‘Public-interest’ companies with more than 500 staff – affecting 11,500 companies across the EU – must begin applying the rules in 2024 for reporting published in 2025. The European Union has introduced new regulations that will require large companies to disclose more information about their environmental, social, and governance (ESG) practices. These regulations aim to improve transparency and accountability among companies by providing stakeholders with a clearer understanding of their impact on society and the environment.
The rules will apply to companies that meet the criteria of being a ‘public-interest’ entity, which includes publicly traded companies, credit institutions, and insurance companies. These entities will be required to disclose information about their ESG policies, targets, and performance in their annual reports. This will enable investors, customers, and other stakeholders to make more informed decisions based on a company’s sustainability practices.
The new regulations will also introduce a standardized reporting framework, making it easier for stakeholders to compare companies’ ESG performance. This will encourage companies to improve their sustainability practices in order to remain competitive and attract socially conscious investors.
In addition to the disclosure requirements, the regulations will also introduce stricter rules on the verification of reported information. Companies will need to ensure that the information they disclose is accurate, reliable, and consistent. This will help to prevent greenwashing, where companies exaggerate or misrepresent their sustainability efforts.
The implementation of these regulations will be phased in over the next few years. ‘Public-interest’ companies with more than 500 staff – affecting 11,500 companies across the EU – must begin applying the rules in 2024 for reporting published in 2025. Smaller companies will have more time to comply, with the rules becoming mandatory for companies with between 250 and 500 staff in 2026.
The European Union hopes that these new regulations will drive positive change and contribute to a more sustainable and responsible business environment. By increasing transparency and accountability, companies will be incentivized to prioritize ESG practices and make a positive impact on society and the environment. These regulations represent a significant step towards a greener and more socially responsible future for businesses across the European Union.