Sat. Sep 24th, 2022

Brussels, 10 February 2022

On Thursday morning, Commissioner McGuinness briefed MEPs on the Commission’s work on sustainability reporting standards and the progress of the European Financial Reporting Advisory Group.

During an exchange of views in the Legal Affairs committee (JURI), Mairead McGuinness, Commissioner for Financial services, financial stability and Capital Markets Union, presented the Commission’s recent proposal for a Corporate Sustainability Reporting Directive, a core proposal of the EU’s Sustainable Finance Agenda and the ambitions of the European Green Deal, which the JURI committee is currently assessing and amending.

Ms McGuinness highlighted the importance of bringing sustainability reporting standards on an equal footing as financial reporting standards. The new rules will allow greater clarity to investors who need better quality and comparable information from companies they want to invest in, and will serve as a management tool allowing companies to better plan ahead. The Commission highlighted the important advisory role of the European Financial Reporting Advisory Group (EFRAG), tasked with developing draft EU sustainability standards expected by October 2022. The Commission will then adopt the standards via delegated acts, which the co-legislators will have a final say on, she added.

Most MEPs directed questions to the Commissioner related to extending the scope of the proposal to SMEs, which some members fear could cause additional burdens to a sector that was heavily impacted by the Covid-19 crisis. Commissioner McGuinness explained the positive approach behind including listed SMEs in the scope, saying that that it would be difficult for SMEs to get financing if they are completely excluded by the revision. This is why she said it is important for rules to be proportionate and tailor-made for SMEs, with an additional 3-year period to adapt to the new rules and the possibility for other non-listed SMEs to use these standards on a voluntary basis.

Members also asked about adapting future rules also for companies based outside of Europe as well as EU’s role in setting global standards on sustainability reporting, as well as the current deadlines and financing of EFRAG. Commissioner McGuinness told MEPs that EU’s standards match the global ones set by the ISSB, but that while our path towards sustainability will serve as an example, we are faster and more ambitious than other regions. On deadlines, she said the EU should remain determined, as we do not have much time to achieve our climate goals, reminding that companies are waiting for more legal clarity so they can adapt for the future.

MEPs wanted to know more about further efforts needed to reach EU’s climate ambitions, aside from reporting, including rules on due diligence. Ms McGuinness agreed on the vital need to have laws, like the Fit for 55 package and the upcoming proposal on sustainable corporate governance. She concluded by saying that it will not be enough to have companies report – the role of company board members is also important, as well as having competent authorities responsible for verifying the reported information. She was confident that an agreement could be reached by the middle of this year.

Watch the entire exchange of views here (scroll to 10.00 timestamp)

The committee also held an exchange of views with Jean-Paul Gauzès, EFRAG President, and Patrick de Cambourg, Chair of the EFRAG Task force on non-financial reporting standards earlier in the day, available on replay here.

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