November 2022
I pushed my chair back and stood up quickly, brimming with excitement. It felt like we were on the verge of unlocking a whole new world of insight.
The chemical sector is not exactly known for its transparency efforts. We’re usually only allowed to see small glimpses, never the full picture. The vast majority remains shrouded in secrecy, hidden behind claims of confidential business information or a lack of reporting standards.
So, you can understand my excitement when I found out that the new Corporate Sustainability Reporting Directive in the EU — also known by its catchier name CSRD — would bring a never-before-seen level of transparency to the elusive chemical sector.
The CSRD aims to set a much higher standard for sustainability reporting in the European Union. Companies will be required to share details on their Environmental, Social, and Governance (ESG) practices, with a particular focus on the impact on human health and the environment. It will cover 12 topics, including not only the climate aspect but also pollution, water, waste, and biodiversity.
Stay updated!
Subscribe to our newsletter.
This broad approach means that chemicals will play a much more important role in sustainability reporting than they ever have before. Companies will be obliged to report on everything related to harmful chemicals, including use, production, sales, distribution, emissions, and so on.
I was especially pleased to hear that the ideas from the Chemicals Strategy for Sustainability were being picked up together with terms like “most harmful substances” and “substances of concern”. This may sound trivial, but it actually expands the scope of the reporting standards to a much broader range of hazardous chemicals beyond just SVHCs (Substances of Very High Concern).
September 2023
So far, so good… or so I thought. When the final version of the reporting directive is published, the fine print reveals two gaping loopholes: Companies can decide what is “material” (in other words, relevant) and they can claim confidentiality.
“Deciding what’s “material” to report is like debating whether or not pineapple belongs on pizza”
Let’s start with the first one. Apparently, according to the CSRD, deciding what’s “material” to report is like debating whether or not pineapple belongs on pizza — everyone’s got a different take. When companies are left to make that call, things quickly get murky. To make the reports comparable, the materiality aspect needs to be much better defined and consistent for all companies.
As for confidentiality claims, don’t get me started. In the chemical industry, “confidential business information” is the magic phrase that gets thrown around for just about everything. It’s become the ultimate escape route to avoid being transparent.
The excitement I felt a year ago started to wane. I realized that these two huge loopholes could potentially render the new law useless and that this golden opportunity could be wasted.
February 2024
By the following year, my frustration was at an all-time high. Sure, companies would have to report on a bunch of sustainability aspects, including chemicals… but which companies? And when? We were told it’s a ‘tiered approach,’ with deadlines as early as 2025 and as late as 2028.
My head was spinning — trying to get straight answers felt like herding cats.
“At this point, I was ready to throw my hands up in defeat”
We started asking chemical companies for clarity, but that only made things worse. One company with a large EU presence said they wouldn’t need to report until 2028. Meanwhile, another, with no EU sales at all, claimed they’d be reporting next year!
At this point, I was ready to throw my hands up in defeat — but I couldn’t. It still has the potential to become a real game-changer. As an “accounting regulation”, it needs to be evaluated by an auditing company, and non-compliance would get messy. It could potentially become very expensive for the company and in some EU countries, the CEO could even end up in jail.
July 2024
By July, we understood that the double materiality assessment for EU-headquartered companies needs to be done soon. Double materiality, you ask? It means companies must disclose not only what might affect their performance but also how they impact people and the environment throughout their value chain.
However, once again, we’re hearing widely differing opinions. Some believe that all Substances of Concern (SoCs) are material to report for a chemical company. Others — incorrectly, if I may add — claim that if they comply with EU legislation, nothing outside of that is material to report.
To counter the latter’s flawed logic, there’s a four-letter word (well, abbreviation) I would like to bring to the table: PFAS. Though not yet fully regulated in EU legislation, PFAS are already surpassing asbestos both in terms of financial and environmental impacts. Surely, these chemicals must be seen as material to report.
Featured news
EU’s new sustainability reporting is great but misses the PFAS mark by a couple of thousand substances
October 2024
Almost two years later, am I much wiser? Not really. But, like any good quest, the journey is half the battle. Will the CSRD be the game-changer it has the potential to be? I don’t know. How will the reporting look? We’ll find out in the beginning of next year.
However, what we do know is that the CSRD must be consistent for all companies. This is key if we want the reporting to be useful and truly comparable. And let’s not forget the loopholes — these need to be firmly closed to prevent further opportunities for companies to quietly continue polluting both the planet and our health.
Sonja Haider
Head of Sustainable Finance at ChemSec