The changes approved by the European Commission with the aim of making companies' commitment to climate change and its social impact more visible will allow Spanish companies to be ahead of the pack in reporting and management of ESG aspects.
The new Sustainability Reporting Directive (Corporate Sustainability Reporting Directive, CSRD) will change the way companies commit to, report on and monitor their social and environmental objectives.
Its approval implies that they will have to publish impact reports of their activities on the environment and society and the risks to which they are exposed.
While the obligation to collect, analyse and publish non-financial data starts 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 obliges them to go further.
Impact and dual materiality, new features of the regulation
The main novelty, pending its transposition into Spanish law by July 2024 at the latest, concerns the management of the social, environmental and governance performance of the company.
All of them will have to report an assessment of the impact caused both directly and through their value chain, and in that line also define how they manage this impact. This involves assessing the impact that these sustainability issues have on the company's strategy, business and bottom line.
The second major change in corporate sustainability reporting is the dual materiality approach.
This analysis has a dual perspective. On the one hand, the impact assessment, which refers to the positive and negative sustainability-related impacts related to the company's business. On the other hand, the analysis of the financial risks and opportunities related to the company's sustainability, identified through a financial materiality assessment process.
Increased transparency, management and control of ESG issues
These changes are intended to improve transparency in the definition of social and environmental commitments, and greater control over implementation and management in order to implement improvements.
In this way, investors, consumers, regulators and society in general will be able to make purchasing, financing and subsidy decisions based on audited sustainability criteria.
In addition to ensuring transparency, the European Commission aims to mitigate corporate greenwashing by establishing control mechanisms such as independent audits and certification. Digital access to sustainability reports will also facilitate transparency in this area.
This represents a firm commitment on the part of the European authorities to standardise data as far as possible across the EU.
This is an ambitious initiative from a regulatory point of view and also for companies, which will require accelerated adaptation in terms of measuring, analysing and monitoring their social and environmental commitments and the impact generated.