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EU tightens greenwashing rules with new agreement on company disclosures

Fri 24 Jun 2022 | 10:15 am GMT
Rob Hutchins | Products of Change Writer

EU to tighten rules on greenwashing with new agreement on company disclosures

The European Union has reached a new deal on corporate sustainability reporting requirements for large companies in a clamp down on greenwashing, a European Parliament committee revealed earlier this week. Members of the European Parliament and EU governments struck a provisional agreement on new reporting rules for large companies, as concerns have grown over businesses engaging in greenwashing or making exaggerated climate-friendly claims to attract investors. The new regulations are expected to come into force from January 2024. A statement from the European Parliament’s legal affairs committee said: “This aims to end greenwashing and lay the groundwork for sustainability reporting standards at the global level.” Under the rules, listed or unlisted companies with over 250 staff and turnover of €40 million will have to disclose environmental, social, and governance (ESG) risks and opportunities as well as the impact of their activities on the environment and people. Some smaller listed companies will be subject to a lighter set of reporting standards, which they can opt out of until 2028, the committee agreed. “From now own, having a clean human rights record will be just as important as having a clean balance sheet,” said Pascal Durand, who led the negotiations for parliament. Pascal added that disclosures must be externally audited, while the new rules will make room for new players to offer this service and “not just leave it in the hands of the Big Four,” in reference to EY, KPMG, Deloitte, and PwC which currently dominate financial auditing. The rules are part of a package which includes a guidance on what constitutes a green investment and ESG disclosures for asset managers to help transition to a climate-neutral economy. A formal vote by EU member states will take place next week to ratify the deal. It is expected to pass without complications. If the deal passes, the new mandate will replace the non-financial reporting directive. French environment minister Bruno Le Maire, said: “This agreement is excellent news for all European consumers. They will now be better informed about the impact of business on human rights and the environment… Greenwashing is over.”
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