Commission Delegated Regulation (EU) 2022/1288 of April 6, 2022, supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council as regards regulatory technical regulations, by specifying the details of the content and presentation of information in relation to the "do not significantly disrupt" principle, by specifying the content, methodologies and presentation of information in relation to sustainability indicators and adverse impacts on sustainability, as well as the content and presentation of information in relation to the promotion of environmental or social characteristics and sustainable investment objectives in pre-contractual documents, on websites and in regular reports (Text with EEA relevance)

This regulation enters into force on the twentieth day after its publication in the Official Journal of the European Union. This regulation applies from 1 January 2023.

Commission Regulation (EU) 2022/1288 focuses on improving transparency in the field of sustainability in the financial services sector. The goal is provide end investors with clear, concise and understandable informationto be able to do informed investment decisions. The Regulation supplements and specifies the rules set out in Regulation (EU) 2019/2088 of the European Parliament and of the Council.

The Regulation addresses the following key aspects of sustainability disclosure:

• "Do not significantly violate the principle": sets out details of the content and presentation of information in relation to this policy.
• Sustainability indicators: specifies the content, methodologies and presentation of information regarding sustainability indicators and adverse impacts on sustainability.
• Pre-contractual documents: Defines the content and presentation of information on the promotion of environmental or social properties and sustainable investment goals in pre-contractual documents.
• Websites: Establishes rules for publishing information on the websites of financial market participants.

The regulation introduces the obligation for financial market participants to publish information on the main adverse effects their investment decisions on sustainability factors. This information must be published on the website in a special section entitled "Statement on the main adverse effects of investment decisions on sustainability factors". The statement must be published every year until June 30, while it refers to the period from January 1 to December 31 of the previous year.

Regulation further adjusts the presentation of information about:

• Financial products promoting environmental or social properties: Determines the format and content of pre-contractual information as well as information published in regular reports.
• Financial products whose goal is a sustainable investment: Establishes the format and content of pre-contractual information, as well as information published on websites and in regular reports.
• Financial products with investment options: Defines the rules for the publication of information about products that offer investors different investment options, while also promoting environmental or social characteristics, or which aim at sustainable investment.

The regulation provides detailed rules for calculation and presentation of indicators of the main adverse impacts on sustainability factors. These indicators are divided into three categories:

• Indicators applicable to investments in companies
• Indicators applicable to investments in states and multinational companies
• Indicators applicable to investments in real estate

The regulation also emphasizes the importance of engagement policies, which should be introduced by financial market participants with the aim of reduce identified major adverse impacts on sustainability factors.

An important part of the regulation is also the requirement to publish information on the extent to which investments are made in environmentally sustainable economic activities in accordance with the EU taxonomy set out in Regulation (EU) 2020/852. Financial market participants must also provide information on methods and data sources used to measure and monitor the sustainability of their investments.

The Regulation entered into force on the 20th day after its publication in the Official Journal of the European Union and it applies from 1 January 2023. His goal is increase transparency and accountability in the area of sustainability of financial investments and help investors make more informed decisions.

Regulation of the European Parliament and of the Council (EU) 2019/2088 (SFDR) Sustainable Finance Disclosure Regulation (SFDR) of 27 November 2019 on the disclosure of information on sustainability in the financial services sector (Text with EEA relevance).

This regulation enters into force on the twentieth day after its publication in the Official Journal of the European Union. This regulation applies from March 10, 2021. Notwithstanding paragraph 2 of this article, however, article 4 par. 6 and 7, Article 8 para. 3, Article 9 par. 5, article 10 par. 2, Article 11 par. 4 and Article 13 par. 2 apply from December 29, 2019 and Article 11 par. 1 to 3 applies from 1 January 2022.

Regulation (EU) 2019/2088 focuses on improving transparency in the financial services sector in connection with sustainability. Its aim is to reduce information asymmetries between providers of financial products and services (financial market participants and financial advisors) and final investors.

The regulation introduces information disclosure obligations for financial market participants and financial advisors in the following areas:

• Inclusion of sustainability risks: Market participants and advisers must disclose their policies regarding the incorporation of sustainability risks into their investment decisions and the provision of advice. They must also disclose how they take these risks into account when choosing financial products for clients, and what impact these risks may have on investment returns.
• Consideration of adverse sustainability impacts: Market participants must disclose information on whether and how they take into account the main adverse impacts of their investment decisions on sustainability factors (eg environmental impact, social aspects, human rights). They must also describe their due diligence policies in this area and, where appropriate, state the reasons why they do not consider such impacts.
• Promoting environmental or social characteristics: If a financial product promotes environmental or social attributes, market participants must disclose information on how these attributes are achieved. They must also state whether any reference index is used to assess these properties and how this index is aligned with the declared properties.
• Sustainable investments: If the objective of the financial product is to achieve sustainable investments, market participants must disclose information on how this objective is to be achieved and which index is used as a benchmark. If the goal is to reduce carbon emissions, they must also state a target exposure to low carbon emissions in the context of the Paris Agreement.
• Transparency of remuneration policies: Market participants and financial advisers must disclose information on the extent to which their remuneration policies are consistent with incorporating sustainability risks.

In addition to these areas, the regulation also introduces requirements for regular update published information and on them presentation on the websites of market participants and financial advisors.

Regulation (EU) 2019/2088 represents an important step towards greater transparency and responsibilities in the area of sustainable investments. Its implementation will help end investors better understand the environmental and social impacts of their investments and will enable them make more informed investment decisions.

Commission Delegated Regulation (EU) 2023/2772 (ESRS) European Sustainability Reporting Standards of 31 July 2023, supplementing Directive 2013/34/EU of the European Parliament and of the Council with regard to reporting standards for sustainability information.

This regulation enters into force on the third day after its publication in the Official Journal of the European Union. It applies from 1 January 2024 for accounting years beginning on or after 1 January 2024.

This regulation focuses on the reporting of sustainability information by businesses. The main goal is ensure transparency and comparability of information about how businesses affect aspects of sustainability and how these aspects affect their operations.

Basic principles of the regulation

The regulation introduces several key principles for reporting sustainability information:

• Double significance: Businesses must report sustainability aspects based on the principle of double significance. This principle has two dimensions: the significance of the impact a financial significance. This means that they must consider both the impacts of the business on the sustainability aspects and the impacts of the sustainability aspects on the business.
• Value chain: The sustainability statement must cover the entire value chain of the business, not just its own operations. This means that businesses must consider impacts and dependencies throughout their supply chain.
• Time horizons: The regulation emphasizes the link between past, present and future in the reporting of sustainability information. Businesses must consider short, medium and long-term impacts, risks and opportunities.

Structure of the regulation

The Regulation introduces the European Sustainability Reporting Standards (ESRS), which are divided into three categories:

1. Cross-sectional ESRS: They establish general requirements for reporting information on sustainability. This includes a description of the procedures for identifying and assessing significant impacts, risks and opportunities related to environmental pollution, water and marine resources a resource use and circular economy.
2. Thematic ESRS: They focus on specific sustainability topics. Examples include:
   • Pollution of the environment: Businesses must report information on how they affect air, water and soil pollution, what measures they have taken to mitigate negative impacts and what the expected financial impacts are.
   • Water and marine resources: Disclosure of information is required on how the company affects water and marine resources, what measures it has taken to protect them and what the expected financial impacts are.
   • Resource utilization and circular economy: Businesses must report on their impact on the use of resources, on measures to support the circular economy and on expected financial impacts.
   • Own workforce: The regulation also focuses on social aspects, requiring the publication of information on the effects on the own workforce, on measures to ensure good working conditions and on risks and opportunities related to employees.
   • Workers in the value chain: Businesses must also consider their impact on workers throughout their value chain, including suppliers. They must inform about the measures to ensure their rights and the risks and opportunities associated with it.
   • Affected communities: The regulation also emphasizes the responsibility of businesses towards the communities in which they operate. Businesses must disclose information about impacts on these communities, about measures to mitigate negative impacts, and about risks and opportunities.
   • Consumers and end users: Another important topic is the impact on consumers and end users of the company's products and services. Disclosure of information on impacts on their health, safety and privacy, on measures to protect their interests and on risks and opportunities is required.
   • Business Conduct: The regulation also deals with the ethical aspects of business. Businesses must communicate their strategy and practices in areas such as supplier relationship management, anti-corruption and bribery, and payment procedures.
3. Sectoral ESRS: They will be developed later and will apply to specific industries.

Content of the sustainability statement

The sustainability statement must include information on:

• Measures and resources related to significant aspects of sustainability: Businesses must describe the measures they have taken to address significant aspects of sustainability and the resources allocated to their implementation. The goal is ensure understanding of key measures taken to prevent, mitigate and correct negative impacts, as well as to take advantage of opportunities.
• Metrics and target values: The regulation requires businesses to set measurable targets and indicators to track their sustainability progress. The goal is monitor the effectiveness of policies and measures through target values.
• Processes for identification and assessment of materiality: Businesses must describe their procedures for identifying and assessing the significance of sustainability impacts, risks and opportunities.
• Disclosure requirements in other ESRS: Businesses must identify and list any disclosure requirements in other ESRS that they have met.

Transitional provisions

The regulation contains transitional provisions that allow companies to phase in certain disclosure requirements. For example, in the first year (first year) of a sustainability statement under the ESRS, some disclosure requirements or data points may be omitted or may not apply. The list of gradually introduced disclosure requirements is provided in Appendix C to the Regulation.

Application requirements

The regulation also contains application requirements that provide more detailed guidance on individual aspects of reporting sustainability information. These application requirements are listed in Appendix A to the regulation and have the same validity as other parts of the standard.

Important concepts

The regulation introduces and defines several important concepts related to sustainability. Some of these include:

• Double significance: A principle that requires businesses to consider both their impacts on aspects of sustainability and the impacts of aspects of sustainability on them.
• Significance of influence: It focuses on how the business affects the economy, environment and society.
• Financial significance: Assesses how aspects of sustainability affect a company's financial situation, performance and cash flows.
• Value chain: It includes all entities and activities that are involved in the life cycle of a product or service, from the acquisition of raw materials to the disposal of waste.
• Stakeholders: Individuals or groups that can influence or be affected by the business. These include, for example, employees, suppliers, customers, investors and local communities.
• Sustainable oceans and seas: A concept that emphasizes the responsible use and protection of marine resources and ecosystems.

Conclusion

The Sustainability Reporting Regulation represents a significant step towards a more transparent and responsible business practice. The introduction of ESRS and the emphasis on dual materiality, value chain and time horizons provide a comprehensive framework for reporting sustainability information. It is important that businesses thoroughly understand the requirements of the regulation and have the necessary processes and systems in place to ensure compliance. Spring

Directive of the European Parliament and of the Council 2014/95/EU (NFRD) Non-Financial Reporting Directive of 22 October 2014 amending Directive 2013/34/EU as regards the disclosure of non-financial and diversity information by certain large undertakings and groups Text with EEA relevance.

This Directive shall enter into force on the twentieth day following its publication in the Official Journal of the European Union.

The main focus is disclosure of non-financial and diversity information by large businesses and groups.

The directive responds to the need increased transparency in the area of social and environmental information provided by businesses. The European Parliament emphasized the importance of information on sustainability, especially in the social and environmental fields.

Main points of the directive:

• Coordination of national regulations: The directive emphasizes the need to coordinate national regulations regarding the disclosure of non-financial information by large companies. This is important for the interests of companies, shareholders and stakeholders, especially if companies operate in several Member States.
• Minimum requirements: Minimum legal requirements are introduced for the extent of information that businesses must disclose. It's about providing unbiased and complete overview of policies, results and risks.
• Non-financial statement: Large businesses must prepare non-financial statement, which contains information on environmental, social, employment issues, respect for human rights and the fight against corruption.
  • Content of the report: The report should describe the company's policies in these areas, their results and risks. It should also include information on supply chain due diligence policies.
  • Exceptions: Member States may exempt companies from the obligation to prepare a non-financial statement if there is already a separate report with the same content.
  • Detailed information: The report should also contain information on the company's impact on the environment, measures to ensure gender equality, working conditions, social dialogue, safety and health protection at work and measures to protect local communities.
• Risks and their impact: Businesses must provide information about risks that could have serious negative consequences. These risks may arise from or be related to the company's operations, including its products, services and business relationships.
• Reporting frameworks: Companies can rely on national, European (e.g. EMAS) or international frameworks (e.g. UN Global Compact initiative, OECD, ISO 26000) when providing information.
• Enforcement: Member States must ensure effective means of enforcement disclosure of non-financial information in accordance with the directive.
• Importance for investors: Investors' access to non-financial information is an important step to support investments in business efficiency.
• Focus on large enterprises: New disclosure requirements they only apply to large companies and groups, in order to minimize the burden on small and medium-sized enterprises. The obligation to publish a non-financial statement applies to large enterprises that are subjects of public interest and to parent enterprises of large groups with more than 500 employees.
• Consolidated Reports: For groups of enterprises, consolidated management reports are required to ensure comparability and consistency of information.
• Information verification: Statutory auditors check whether a non-financial statement or separate report has been provided. Member States may also require verification of information by independent assurance service providers.
• Commission Guidelines: The Commission is to develop non-binding guidelines on the methodology for reporting non-financial information, including key performance indicators.
• Diversity Policy: Large companies must disclose their diversity policies in administrative, management and supervisory bodies (eg age, gender, education). If they do not have such a policy, they must explain why.
• Implementation report: The Commission will submit a report on the implementation of the directive to the European Parliament and the Council, in which it will also evaluate its scope and effectiveness.

Conclusion:

Directive 2014/95/EU represents an important step towards greater transparency and corporate responsibility. Its aim is to provide investors and other interested parties with a comprehensive overview of the company's non-financial performance, particularly in areas such as environmental responsibility, social affairs and governance. Spring

Directive of the European Parliament and of the Council (EU) 2024/1760 (CSDDD) Corporate Sustainability Due Diligence Directive of 13 June 2024 on corporate due diligence in the field of sustainability and amending Directive (EU) 2019/1937 and Regulation (EU) 2023/2859 (Text with EEA relevance)

This directive lays down rules for companies regarding their liability for actual and potential adverse impacts on human rights and the environment. It mainly focuses on their own activities, the activities of their subsidiaries and business partners within their chains of activities. The directive aims to achieve more sustainable economy and on limiting global warming.

Key Aspects of the Directive:

• Scope of application: The directive applies to large companies with a certain turnover and number of employees. It includes companies from the EU and third countries that meet the set criteria.
• Due care: Companies must implement a due diligence process that includes:
  • Identification and assessment actual and potential adverse impacts on human rights and the environment.
  • Prevention, mitigation, removal or minimization the extent of these influences.
  • Provision of remedy in case of actual adverse effects.
  • Stakeholder engagement, including employees, unions and communities.
  • Introduction of a notification mechanism and complaint procedure.
  • Monitoring the effectiveness of the measures taken.
  • Public information about your due diligence.
• Transformation Plan for Climate Change Mitigation: Companies must adopt a plan to ensure that their business model is compatible with the commitments of the Paris Agreement on climate change.
• Adverse effects: The Directive defines "adverse effects on human rights" and "adverse effects on the environment". They include violations of international conventions and standards in the field of human rights and the environment.
• Responsibility: Companies can be civilly liable for damages caused by their failure to comply with due care obligations. The Directive sets out rules on limitation periods, access to evidence and court orders.
• Sanctions: Member States must provide effective, proportionate and dissuasive sanctions for violation of the directive, including fines.
• Support: The Commission and the Member States will provide guidelines, support and tools to help companies fulfill their obligations. This also includes specialized websites, platforms a portals.

Important Terms:

• A chain of activities: It includes all activities related to the production and sale of the company's products or services, from the acquisition of raw materials to the final consumer.
• Business partner: Includes suppliers, subcontractors, distributors and other entities with which the company cooperates within its chain of activities.
• Stakeholders: They include everyone affected by the company's activities, including employees, trade unions, local communities and non-governmental organizations.
• Due care: A systematic process of identifying, preventing, mitigating and resolving adverse impacts on human rights and the environment.

Objective of the Directive:

The Directive on due diligence of companies in the field of sustainability aims to:

• Protect human rights and the environment in global value chains.
• Strengthen sustainability and support the transition to a low-carbon economy.
• Increase corporate responsibility for their impact on society and the environment.
• Create a level playing field for companies in the EU internal market.

Conclusion:

This directive represents a significant step towards more sustainable and responsible business. Misleading binding rules for companies and provides them tools and support for their fulfillment. The directive is expected to have a positive impact on human rights, the environment and the fight against climate change.

Directive of the European Parliament and of the Council (EU) 2022/2464 (CSRD) Corporate Sustainability Reporting Directive of December 14, 2022, amending Regulation (EU) No. 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU regarding corporate sustainability reporting (Text with EEA relevance).

This Directive shall enter into force on the twentieth day following its publication in the Official Journal of the European Union. Article 4 of this Directive shall apply from 1 January 2024 to accounting years beginning on or after 1 January 2024.

This directive deals with the issue of reporting information on sustainability by companies. The main objective of the directive is to improve the quality, comparability and availability of information on sustainability aspects that companies publish.

Why is sustainability reporting important?

• Increasing financial importance: Sustainability information is increasingly important from a financial point of view.
• Better decision making and risk management: Quality sustainability reporting enables companies to better recognize and understand sustainability-related risks and opportunities and make more informed decisions.
• Increasing investor confidence and access to financial capital: Investors are increasingly looking for sustainability information when making investment decisions. Companies with good sustainability transparency may have better access to financial capital.
• Improving communication with stakeholders: Sustainability reporting facilitates dialogue and communication between businesses and their stakeholders such as employees, suppliers, customers and local communities.
• Reduction of administrative burden: Harmonized reporting standards on sustainability information reduce the number of ad hoc requests for information and simplify the reporting process for businesses.

Who does the directive apply to?

The Directive extends the scope of mandatory reporting of sustainability information to a wider range of businesses:

• All major businesses: Regardless of whether their securities are traded on a regulated market.
• All businesses, with the exception of micro-enterprises, whose securities are traded on a regulated market in the EU: Including issuers from third countries.
• Parent companies of large groups: At the group level.
• Credit institutions and insurance companies: If they meet certain size criteria.
• Enterprises from third countries: Whose securities are traded on a regulated market in the EU or which carry out significant activity in the territory of the EU.

What do businesses have to report?

The Directive defines "sustainability aspects" as environmental, social, human rights and administrative factors.

Businesses must report information on:

• Double significance: The Directive emphasizes the importance of reporting information in terms of risk for the business (how aspects of sustainability affect the company) also in terms of the influence of the company (how the business affects aspects of sustainability).
• Due diligence process: Information on how businesses identify, assess and manage their sustainability impacts throughout their value chain.
• Environmental factors: For example, greenhouse gas emissions, water and energy consumption, biodiversity and pollution.
• Social factors: For example, working conditions, human rights, diversity and inclusion.
• The right factors: For example, governance and corporate culture, anti-corruption and payment practices.

Standards for reporting sustainability information

The Directive obliges the Commission to adopt delegated acts laying down sustainability reporting standards.

These standards:

• In more detail, they determine the information that businesses must publish.
• They ensure the quality of reported information: Information should be comprehensible, relevant, verifiable, comparable and truthfully presented.
• They take into account the work of global standard-setting initiatives: To minimize the administrative burden on businesses.
• They set industry-specific requirements: Given the different risks and impacts in individual industries.
• They take into account the needs of small and medium-sized enterprises: By providing adequate standards for these businesses.

Sustainability reporting assurance

The Directive introduces an obligation assurances in the field of reporting information on sustainability, which is supposed to ensure the trustworthiness of published information.

• Independent assurance service providers: They must verify that the reporting of sustainability information meets the requirements of the directive and the reporting standards of sustainability information.
• Assurance opinion: Must be published together with the sustainability report.

Sanctions

The Directive stipulates that Member States must introduce effective, proportionate and dissuasive sanctions for non-compliance with the requirements of the directive.

Conclusion

The Sustainability Reporting Directive is a significant step towards more transparent and responsible business in the EU.

It is important to note that the directive is quite complex and detailed. This text provides only basic information about its main points. For more detailed information, it is necessary to consult the entire text of the directive. (Co2AI)

See also CSRD Directive in a nutshell