So much for double materiality. Rumors have been swirling around ESG-focused news outlets that the European Commission is expected to ‘heavily water down’ the requirements of its landmark CSRD and Corporate Sustainability Due Diligence Directive (CSDDD) legislations in its upcoming Omnibus package.
Reported changes to CSRD could include making companies with less than 1,000 employees exempt from having to report under the regulation, estimated to mean that around 85 percent of firms covered by the directive would no longer be in scope. Other aspects at risk include the need for double materiality accounting, which may be rowed back in favor of single materiality reporting.
The Commission has refused to comment on the rumors, with the scheduled publication of the Omnibus set for February 26. But while some IROs may breathe a sigh of relief at the news – and the prospect of not having to conduct a double materiality assessment – it may not lead to good outcomes for investors.
Stakeholders across the board – and outside of Europe – have been waiting for CSRD to improve the depth of data available on how companies are dealing with ESG and other sustainability challenges, as well as opportunities.
The first trickle of CSRD reports have started to be published in the first quarter of the year — and many of those larger companies are unlikely to row back any augmentations to their reporting processes.
But with the prospect of requirements being watered down, there would be a corresponding break in the data infrastructure created around CSRD that investors may come to expect.
And, if double materiality reporting requirements were scrapped, many investors would question the use of CSRD should companies only be forced to report on a single materiality foundation, which many do already on a voluntary basis.
You can read the rest of this article at Governance Intelligence sister site IR Impact (formerly IR Magazine)
Laurie Havelock
Laurie has been with IR Impact for over a decade, becoming editor in 2023 after roles as a reporter and research editor. He moderates events and serves as MC for global awards. Previously, he was acting business editor at the i newspaper and deputy...
