Sustainability Reporting

CSRD

Irish legislation transposing the Corporate Sustainability Reporting Directive (CSRD) has not been published, but is anticipated in advance of the July transposition deadline.  As companies within scope of the first phase prepare to report (in 2025 on FY 2024) recent developments in relation to the CSRD and ESRS include:

• Publication of draft ESRS Implementation Guidance (covering materiality assessment; value chain and ESRS data-points) by EFRAG and the launch of its ESRS Q&A Platform.
• A two-year delay in the adoption of sector-specific ESRS and ESRS for non-EU companies operating in the EU was provisionally approved.
• Consultation on exposure draft ESRS for listed SMEs and voluntary reporting standards for non-listed SMEs.

Efforts continue regarding synergies and interoperability with other disclosure regimes and frameworks:

• EFRAG and GRI are developing a GRI-ESRS Interoperability Index, a mapping tool which assists reporting companies to understand the commonalities between the ESRS and the GRI Standards.
• EFRAG and the Taskforce on Nature-related Financial Disclosures (TNFD) signed a cooperation agreement to further advance nature-related reporting.
• GRI launched a new biodiversity standard GRI 101: Biodiversity 2024 which has been built on and is aligned with the TNFD Recommendations.

SEC Climate Disclosure Rules

The SEC adopted final Climate-Related Disclosure Rules requiring US listed companies to provide climate-related disclosures in their registration statements and annual reports.  While the SEC Rules and the CSRD share common aims including increased transparency through standardised disclosures, there are some key differences including the breadth of disclosure requirements and the materiality assessment.  The SEC acknowledged that companies may be navigating disclosure requirements across one or more additional jurisdictions, but has not adopted substituted compliance for  the CSRD or ISSB standards.  The CSRD provides an exemption where a company and its subsidiaries are included in a sustainability report drawn up under standards deemed “equivalent” to the ESRS, however the European Commission has not yet adopted the necessary equivalence mechanism.

Due Diligence

Following negotiations, the Council of the EU has endorsed the text of the EU Corporate Sustainability Due Diligence Directive with some key changes, including a reduced scope.

The EU Deforestation Regulation will, from 20 December 2024, prohibit the placing or making available on the EU market or exporting from the EU, “relevant commodities” (cattle, cocoa, oil, palm, rubber, soya, wood) and derived products, unless they are “deforestation-free”, produced in accordance with the legislation of the country of production and accompanied by a due diligence statement.

Carbon

Importers of cement, electricity, fertilisers, iron and steel, aluminium and hydrogen to the EU were required to submit a first report by 31 January 2024 (in respect of Q4 2023) under the transitional phase obligations of the Carbon Border Adjustment Mechanism Regulation.

Greenwashing

The new Directive on Empowering Consumers for the Green Transition (ECGT) must be transposed into national law by 27 March 2026.  The ECGT aims to address greenwashing and misleading product information to enable consumers to make informed purchasing decisions.  The ECGT prohibits the making of general environmental claims without proof, displaying a sustainability label which is not based on an approved certification scheme or established by public authorities and claims that a product has a neutral, reduced or positive impact on the environment based on greenhouse gas emission offsetting.

The proposed Green Claims Directive, which is expected to be adopted later this year, will set out specific rules for companies on substantiation, verification and communication of claims to consumers in the EU regarding the environmental benefits of their products, together with criteria for environmental labelling.