- Scope: The CSRD reporting requirements will apply to all large EU companies and all listed companies, including listed small and medium-sized enterprises (“SMEs”). This is estimated to cover around 49,000 companies.
- Reporting: The so-called “double materiality” principle remains, but in-scope companies will now have to report according to mandatory sustainability standards. Simpler and “proportionate” standards will apply to listed SMEs.
- Audit: The CSRD will require, for the first time, a general EU-wide audit (assurance) requirement for sustainability information.
- Digitization: The sustainability information must be published in companies’ management reports — and not separately reported — and the information will need to be digitized or “tagged” so it can be incorporated into a planned European Single Access Point.
- Timing: If the proposal is adopted and standards can be agreed in line with current ambitious estimates, large in-scope companies must comply from financial years starting on or after 1 January 2023, publishing reports from 2024; whilst SMEs have to comply from 1 January 2026.
Sinéad Oryszczuk is special counsel and solicitor advocate in Covington's London Life sciences and Environment regulatory team. Ms. Oryszczuk’s UK and EU law practice is diverse, spanning energy, environment, life sciences, consumer products, and technology sectors. She supports a variety of internal and in-house teams including corporate, real estate, projects, construction, planning, health and safety, IP, insurance, and banking. She is experienced in contentious matters, assisting clients before criminal, civil, administrative and specialist tribunals, and non-contentious (regulatory, transactional/M&A) matters. She has advised in relation to some of the UK’s most high profile recent environment cases up to Court of Appeal level, as well as large group actions, and has brought cases before the European Court in life sciences matters. Prior to joining the firm, Ms. Oryszczuk spent 5 years in the UK's leading specialist energy, environment, and regulatory team.
Ms. Oryszczuk has broad experience in traditional environment areas such as contaminated land and allocation of environment liabilities in transactions, permitting, waste, climate change, species-specific requirements, emissions, and contentious work including prosecutions relating to large scale pollution incidents, environmental damage, and general regulatory and subject specific ad-hoc advice. Ms. Oryszczuk also provides advice on specialist scientific and technical regulatory aspects spanning a variety of sectors. She has built up particular expertise in chemicals law and hazardous/regulated substances (e.g. REACH, CLP, RoHS, biocides, nuclear/radiological), novel technologies and agri-tech (e.g. advanced genetic engineering, GMOs, nano), and corporate/accounting and regulatory energy and environment reporting and efficiency (e.g. EU ETS, CRC, mandatory energy audits (ESOS) and non-financial reporting).
Ms. Oryszczuk advises day-to-day on transactional matters and liability (including director/officer and parent company), land contamination and hazardous substances, and in multinational competitive bids. She has a broad experience including in relation to manufacturing and waste facilities, energy storage projects, wind farms, grid projects, redevelopments and remediation projects, landfills, mines and minerals operations, and nuclear and radioactive materials facilities. She has acted for a variety of parties including buyers/sellers, tenants/landlords, bidders, lenders, insurers, developers, authorities/regulators, trustees, insolvency practitioners, and private equity/funders. Ms. Oryszczuk provides specialist corporate due diligence (including vendor due diligence). She often acts as specialist outside counsel and has drafted bespoke instruments including transfer of liability deeds, contractor T&Cs, site remediation/investigation/access agreements, as well as environment indemnities and warranties. Ms. Oryszczuk often coordinates multinational projects and advice and regularly liaises and negotiates with regulators on behalf of her clients. On corporate work in particular, Ms. Oryszczuk assists very large multinationals (including global asset funds) with complex organisational structures through national and international compliance scenarios, including on corporate reporting and carbon .trading.
On contentious work, Ms. Oryszczuk has taken leading roles in some of the UK’s largest and most high profile environment cases, often building on her science background in respect of issues concerning hazardous substances. She regularly defends in relation to large domestic civil group actions relating to environment issues. More recently she has acted in contentious life sciences cases relating to medicinal products including before the European Court and national regulators, e.g. the UK’s NICE.
Sustainable Finance Package: Context and CommentThe Commission’s intention with its Sustainable Finance Package is twofold: (1) in the short term, to set a clear regulatory framework to encourage investments that will contribute to a sustainable and inclusive economic recovery from the COVID-19 pandemic; and (2) in the long term, to ensure the transition to a carbon neutral EU economy by 2050, in accordance with the 2020 European Climate Law. Following the adoption of the EU Taxonomy Regulation (explained further below), the Sustainable Finance Disclosure Regulation, and the Benchmark Regulation, which enhances the transparency of benchmark methodologies, the Commission has in this legislative package laid out the next building blocks for its envisioned sustainable finance ecosystem.
In addition to the impact on financial institutions and investors directly subject to the new laws, the Sustainable Finance Package may impact corporates in the following ways:
- Corporates may be more likely to receive requests for data on their environmental and other sustainability practices as upstream capital markets participants grapple with new obligations to distinguish between green, “light green,” and other investments;
- Corporates may be subject to direct requirements to report on activities relating to their environmental, social, and governance objectives;
- Longer-term, the package may form the basis of a “blueprint” for wider stakeholders, meaning that corporates may need to improve performance against the standards, not just to attract capital, but also to remain competitive; and
- On a global level, these EU sustainability measures have real potential to become gold standards and influence the investment market outside of the EU, a phenomenon known as the ‘Brussels Effect’.
The UK Government recently announced that it is developing legislation that would make it illegal for large businesses operating in the UK to use certain commodities that have not been produced in line with local laws, and require in-scope companies to conduct due diligence to ensure that their supply chains are free from illegal deforestation…
“Businesses that have better risk mitigation processes across their supply chains cause less harm to people… Good environmental, social, and governance practices pay off… We need to make sure that responsible business conduct and sustainable supply chains become the norm.”
EU Commissioner for Justice, Didier Reynders, April 29, 2020
On April 29, 2020, in a webinar hosted by the European Parliament’s Responsible Business Conduct Working Group, EU Commissioner for Justice Didier Reynders announced that the European Commission (the “Commission”) will move swiftly to introduce regulation on mandatory human rights and environmental due diligence for companies, with its legislative proposal to the European Parliament and Council expected in the first quarter of next year.
In this alert, we provide an overview of the comments and commitments made by Commissioner Reynders against the backdrop of the recently published Study on Due Diligence Requirements Through the Supply Chain (the “Study”), which considered possible EU-wide regulatory interventions relating to human rights and environmental due diligence, and which provides the impetus for the Commissioner’s announcement.
Consultations to inform the Commission’s legislative proposal are expected to start in the coming weeks, so we also set out some initial factors that commercial organizations operating in the European Union may want to consider as they seek to engage with this policy process.
- Background: the Study
Commissioner Reynders’s presentation centered around the findings of the Study, which was published in late February and conducted by an expert panel that included representatives of the British Institute of International and Comparative Law, the London School of Economics and Political Science, and Civic Consulting, a public policy consultancy.
The Study involved: (i) a detailed examination of existing regulations and proposals for supply chain due diligence requirements, as well as market practices; (ii) the development of four general options for regulatory interventions at the EU level; and (iii) an assessment of the potential impact of these four options, based also on stakeholders’ perceptions of the different regulatory interventions.
In high-level terms, the Study identified and evaluated the following four options:
Option 1—No EU level policy change: This option would not involve any harmonized EU level regulatory intervention. The Study indicates that this option would be likely to result in a “patchwork” of due diligence expectations across the EU, as there are pending proposals or campaigns for mandatory human rights and environmental due diligence laws in 13 European countries, of which 11 are EU Member States.
Continue Reading European Union Justice Commissioner Commits to Regulation on Corporate Human Rights and Environmental Due Diligence
In Part 3 of our blog series to honour the UN’s World Human Rights Day, we consider the evolving mineral supply chain due diligence landscape, focusing particularly on the implications of the London Metal Exchange Policy on Responsible Sourcing for the extractive industry.
In October 2019, the London Metal Exchange (LME) unveiled a new policy…