbon leader harder to spot on EU sustainability cutback

A reduc­tion in scope of the European Union’s sus­tain­ab­il­ity dis­clos­ure rules may cut red tape for busi­nesses but investors say less trans­par­ency will make it harder to identify which com­pan­ies are genu­inely mov­ing toward low­car­bon oper­a­tions.

After months of pres­sure from com­pan­ies and gov­ern­ments, the European Union agreed on Tues­day to sharply scale back two flag­ship sus­tain­ab­il­ity dis­clos­ure laws.

The changes affect the Cor­por­ate Sus­tain­ab­il­ity Report­ing Dir­ect­ive (CSRD) ­ the EU’s rule book that requires large com­pan­ies to pub­lish detailed inform­a­tion on their envir­on­mental, social and gov­ernance per­form­ance, and the Cor­por­ate Sus­tain­ab­il­ity Due Dili­gence Dir­ect­ive (CSDDD), which requires firms to check sup­ply chains for human right sab­uses and envir­on­mental harm.

The CSDDD had also required com­pan­ies to have and imple­ment a plan to cut emis­sions to net zero, but that oblig­a­tion has now been dropped.

Less reli­able
Water­ing down the rules means investors will have less reli­able, com­par­able inform­a­tion on com­pan­ies’ sus­tain­ab­il­ity efforts, mak­ing it harder to tell which busi­nesses are ser­i­ous about cut­ting emis­sions, man­aging cli­mate risks and envir­on­mental, social and gov­ernance stand­ards.

Eleanor Fraser­Smith, Head of Sus­tain­ab­il­ity at investor Vic­tory Hill Cap­ital Part­ners, said the weak­en­ing of the rules would “leave investors with poorer inform­a­tion for decision­mak­ing”.

“Yes, EU report­ing has become overly com­plex, but the solu­tion is clearer guid­ance and bet­ter struc­ture, not dilu­tion. Step­ping back from require­ments doesn’t make the sys­tem easier,it just makes it less coher­ent.” Some investors high­lighted the scrap­ping of cli­mate trans­ition plans in the EU’s due dili­gence law as a major con­cern.

“Without cred­ible trans­ition plans, Europe could lose com­par­ab­il­ity, vis­ib­il­ity on pro­gress and a poten­tially use­ful tool to access trans­ition fin­ance. Investors rely on these plans to assess cli­mate risks and oppor­tun­it­ies,” said Car­lot­aG­ar­cia­Manas, head of cli­mate trans­ition at Brit­ish investor Royal Lon­don Asset Man­age­ment, which man­ages around £180 bil­lion ($239.53 bil­lion).

Hortense Bioy, Head of Sus­tain­able Invest­ing Research at industry tracker Morn­ing­star Sus­tainalyt­ics, said the changes would put the onus on investors to assess whether com­pan­ies fol­low through on their prom­ises.

“The respons­ib­il­ity will increas­ingly fall on asset man­agers offer­ing these strategies to hold com­pan­ies account­able.”

Pres­sure on thresholds
Under the changes to CSRD, only com­pan­ies with more than 1,000 staff mak­ing more than €450 mil­lion would report, with fin­an­cial firms excluded.

For CSDDD, the threshold was even higher at 5,000 staff and €1.5 bil­lion in net turnover, with a delayed start­date and breaches dealt with at the national rather than EU level, with added flex­ib­il­ity for com­pan­ies on what to report.

Hans Stege­man, chief eco­nom­ist at sus­tain­ab­il­ity­focused lender Tri­odos Bank, said the moves rep­res­en­ted a “sig­ni­fic­ant weak­en­ing of essen­tial sus­tain­ab­il­ity rules”.

“Legis­la­tion meant to com­bat child labour, envir­on­mental pol­lu­tion, and exploit­a­tion in sup­ply chains is being hol­lowed out. The so­called ‘anti­look­ing­away law’ has had its scope drastic­ally lim­ited,” he said.

Debated since Feb­ru­ary, the cuts to the EU laws fol­low months of pres­sure from com­pan­ies and gov­ern­ments, includ­ing the U.S. and Qatar, who warned Brus­sels that the rules risked dis­rupt­ing their gas sup­plies to Europe. Industry groups wel­comed the move as relief from Europe’s com­plex sus­tain­ab­il­ity regime.

Source: https://www.pressreader.com/india/the-hindu-international-9BN2/20251211/282162182540968 

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