EU to require standardized format on sustainability reporting
In one of the latest updates from the EU Commission the EU is suggesting sustainability metric reporting to follow a standardized, digital format.
In line with the Commission’s Sustainable Finance Action Plan, the EU is taking a number of measures to ensure that the financial sector will play a significant part in achieving the objectives of the European Green Deal. The EU has recognized that getting better and more usable data from companies themselves is essential to implementing the European Green Deal successfully. The bloc wants better tracking of companies’ impact on people and the environment, on their potential sustainability risks, and on their financial investments. The aim is to strengthen relations between business and society. This will also create opportunities for companies, investors, civil society and other stakeholders to improve the way sustainability information is reported and used in business and to ultimately pave the way for the green transition.
To work towards this goal, the EU Commission has proposed an amendment to how corporate sustainability reporting is carried out. Previous EU Directives on financial reporting do not require that reports are provided in a digital format – something the Commission is looking to change. This change would bring the reporting requirements in line with its European Strategy for Data and Digital Finance Strategy for the EU.
To meet the proposed changes, undertakings would be required to prepare their financial statements and report in XHTML format and mark-up sustainability information and disclosures required by the new sustainable finance taxonomy. The EU Commission highlights how a digital transition is necessary in order to meet the new reporting requirements of the EU taxonomy and allow information to be ‘tagged in accordance with those standards’. The benefits of digitalization in sustainability reporting are clear - including making information easier to find, creating opportunities to use information more efficiently, creating greater transparency, promoting accountability, and holding the potential forsignificant cost savings for businesses.
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