ESG Regulations: Global Update February 2024
As ESG regulations rapidly develop, FTI Consulting is providing a quick summary of need to know updates across the globe.
Sustainability Reporting
ESG Ratings
Human Rights
Supply Chain
Greenwashing Penalties
As ESG regulations rapidly develop, FTI Consulting is providing a quick summary of need-to-know updates from around the globe. This month we cover China’s top stock markets’ new sustainability reporting guidelines, provisional agreements on ESG ratings in the EU, and a delay in voting on EU legislation to implement company liability for human rights issues in their value chains.
1. China’s top stock markets introduce sustainability reporting guidelines
What do I need to know?
- The Shanghai Stock Exchange, Beijing Stock Exchange, and Shenzhen Stock Exchange have published sustainability reporting guidelines for listed companies, a move that mirrors the EU’s Corporate Sustainable Reporting Directive and other major markets implementing reporting mandates.
- The “core content” areas for the requirements are governance, strategy, impact, risk and opportunity management, and indicators and goals; these will outline to investors how listed companies both impact and are impacted by the environment and society through a double materiality lens.
What’s next:
- Larger listed companies in these markets will be required to report in 2026 for the 2025 reporting period, with over 450 companies affected.
2. EU Council and Parliament reach provisional agreement on ESG ratings activities
What do I need to know?
- The provisional agreement provides details on scope and exclusion of the regulation, as well as defining what it means to operate in the EU.
- The agreement also opens the possibility of separating E,S, and G ratings, and clarifies that the weighting of each factor would need to be explicit in a total score.
- This version of the agreement eases the registration regime for smaller ESG ratings providers, with proportionately smaller fees.
What’s next?
- The Council and the Parliament must officially approve the provisional agreement before going through the formal adoption procedure. The regulation will start applying 18 months after it comes into effect.
3. EU vote on Corporate Sustainability Due Diligence Directive (CSDDD) postponed
What do I need to know?
- The Green Claims Directive would require companies making green claims to have the claims pre-verified with scientific evidence backing them.
- The proposed law includes significant fines of “at least at 4% of their annual turnover”.
What’s next?
- The directive will need to go through a Parliament plenary vote, and then it would need to be approved by the Council of EU member states with the final agreement anticipated following the June European Parliament elections.
4. Two European Parliament committees voted in favor of a proposed Green Claims Directive
What do I need to know?
- The vote to ratify the CSDDD, which would mandate human rights and environmental due diligence requirements for qualifying companies, has been postponed as Italy and Germany declared abstention.
- The German government was required to abstain due to internal pushback from German liberal party FDP (Renew), who argued that the law would over-burden German companies already complying with a similar national supply chain legislation.
What’s next?
- The vote is delayed due to lack of consensus, with the ability to proceed based on either Italy or Germany moving it forward.
- To pass, the legislation must have consensus from the majority of 15 EU countries representing 65% of the EU’s population.
- Some are concerned this delay could mean legislation may not pass before elections. If the file were not prioritized in next mandate, it could be the end of the road for the directive.
Contact us: For further information on how your business can better navigate emerging ESG regulations, please contact Ben Herskowitz, Senior Managing Director, U.S. at [email protected]
The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.
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