Definition
The term ‘sustainability reporting’ refers to reporting information relating to sustainability matters as described in the European Commission’s Corporate Sustainability Reporting Directive, which increases companies’ obligations concerning the reporting of non-financial information.
Background and status
On 21 April 2021, the European Commission put forward a proposal for a directive on the publication of a Corporate Sustainability Reporting Directive. The directive is intended to harmonise the sustainability information published by companies, which will provide financial firms, investors and the broader public with access to comparable and reliable information in this area.
On 10 November 2022, the European Parliament formally adopted the proposal, which had been significantly strengthened by Members of the European Parliament. Undertakings with more than 500 employees are already subject to a number of obligations concerning the reporting of non-financial information, but the scope of these obligations is broadened by this directive. The directive grants new rights to employee representatives, and at the same time strengthens social dialogue. In line with the directive, companies will have to publish data on their societal and environmental impacts at regular intervals, in the form of a sustainability report. The directive will apply to all large undertakings, whether or not they are listed on the stock exchange, and to non-European undertakings whose turnover exceeds €150 million in the EU. Publicly listed small and medium-sized enterprises will also be subject to these obligations.
It is estimated that in future around 50,000 undertakings will have to publish a sustainability report, compared with the current figure of 11,700. Undertakings with more than 500 employees, which are already subject to the current Non-Financial Reporting Directive, will have to publish their initial sustainability reports in 2025. Large undertakings that are not subject to this directive will have to publish their reports in 2026 while small and medium-sized enterprises and other undertakings will have to publish their reports in 2027.
Overview
Content of the sustainability report
The sustainability report should enable workforce representatives to understand their company’s impact on the environment and on society, and its sustainability strategy. The Commission will adopt delegated acts to provide for sustainability reporting standards, but the Corporate Sustainability Reporting Directive (Article 29b(2)) already mentions some items related to social issues that should be discussed in the reports:
(i) equal treatment and opportunities for all, including gender equality and equal pay for work of equal value, training and skills development, the employment and inclusion of people with disabilities, measures against violence and harassment in the workplace, and diversity;
(ii) working conditions, including secure employment, working time, adequate wages, social dialogue, freedom of association, existence of works councils, collective bargaining, including the proportion of workers covered by collective agreements, the information, consultation and participation rights of workers, work-life balance, and health and safety;
(iii) respect for the human rights, fundamental freedoms, democratic principles and standards established in the International Bill of Human Rights and other core UN human rights conventions, including the UN Convention on the Rights of Persons with Disabilities, the UN Declaration on the Rights of Indigenous Peoples, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work and the fundamental conventions of the International Labour Organization, the European Convention for the protection of Human Rights and Fundamental Freedoms, the European Social Charter, and the Charter of Fundamental Rights of the European Union.
Employee representatives’ involvement
In addition, the undertaking’s management will be required to inform ‘workers’ representatives at the appropriate level’ and discuss ‘with them the relevant information and the means of obtaining and verifying sustainability information. The workers’ representatives’ opinion shall be communicated, where applicable, to the relevant administrative, management or supervisory bodies’ (Article 19). Recital 9 states that the ultimate beneficiaries of sustainability reports include ‘trade unions and workers’ representatives who would be adequately informed and therefore able to better engage in social dialogue’. The text therefore assigns an important role to employee representatives to express their opinion on the sustainability report.
Related dictionary terms
Corporate social responsibility ; due diligence ; Global Deal ; global union network ; International Labour Organization