Topic 2 CSR Related Regulatory Framework

Corporate Sustainability Reporting Directive

  • In order to set a baseline for reporting all CSR practices, the EU rules large companies, as well as all those listed on EU regulated markets, to annually report the social and environmental impacts through the Non-Financial Reporting Directive (NFRD).
  • On 21 April 2021, theEuropeanCommission issued their proposed changes to strengthen the nature and extent of sustainability reporting in the EU over the coming years, through the Corporate Sustainability Reporting Directive (CSRD). 
  • The CRSD sets out in far greater detail the non-financial information that entities should report. It introduces mandated EU sustainability standards, to be prepared by the European Financial Reporting Advisory Group (EFRAG) and adopted via secondary legislation. The standards should be based on the recent recommendations recently made by the EFRAG Task Force on Non-Financial Reporting Standards, with a first set of standards due for adoption by 31 October 2022.

Environmental & Human Rights Due Diligence on Supply Chain

  • The European Commission is set to propose new rules subjecting companies to stricter controls in a bid to ensure that their suppliers respect human rights and do not harm the environment.
  • These rules will increase companies’ capacity to control their global supply chain, especially small and medium-sized businesses (SMEs), within and beyond Europe’s borders.

So, although it seems that CSRD will not affect startups directly, it will definitely do so indirectly.

Startups on the supply chain of bigger companies will have to provide information on how they manage sustainability issues, like respect for human rights, environmental issues, etc.

European Green Deal

  • The European Commission in order to emphasise even more the need to act and take measures for the environment, announced and communicated on 11/12/2019 the European Green Deal (GD).
  • GD is a new growth strategy that aims to transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy.
  • The overall aim is no net emissions of greenhouse gases by 2050.
  • GD also aims to protect, conserve and enhance the EU’s natural capital, and protect the health and well-being of citizens from environment-related risks and impacts.

EU Funding

  • The proposed financing of the EU Green Deal is set out in the EU Green Deal Investment Plan.
  • The Plan comprises of two principal financing streams totaling €1 trillion. Over half of the budget, €528 billion, will come directly from the EU budget and the EU Emissions Trading System. The remainder will be sourced through the InvestEU programme, which combines €279 billion from the public and private sectors to 2030 and €114 billion from national co-financing.
  • Clearly, EU funding will be linked with EU Green Deal and the Sustainability Agenda.
  • So, startups seeking to attract funds from investors or EU institutions must link their strategy and operations with CSR and Sustainability.
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