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New data on what information Spanish companies disclose in relation to Climate Change and Human Rights: lessons to take into account for the reform of the EU Directive

European policy makers are currently debating the proposal presented this April by the EU Commission for the renewal of what is now called Corporate Sustainability Information Directive (CSRD), that will mean important changes in the disclosure obligations of companies, including the development of long-awaited EU information standards. A new research published by Frank Bold and Sustentia on the information disclosed by 250 companies on key climate and human rights issues sheds light on data gaps and positive trends.

The main conclusion is that, despite the timid advances, information on corporate sustainability continues to focus too much on general information and lacks specific and meaningful data on risks, key objectives and indicators. The research complements the landmark studies published by the alliance for Corporate Transparencywill , Frank Bold and Sustentia in previous years, that monitor how large companies are applying the EU Directive on non-financial information. The Commission's proposal seeks to reform this legislation that obliges large companies to disclose their risks and impacts on sustainability, but does not establish detailed disclosure requirements.

As the EU experiences a tectonic shift in financial and climate policies in support of a more sustainable and responsible economic model, risks and opportunities of an unprecedented scale are evident for all sectors of the economy. Lack of reliable and useful data jeopardizes the EU's sustainable financing strategy, as well as the achievement of the objectives set in the Green Deal (Green Pact) from the EU. Without adequate information on the performance of companies in terms of sustainability, it will not be possible to scale up sustainable financing, nor increase corporate accountability.

For this reason, the European Commission has proposed a new framework to improve and better focus disclosure by introducing mandatory sustainability reporting standards, which should come into force in 2023, and thus helping companies to disclose the key data your stakeholders need, NGOs and financial markets.

As we highlight in our recent Article, These rules will alleviate the administrative burden on companies and will generate cost savings for the company estimated between 24.200-41.700 euros per year. The public consultation carried out by the European Commission also showed that the 80% of companies currently preparing reports support the establishment of common standards. In addition to giving clarity and certainty to companies, consequently these standards will also allow them to access capital more easily, and prepare for a future with zero net emissions.

What the new research tells us

The analysis of key information on the climate and human rights of 250 companies in high-risk sectors (1) in Germany, Spain, Poland and the Czech Republic show some promising advances in science-based climate target information (2) and in the description of the due diligence process of the companies (3) on human rights, although still only a minority of the companies analyzed provide such information.

Also, only half of companies reported climate-related risks, and a large majority continue to lag behind in providing more specific climate change information, just as investors need, such as information on GHG emissions of scope 3 (4), or how they take into account different time horizons in their assessment of climate risks.

When it comes to specific information on human rights issues, the 85% of the companies evaluated did not describe the specific risks of human rights impacts linked to their value chain, and almost none described the management of such risks or the involvement of affected stakeholders.

The data also reveal important differences between the countries analyzed: In most cases, the Czech Republic and Poland remain well below average values. In the case of Spain we find some values ​​above the average.

About the 58 Spanish companies analyzed

Then, the key results:

According to a important study carried out by CEPS for the European Commission, there is a greater awareness among companies about the value and importance of sustainability. Other aspects that contribute to this change are the demands of business partners and changes in society's preferences.. However, the companies in the survey identified legislation as one of the main drivers of changing their strategies. The reform of the EU Directive and, the application of mandatory EU sustainability standards, is our opportunity to learn from the lessons learned and address the remaining gaps.

In this regard, Mª José Gálvez Cardona, Vice President of Spainsif and former Director of Sustainability of Bankia, he thinks that “The Directive on Non-Financial Information has been a good start to harmonize the ESG criteria that companies must take into account. But it does not provide a common standard for communicating ESG criteria.. Each organization is measuring ESG criteria and KPIs in their own way, so the comparison of the different companies is difficult. It is crucial that the new Directive on corporate sustainability reporting establishes European sustainability reporting standards: companies will provide the same information and it will be easier for different stakeholders to compare them”.

Background information on the Alliance for Corporate Transparency

Frank Bold coordinates the initiative of the Alliance for Corporate Transparency, of which Sustentia is a technical partner since its foundation. This ambitious project brings together more than 20 Expert NGOs working in the field of transparency and sustainability of companies and create a platform for engagement with progressive actors representing responsible investors and leading companies in ESG reporting. Some of our works include:

  • Research on the publication of information on sustainability of 1000 companies of 28 países europeos pertenecientes a 11 sectors with respect to the year 2019 (English and Spanish), and in particular a report on the 67 Spanish companies analyzed. You can access the interactive database.
  • Research on the publication of sustainability information – climatic, environmental and governance – of 300 companies from the EEC and southern Europe (2020): investigation report , interactive database.
  • Report on the exercise carried out by the supervisory authorities in the application of the regulations in cases of non-compliance with the Directive on non-financial information of the EU.
  • Series of in-depth articles on sustainability reports published in the Alliance for Business Transparencyl and by Sustentia in Spanish.

Frank Bold and Sustentia are responsible for any errors or inaccuracies in the investigation and presentation of the results..

(1) Predominantly from the extraction of energy and resources, finance, food and drinks, infrastructures, resource transformation and transportation

(2) The company targets net GHG emissions to 2050 or states that the target is aligned with the 1.5 ° C targets / well below 2 ° C of the Paris Agreement or claims to be aligned with the scientifically based Goals Methodology

(3) The analysts assessed whether all aspects of the due diligence process, but not if the individual steps comply with existing standards and focus on the most important issues.

(4) Scope GHG emissions 3 for the financial sector they cover not only the impact of your investment, but also other indirect emissions, that are the result of the company's operations, but they are not under your direct control (for example, business trips).