Europe's corporate disclosure rules are coming. Any U.S. company that isn’t paying attention risks being left unprepared
The E.U. is in the middle of implementing its Green Deal program with a wide range of implications for how the world tackles climate change. Perhaps nothing is of more obvious import to global business leaders than the bloc’s coming climate disclosure rules, which are scheduled to be finalized next month. The rules will start in Europe, but will soon affect companies around the globe.
To understand the implications of the rules, it’s helpful to look briefly at the long history of climate disclosure. For decades, civil society groups and governments have pushed companies to disclose both their climate impact and the risks that climate change poses to their business. Many companies have jumped on board the disclosure train, and a range of different yet overlapping voluntary standards have emerged.
The SEC rules, however, may end up being less significant than what’s coming out of Brussels, known in typical wonky E.U. language as the Corporate Reporting Sustainability Directive . While the proposed SEC rule focuses only on factors that it says are material to a company’s financial performance, the E.U. rules rely on a different, more consequential standard known as double materiality.
In Europe, many in the business community are up in arms about the cost of compliance as the E.U. rolls out a range of new climate-linked regulations beyond the corporate reporting requirement, from new passenger vehicle standards to an expanded emissions trading system. These businesses are especially concerned about the possibility of too many different standards in different jurisdictions.
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