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AWARDS FOR BEST BELGIAN SUSTAINABILITY REPORTS Edition 2022
3
TRENDS AND EVOLUTIONS
IN SUSTAINABILITY REPORTING
IN BELGIUM
WITH SPECIFIC COMMENTS OF THE JURY
> Ready for the ESG (reporting) requirements and to increase reliability of the reports?
Initiatives to regulate sustainability reporting have recently been developed at European and international level, tending towards an expected harmonisation of standards. Therefore, integrating sustainability in their strategy and risk analysis is now becoming a necessity for organisations. However, they should also see sustainability as an opportunity.
As part of the European Green Deal and a wider EU policy to encourage companies to commit to respecting human rights and reduce their impact on the planet, the European Commission has developed various regulatory initiatives: the EU Taxonomy, the Corporate Sustainability Reporting Directive (CSRD) proposal and the proposal directive on corporate sustainability due diligence. The development of European standards on sustainability reporting is currently being finalized by the European Financial Reporting Advisory Group (EFRAG) at the request of the EU Commission. These standards create links with the various initi- atives in this area (Taxonomy, SFDR, TCFD, GRI, ISSB Standards (IFRS) and other guidelines).
The CSRD proposal has been adopted by the EU Parliament and Council this month (November 2022) and will soon be published in the EU Official Journal. The rules will start applying between 2024 and 2028. The directive targets all large companies (exceeding two of the three following criteria : 250 employees, €20m balance sheet total, €40m net turnover), whether they are listed or not, but it also targets listed SMEs, even though those will get more time to adapt to the new rules, and non-EU compa- nies (more than €150m EU revenue and 1+ subsidiary or branch). The number of European companies required to report sustain- ability information is likely to increase from 11,000 today to more than 50,000 in 2024. In Belgium, it is estimated that around 2,500 companies will be impacted.
Furthermore, Belgian SMEs will indirectly be impacted by the CSRD. As part of their supply chain due diligence procedures and footprint analysis, large companies will request from stakeholders within their supply chain (eg. SMEs being suppliers, customers, subsidiaries...) additional transparency and disclosures (eg. Poli- cies, risk assessment, management approach, performance...). As a consequence, almost all companies in Belgium will be impacted by those changes and practices in reporting. Banks and financial investors will also start looking closer at ESG activities of companies seeking financing. It is therefore high time for SMEs to start integrating ESG in their strategy , governance and reporting.
At the international level there are various reporting frameworks (eg. TCFD, CDP, GRI, IIRC...), out of which the Global Reporting Initiative (GRI) is one of the most common set of reporting stand- ards used by companies and organisations. The IFRS Foundation has also created the International Sustainability Standards Board (ISSB), which has developed two draft ISSB standards, one of which deals specifically with climate.
The European Sustainability Reporting Standards (ESRS) are a key component of the CSRD. This set of standards (13 in total currently) is very comprehensive requiring companies in scope to report qualitative and quantitative sustainability information. Timely establishing a roadmap for compliance with these stand- ards is key given the level of transparency and disclosure required within a relative short timeframe.
The CSRD identifies statutory auditors as the natural interlocutors to audit this sustainability information.
The verification of sustainability information by an external auditor, who will provide external assurance, brings added value on several levels:
— It brings additional credibility to the sustainability reports by
strengthening the accuracy of the information;
— It helps identify areas for improvement in the reporting
processes;
— It facilitates relations with banks and financial investors who
are now introducing ESG criteria into their lending and investing programs.
The Jury encourages organisations to follow the example of those obtaining external assurance on selected KPIs with clear indica- tion of the scope of the assurance (limited), as for example organ- isations such as: Azelis, Barco, Befimmo, Cofinimmo, Groupe Bruxelles Lambert, Proximus, Solvay, UCB, Umicore, VPK Group, WDP and Xior Student Housing.
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