The Corporate Sustainability Reporting Directive and Nature Restoration Law shifted the dial.
It was hard to keep up with the pace of legislative developments in Europe this week. If you missed one sustainability-related directive or regulation, there was no need to worry, another would be along in a minute. And depending on who’s mailing list you were on, it would be followed at lightning speed with a denunciation of its lack of ambition or fulsome praise for the hope it offered for a greener tomorrow.
It’s easy for journalists to get too focused on the minutiae of the rule-making process, even if one remembers Bismarck’s comparison with sausage-making, but some genuinely historic progress was made. MEPs’ recent vote against inclusion of gas and nuclear in Europe’s environmental taxonomy or their vote in favour of a less ambitious extension of the EU’s Emissions Trading System may or may not having lasting impact. But political agreement on the Corporate Sustainability Reporting Directive (CSRD) and the unveiling of the Nature Restoration Law did feel like significant steps forward.
There’s some cause for regret in the small print of the CSRD, in terms of timing and scope and the reservations expressed by the Global Reporting Initiative about its accompanying reporting standards (too detailed, too vague, too unaligned with existing practice). But the fact remains that the directive mandates 50,000 of Europe’s largest corporates to report on common environmental and social performance indicators, as well as outlining transition plans.
This makes tangible the prospect of investors making accurate comparisons across companies using audited sustainability data for the first time. The data gaps are being filled and reliance on proxies may soon be at an end. Some wishful thinkers even observed that greenwashing is over; certainly CSRD can provide the “bedrock” for Europe’s sustainable finance agenda.
The European Commission presented the Nature Restoration Law as a milestone – its first law requiring member states to act to restore nature – but also a starting point for a transition to sustainable food systems. Commission Executive Vice-President Frans Timmermans positioned it as a riposte too: “Using the war in Ukraine to water down proposals and scare Europeans into believing sustainability means less food, is frankly quite irresponsible”.
No law can please everyone, but this one was warmly welcomed even by campaigners. The proposal is a “strong tool” for restoring ecosystems, said Laura Hildt, Policy Officer for Biodiversity at the European Environmental Bureau, warning also that “the window to adapt to the reality of the climate crisis is rapidly closing”.
Some campaigners, and indeed investors, may have been more focused more on Nairobi than Brussels, especially if interested in ensuring the Global Biodiversity Framework (‘Paris for plants’) maintains momentum. The talks in the Kenyan capital are viewed as a last-chance saloon after earlier discussions came to an impasse in Geneva. There remains hope that the GBF will include a commitment to align private financial flows with its core aims of protecting and restoring natural resources and ecosystems. This may not be greeted wholehearted by those financial institutions still struggling to align with Paris. At least there is extra time to seek consensus, now that COP15 has been moved from Kunming in October to Montreal in December.