Companies adapt to the new sustainability regulation

The changes approved by the European Commission with the objective of making visible the commitment of companies against climate change and its social impact will allow Spanish companies to take the lead in the report and managing ESG aspects.

The new Directive on sustainability reporting (Corporate Sustainability Reporting Directive, CSRD) of the European Union will change the way in which companies commit, report and monitor their social and environmental objectives.

Its approval implies that they must publish reports on the impact of their activities in the environment and in society and of the risks to which they are exposed.

Although the obligation to collect, analyze and publish non-financial data begins in 2024 for large companies, the requirement will be progressively extended to all types of companies until 2028.

In Spain, many large companies have already started to make their non-financial information public, but the new regulation extends the obligation to companies with less than 250 employees. For all of them, the CSRD forces them to go further.

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Impact and dual materiality, regulatory news 

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The main innovation, still pending its transposition into the Spanish legal system scheduled for late July 2024, has to do with the management of the company's social, environmental and governance performance.

All of them will have to report an assessment of the impact caused both directly and through their value chain, and along that line also define how they manage that impact. repercussion. This involves evaluating the impact that these aspects of sustainability have on the company's strategy, business and income statement.

The second major change in the preparation of corporate sustainability reports is the approach based on dual materiality.

This analysis has a dual perspective. On the one hand, impact assessment, which refers to the positive and negative impacts related to sustainability that are related to the company's business. And, on the other hand, the analysis of financial risks and opportunities related to the company's sustainability, identified through a process of evaluating financial materiality.

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Greater transparency, management and control of ESG aspects 

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These changes seek to improve transparency in the definition of social and environmental commitments, and greater control in execution and management to implement improvements.

In this way, investors, consumers, regulators, and society in general will be able to make purchasing, financing and grant decisions based on audited sustainability criteria.

In addition to ensuring transparency, the European Commission intends to mitigate the “greenwashing” of companies, establishing control mechanisms such as independent audits and certifications. Digital access to sustainability reports will also facilitate transparency in this area.

All of this represents a firm commitment on the part of the European authorities to standardize data as far as possible in the EU.

An ambitious initiative from a regulatory point of view and also for companies, which will require an accelerated adaptation in terms of the measurement, analysis and control of their social and environmental commitments and the impact generated.