The Introduction of Mandatory Corporate Sustainability Reporting in the EU and the Question of Enforcement

Abstract

Directive (EU) 2022/2464 introduces mandatory sustainability reporting for all large undertakings in the European Union, as well as third-country undertakings active in the Union. The new rules were mandated by the increase in investor needs, as well as the interest of civil society actors. The present article discusses the relationship of corporate social responsibility with law and the shift from voluntary to mandatory sustainability reporting. It first presents the main novelties of the Directive with regard to scope of application, issuance of uniform European reporting standards and introduction of mandatory external assurance. It then turns to the question of public and private enforcement of the new sustainability reporting obligations. Public enforcement is, to a certain degree, guaranteed by the amendment of existing rules. The new Directive is silent on private enforcement issues, although it may trigger private litigation, predominantly by shareholders. Other interested groups, such as consumers and civil society actors, will not be able to directly challenge breaches of the new rules, despite the intention of the legislator to foster sustainability reporting and responsible corporate behaviour to the benefit of civil societies.