How Will the New European Union Corporate Sustainability Mandate Affect U.S. Companies?

By: Alexandra Kueller

Earlier this year, the European Parliament adopted a new corporate sustainability reporting disclosure mandate (the Directive). This Directive coming from the European Union will require certain companies to begin publicly reporting on environmental and social strategies, policies, programs, and actions. Since a number of US companies are listed on the EU exchange, many of them will have to incorporate the Directive into their own reports. With the Directive coming into full effect this fall, let’s take a look at what this means for US companies:

Who has to disclose and report?

According the Directive, the US companies that will be affected must meet all three of the following:

  1. Public-interest entities with
  2. 500 or more employees, and
  3. A balance sheet of €20M or more OR a net turnover of €40M or more

The important thing to note is that if your US company is listed on EU regulated markets and meets the (2) and (3) conditions, you will have to follow the new mandate.

What will the U.S. reports have to contain?

The Directive states that companies will have to at least contain information on the following:

  • Environmental impacts: renewable energy, GHG emissions, water use, air pollution, etc.
  • Social and employee matters: actions taken to ensure gender equality, respect for the right of workers and trade union rights, health and safety and working conditions, social dialogue and engagement, etc.
  • Respect for human rights: information on prevention of human rights abuses, etc.
  • Anti-corruption and bribery: programs in place in order to fight anti-corruption and bribery, etc.
  • Diversity of management bodies: age, gender, education and professional background of the administrative and management staff, etc.
  • A description of the business model, outcomes, policies, principle risks and relevant non-financial KPIs

The EU mandate directs companies to already existing and recognized frameworks, such as the GRI or the UN Global compact.

What should U.S. corporate leaders be doing now?

If you’re one of the US companies that falls under the new Directive, make sure that you get your company prepared to report on all of the new requirements if you aren't already doing so. Make sure you give yourself enough time to organize everything, gather the appropriate data, create reporting material, etc. because it does not happen overnight. The best thing for you to do is to be prepared.

Want to learn more about sustainability reporting? Read more about the topic in our white paper here.