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More than 50,000 companies must start assessing the impact of their operations on the environment from January, after EU lawmakers overcame rightwing opposition to pave the way for the reporting requirements that will also catch multinational companies.
The attempt by a cross-party group of 44 rightwing and liberal MEPs to block the adoption of new sustainability reporting standards was rejected by more than half of the European parliament.
The resistance to backtracking on transparency and reporting on green issues comes amid a wider pushback against environmental and social and governance investing, particularly in the US but also in Europe.
“Standardised, transparent, and comparable data will not just guide companies in their transition but also inform investors and consumers,” said Tsvetelina Kuzmanova, senior policy adviser at climate think-tank E3G.
The sustainability reporting standards are part of wider legal proposals designed to push companies to be more transparent when it comes to their climate impact. They set out exactly what criteria companies should report on, such as pollution, water use and impact on local communities.
The framework had already been loosened in the drafting stage to allow companies to only report their efforts to come into line with the Paris Agreement goals on global warming if they are deemed “material” to their activities.
The EU has set itself apart from markets such as the US by demanding that companies report on the impact of climate change and sustainability issues on their business and the impact their operations have on the environment — a concept known as “double materiality”.
The lawmakers who pushed to reject the standards said that they placed too much of a burden on companies because they are “complex and of a high quantity”, according to the resolution published. They also undermined Brussels’ effort to cut red tape amid fears that environmental legislation is hurting the competitiveness of EU companies, they said.
In addition to the 50,000 listed companies that will have to comply from next year, the scope will expand to large non-listed companies and listed small and medium enterprises in 2025 and 2026.
The commission said that it has “worked to ensure a high level of alignment” with other international reporting standards such as those presented by the Global Reporting Initiative (GRI) and International Sustainability Standards Board so that companies do not face vastly different reporting requirements in different regions.
Eelco van der Enden, chief executive of GRI, said that Wednesday’s vote “signals the transition from political debate to practical implementation for these new rules — which are a game-changer for corporate accountability, in the EU and globally”.
Tiemo Wölken, a German socialist MEP, said that if the standards had been rejected companies would have left companies in a limbo about how to apply new financial reporting rules.
“In practice, companies would have no legal certainty as to how the obligations should be implemented,” he said on Twitter, formerly X.