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The European Parliament adopts new sustainability reporting rules. What does it mean for hotels?

Updated: Mar 13, 2023

European Parliament adopts new sustainability reporting rules.

The Corporate Sustainability Reporting Directive (CSRD has been adopted today with 525 votes in favour, 60 votes against and 28 abstentions. The new regulation will make businesses more publicly accountable by obliging them to regularly disclose information on their societal and environmental impact.

The Council is expected to adopt the proposal on 28 November, after which it will be signed and published in the EU Official Journal. The directive will enter into force 20 days after publication. The rules will start applying between 2024 and 2028.

  • From 1 January 2024 for large public-interest companies (with over 500 employees) already subject to the non-financial reporting directive, with reports due in 2025

  • From 1 January 2025 for large companies that are not presently subject to the non-financial reporting directive (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets), with reports due in 2026

  • From 1 January 2026 for listed SMEs and other undertakings, with reports due in 2027. SMEs can opt-out until 2028.

The Commission adopted, in April 2021, a proposal for a Corporate Sustainability Reporting Directive (CSRD) which would amend the existing reporting requirements of The Non-Financial Reporting Directive (NFRD). The directive extends the scope to all large companies and all companies listed on regulated markets but leaves out the scope listed as micro-enterprises. As a result, audited information must be tagged digitally and companies must report following mandatory sustainability reporting standards.

It is an opportunity to harmonize the current reporting standards landscape, simplifying reporting for hospitality companies. It will also prevent overlapping standards and the inconsistency of data requirements from stakeholder groups. The disclosures should explain how the reporting hotel/hotel group delivers against its policies and targets and its transition trajectory, including past performance (retrospective information) and forward-looking perspectives. The sustainability-related data includes information about the business model, strategy, and supply chains.

The Working Paper (WP) presented the following European Union Sustainability Reporting Standards (ESRS) criteria;

  • ESRS 1: General provisions ESRS E1 Climate change ESRS S1 Workforce ESRS G1 Governance, risk management, and internal control.

  • ESRS 2: Strategy & Business Model, ESRS E2 Pollution ESRS S2 Own workforce – working conditions ESRS G2 Products and services, management and quality of relationships with business partners

  • ESRS 3: Governance and organization of sustainability ESRS E3 Water & marine resources ESRS S3 Own workforce – equal opportunities ESRS G3 Responsible business practices

  • ESRS 4: Material Impacts, Sustainability Risks, and Opportunities

  • ESRS 5: Definitions of policies, objectives, action plans, and resources

  • ESRS 6: Financial Statements and management reports

What companies are obligated to disclose information required under the ESRS of the CSRD regulation?

All listed and large companies that exceed 2/3 of the following: Balance sheet total: > EUR 20M, Net revenue: > EUR 40M, and > 250 average number of employees. The directive aims to build on and contribute to existing international sustainability reporting frameworks and initiatives.

  • Transparency on environmental, social affairs and governance matters to become the norm for large firms

  • EU to become front-runner in global sustainability reporting standards

  • Around 50 000 companies to be covered by new rules, up from the current 11 700

“The reporting frameworks and standards of the Global Reporting Initiative (GRI), the Climate Disclosure Standards Board (CDSB) (now consolidated into the ISSB) the Sustainability Accounting Standards Board (SASB), the International Integrated Reporting Council (IIRC) and the UN Guiding Principles Reporting Framework are reflected, as relevant, in the [draft] Standard”. -EFRAG

How to start preparing

It is now mandatory to report sustainability indicators under the Corporate Sustainability Reporting Directive, but hospitality companies have to start preparing now to comply with the upcoming requirements.

Hotel owners, operators, and management companies can start to gather the information needed for reporting purposes from business partners and stakeholders (such as suppliers, clients, and investee companies) by harnessing cooperation along their supply chains. What’s more, hospitality companies need to start implementing internal processes and structures to ensure the business model complies with the legislation. It will ensure transparency in environmental, social, and governance practices, gather data, put metrics and systems in place, and ensure that the data is well-managed and updated.

There must be a medium in which hospitality companies can collect and store information in an XHTML format. This is due to the fact that the information will be fed into the European Single Access Point using a digital tag.

How do hotels measure sustainability? How do we bring the right information to the right decision-makers at the right time?

It is vital to follow legislative procedures and to ensure that changes are made through the European Financial Reporting Advisory Group, EU Taxonomy Delegated Acts, and the transposition of the directive in EU member states. Until the final reporting framework is available for large firms and in 2026 for SMEs, it is fundamental to ensure the traceability of supply chains.

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