EEA YouTube Show Recap: Sustainability Reporting to Be Simplified in Europe, Stalls in US
This recent Enterprise Engagement Alliance Purpose Leadership and Stakeholder Management YouTube show provides an update on the state of sustainability reporting in the European Union and North America.Click here for links to information about EEA sponsors; here to subscribe to ESM weekly; here for an ESM media kit.
The European Union will likely update the current EU Corporate Sustainability Reporting Directive to reduce the administrative burden, but the law is already in effect and is unlikely to go away in any substantial way. In the US, any additional disclosure requirements on either climate or human capital are unlikely under the new Trump administration. In the meantime, Canada has surprised the world with anti-greenwashing legislation that puts a high cost on making unsubstantiated environmental claims.
Click here to watch the 30-minute show.
These are some of the highlights of the show with Jon McGowan, an attorney who advises businesses, boards, attorneys, professional organizations, and governments on the impacts of international legal development in ESG, sustainability, and climate change regulations. McGowan is also a contributor for Forbes, for which he provides analysis and commentary on legal developments related to ESG, sustainability, and climate change. He has authored multiple legal journal articles and presented at international law conferences on ESG and sustainability laws and regulation and how they impact business. He is particularly focused on developments in the European Union and the United States. McGowan is the founder of The McGowan Law Firm in Jacksonville Beach, Fl.
Here are additional insights from the show if you don't have time to watch it.
Political shift in the EU. The European Union experienced a political shift to the right after the summer elections for the European parliament. This shift was driven by claims that excessive regulation is hurting economic activity.
Regulatory revisions. The new European Commission and Parliament are reconsidering regulations from the European Green Deal, including the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and taxonomy regulations. It is possible the three will be combined and streamlined into an omnibus regulation, with potentially reduced reporting related to Scope 3--indirect pollution through an organization’s value chain.The CSRD focuses heavily on climate change, particularly greenhouse gas emissions, and requires companies to report on their emissions across their value chain (Scope 1, 2, and 3.)
Implementation challenges. The challenges in implementing these regulations are causing delays and confusion. The EU aims to streamline these regulations into a single reporting standard to reduce the burden.
Legal liability. The CSDDD (Corporate Sustainability Due Diligence Directive) introduces legal liability for companies, allowing individuals adversely affected by violations to bring legal challenges against companies.
Compliance versus business opportunity. The more complex and laborious disclosures become, the more organizations adopt check-off-the-box mentalities rather than view reporting as an opportunity for performance improvement. Ideally, reporting requirements provide a meaningful set of metrics related to enhancing organizational performance, rather than a bureaucratic burden.
Comparison between the EU and US. Europeans have largely avoided the controversy related to social issues in sustainability by focusing on basic human rights and treatment of employees, customers, supply chain and distribution partners, and communities. The US got more hung up on issues related to racial or LGBTQ rights. In the US, sustainability reporting has faced political pushbacks on climate reporting rather than broader ESG issues. The new SEC chair is expected to reduce regulations. The idea of broader human capital disclosure requirements from the SEC is gone for now.
Voluntary reporting. Voluntary sustainability reporting has cooled down, based on the pushback against the marketing-oriented corporate sustainability reports with little substance and the new need to align their reports with their business operations and strategic vision.
Greenwashing backfired. The proliferation of unsubstantiated corporate sustainability reports written mostly for marketing purposes helped create the anti-woke backlash and has diminished the value of these reports.
Canada's anti-greenwashing law. Canada introduced strict requirements for green claims in marketing, requiring claims to be backed by reputable standards. Violators are subject to large fines.
The need for authenticity in sustainability reporting. Rather than creating sustainability reports as a corporate communications tool, they should best reflect the actual business operating system of the organization, starting with its purpose, goals, objectives, and values; risks and opportunities, and steps taken to address them.
Enterprise Engagement Alliance Services
Celebrating our 15th year, the Enterprise Engagement Alliance helps organizations enhance performance through:
1. Information and marketing opportunities on stakeholder management and total rewards:
- ESM Weekly on stakeholder management since 2009. Click here to subscribe; click here for media kit.
- RRN Weekly on total rewards since 1996. Click here to subscribe; click here for media kit.
- EEA YouTube channel on enterprise engagement, human capital, and total rewards since 2020
Management Academy to enhance future equity value for your organization.3. Books on implementation: Enterprise Engagement for CEOs and Enterprise Engagement: The Roadmap.
4. Advisory services and research: Strategic guidance, learning and certification on stakeholder management, measurement, metrics, and corporate sustainability reporting.
5. Permission-based targeted business development to identify and build relationships with the people most likely to buy.
Contact: Bruce Bolger at TheICEE.org; 914-591-7600, ext. 230.
