New EU rules aim to make sustainability reporting by global companies relevant and useful for investors. AP7 broadly supports the proposal but calls for a more consistent approach to reporting that enables investors to compare companies and assess their global impacts.
The EU is developing new rules for how global companies with significant operations in Europe should report on their sustainability impacts. The proposed standard, ESRS 40a, has been developed by EFRAG (European Financial Reporting Advisory Group) at the request of the European Commission. The standard aims to provide investors and other stakeholders with relevant information about companies’ impacts, without imposing unnecessarily extensive reporting requirements.
AP7 has responded to EFRAG’s consultation on the new standard and broadly supports the proposal. However, AP7 believes that the option to apply a so-called mixed approach should be removed.
Under the mixed approach, companies could limit their reporting to EU-related impacts in certain sustainability areas, while reporting globally in others. AP7 believes this risks making sustainability reports more difficult to compare and providing an incomplete picture of companies’ impacts across global value chains. It would also result in different reporting requirements for EU-based and global companies that both have significant operations or sales in the EU.
AP7 therefore proposes removing the mixed approach option from the standard.