Companies operating within the European Union are increasingly struggling to meet complex environmental, social, and governance (ESG) reporting regulations. As the EU rolls out new directives related to due diligence and sustainability reporting, businesses of all sizes are left uncertain about their immediate obligations and the evolving role of compliance officers. 

While large firms must adhere to stringent compliance measures, the implications also trickle down to smaller businesses, which may not be directly covered by the regulations but must still provide essential data to their larger partners. Patricio Roffo, head of global governance, risk, and compliance for GetYourGuide, expressed concern over the “ridiculously complex” nature of these rules and noted that compliance may require substantial resources, which smaller firms often lack. 

Upcoming conferences, such as Compliance Week Europe, will explore the challenges posed by these new regulations. Industry experts will discuss the impact of the Corporate Sustainability Due Diligence Directive (CS3D) and the Corporate Sustainability Reporting Directive (CSRD), which aim to improve ESG transparency. Currently, only about 10% of large EU companies report their ESG data, highlighting the need for compliance to improve. 

The CS3D applies to approximately 6,000 large EU companies, while the CSRD will gradually extend to most businesses by 2028. However, a report from Burges Salmon revealed that 32% of U.K. companies feel unprepared to meet ESG obligations, indicating a widespread need for better understanding and resource allocation. 

Experts recommend that firms conduct a gap analysis to assess their current reporting capabilities and establish a robust governance framework to facilitate accurate ESG data collection. The evolving landscape necessitates that companies prioritize compliance while ensuring they can manage the risks associated with their ESG impacts. 

Sources:  

https://www.complianceweek.com/events/whats-your-risk-appetite-eu-firms-grapple-with-ridiculously-complex-esg-reporting-rules/35488.article 

https://www.pwc.com/vn/en/publications/vietnam-publications/six-key-challenges-for-financial-institutions-to-deal-with-ESG-risks.html 

https://impact-investor.com/challenges-remain-as-firms-gear-up-for-new-eu-green-reporting-rules/ 

https://bebeez.eu/2023/08/22/businesses-worldwide-grappling-with-esg-reporting-complexity-according-to-new-survey-by-workiva/