EU REGULATING INSTRUMENTS - LEGAL BASE FOR THE SUSTAINABILITY REPORTING

22.09.2011

 
 
Law-2

Regarding reporting on sustainability information, the European Union has several regulating instruments with implications for all Member States. These instruments are directly in force in all Member States that have to comply with their obligations under the regulation.

In turn, the regulations refer to voluntary and mandatory systems with elements of reporting on sustainability information:
- the Accounts Modernisation Directive;
- the European Pollutant Release and Transfer Register (PRTR);
- the Integrated Pollution Prevention and Control Directive (IPPC);
- the EU Eco-Managementand Audit Scheme (EMAS)
- the EU Emission Trading System (ETS).

The ETS is unique with regard to comparability and transparency. The Directorate-General for the Environment has also
started working on a methodology for environmental reporting in the framework of the Sustainable Consumption and Production Action Plan. This work is expected to be delivered in the beginning of 2012.

Trends in Activities of Governments

By 2010 all EU Member States have transposed the Modernisation Directive and most of the Member States have transposed Directive 2006/46 in their national laws. However, governments have done much more beyond this EU Directive: states are taking up a stronger role in ensuring a minimum level of disclosure and risk prevention.

A number of countries have included mandatory and voluntary requirements for reporting in their national legislation. Early adopters were Sweden, France and Germany (2001), followed by for example Norway, Belgium and Italy in 2004. Hungary
and Romania have some extra (mandatory) standards in place, related to environmental protection that defines the environmental report as an analysis document necessary in the process of plans and programmes promotion. In Hungary the awareness of corporate responsibility and reporting practices is not only driven by government, but also by media, civil society and multinationals applying policies and procedures.

Over the last four years a trend is becoming visible towards more governments starting to make sustainability reporting
mandatory. Governments becoming more active and starting to regulate, was one of the main conclusions of the updated
2010 Carrots & Sticks publication by KPMG, GRI, UNEP and the University of Stellenbosch.

Another developing trend is the fact that governments combine mandatory and voluntary approaches. The voluntary standardsor guidelines are designed to assist companies and/or public agencies in reporting. Voluntary standards are complementary to mandatory standards, but can also function as pre-law: governments might prefer to use “soft power” before they legislate, aiming to provide guidance to companies, without having to pass through official procedures towards legislation.

Source: The State of Play in Sustainability Reporting in the European Union

Glossary:

The EU Accounts Modernisation Directive is intended to increase the comparability between companies in the EU through a common reporting framework. To achieve this objective, the Union requires common financial reporting standards – that are transparent, fully understood, properly audited and effectively enforced. The Directive brings European accounting requirements in line with modern accounting practice and increases the reporting remit to take account of the growing demand for non-financial comment and analysis.

The European Pollutant Release and Transfer Register (PRTR) is a publicly accessible electronic database at European Union (EU) level. This database meets the requirements of the United Nations Economic Commission for Europe (UN-ECE) Protocol on Pollutant Release and Transfer Registers, signed by the Community in May 2003. The public will be able to access this register free of charge on the internet and will be able to find information using various search criteria (type of pollutant, geographical location, affected environment, source facility, etc.)

The Integrated Pollution Prevention and Control Directive (IPPC) require industrial and agricultural activities with a high pollution potential to have a permit. This permit can only be issued if certain environmental conditions are met, so that the companies themselves bear responsibility for preventing and reducing any pollution they may cause. Integrated pollution prevention and control concerns new or existing industrial and agricultural activities with a high pollution potential, as defined in Annex I to the Directive (energy industries, production and processing of metals, mineral industry, chemical industry, waste management, livestock farming, etc.).

The EU Eco-Management and Audit Scheme (EMAS) is a management tool for companies and other organizations to evaluate, report and improve their environmental performance. The scheme has been available for participation by companies since 1995 and was originally restricted to companies in industrial sectors. Since 2001 EMAS has been open to all economic sectors including public and private services. In 2009 the EMAS Regulation has been revised and modified for the second time. Regulation (EC) No 1221/2009 of the European Parliament and of the Council of 25 November 2009 on the voluntary participation by organizations in a Community eco-management and audit scheme (EMAS) was published on 22 December 2009 and entered into force on 11 January 2010.

The EU Emissions Trading System (EU ETS) is a cornerstone of the European Union's policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively. Being the first and biggest international scheme for the trading of greenhouse gas emission allowances, the EU ETS covers some 11,000 power stations and industrial plants in 30 countries. Launched in 2005, the EU ETS works on the "cap and trade" principle. This means there is a "cap", or limit, on the total amount of certain greenhouse gases that can be emitted by the factories, power plants and other installations in the system. Within this cap, companies receive emission allowances which they can sell to or buy from one another as needed. The limit on the total number of allowances available ensures that they have a value.

The Sustainable Consumption and Production and Sustainable Industrial Policy (SCP/SIP) Action Plan was presented on 16 July 2008 by the European Commission. It includes a series of proposals on sustainable consumption and production that will contribute to improving the environmental performance of products and increase the demand for more sustainable goods and production technologies. It also seeks to encourage EU industry to take advantage of opportunities to innovate. The Council endorsed the Action Plan in its conclusions adopted on 4 December 2008. A range of policies at EU and national level already foster resource efficient and eco-friendly products and raise consumer awareness. The proposals complement these policy instruments and provide measures where gaps exist.