The European framework is taking shape, despite pressure from all sides, which clearly shows how fundamental the issue of ecological and social accounting is. At the height of the summer, the European Commission published the texts of these future standards, which fall within the framework of the so-called CSRD directive, and define the extra-financial information that more than 50,000 European companies will begin to produce in 2025. Some concessions had to be made in relation to the initial project, but the European Union (EU) is sticking to a major principle, that of double materiality: it is a question of taking into account not only the impact of environmental factors and social effects on the company’s profits (financial materiality) but also the impact of the company itself on nature and society.
For Alexandre Rambaud, teacher-researcher at AgroParisTech and co-director of the “Ecological accounting” chair (AgroParisTech, Paris-Dauphine University, University of Reims Champagne-Ardenne, Louis Bachelier Institute), the European model must above all be defended at international in the face of the lowest bidder of the ISSB, chaired by the former boss of Danone, Emmanuel Faber, based on simple financial materiality. A fight not to be lost if we intend to align ourselves with the Paris Agreement to fight against global warming.
L’Express: Pressure has been strong in recent months for Europe not to be too demanding. With what concessions in the end?
Alexandre Rambaud: The European Commission has published its delegated acts, after tough negotiations and despite dubious comments from some leading business representatives and lobbying from the ISSB [NDLR : organisme privé dirigé par Emmanuel Faber et préconisant un autre cadre de reporting extrafinancier]. It’s not over, the text must now go through trialogue and can still evolve. But a big step has been taken. We can see the glass as half empty or half full. On the positive side, we salute this remarkable work and in record time, since the revision of the previous text (NFRD) began in 2021, resulting, at the end of 2022, in a very ambitious proposal from Efrag [NDLR : organisme public chargé d’élaborer le standard européen]. Above all, these rules reflect a new philosophy: it is no longer a simple publication of information whose interest is limited to the CSR department, with no impact on the organization. Here, the idea is to connect extra-financial indicators with accounting and management by developing transition plans, objectives, figures.
And if we look at the glass half empty?
It is regrettable that the publication obligation is subject to a materiality analysis by the companies themselves. That is to say, if a company considers that a subject, such as biodiversity or the management of water resources, is not important on its scale, it is not required to publish information on the question. Only the Climate component stands out in the texts: in this case, the company will have to justify itself if it does not communicate information, with the risk that this creates a focus on this issue. It is to be expected that companies will minimize what they will define as impact [conséquences de l’activité de l’entreprise sur son environnement]. There is an imbalance here between what is required in financial terms and what will be required in terms of indicators and impact information. On the first subject, the shareholders are the guarantors of the analysis of financial materiality. For the second, the company, we do not know how, must decide on the impact: it is up to it alone to define the other stakeholders. This problem highlights the question of complexity: who is able to say, to qualify, to quantify what the impact is? Beyond goodwill, this relates to the structuring of the company and its access to information. And some things are hard to do.
Should companies be given more support on these subjects?
On environmental issues, one could have imagined that the European Environment Agency, for example, would be identified as an official body serving as a counter to help them in their impact analysis. A public actor could tell them how to collect information, have the scientific inventory, give the right indicators. We cannot leave companies alone in the face of the proliferation of scientific debates, indicators and environmental issues. Just on “climate” subjects, they must enter into the technique of carbon assessments, and especially carbon budgets… When it comes to biodiversity, things get even more complex! Support would also have facilitated the acceptability of these standards.
So there is reason to be disappointed?
We are in 2023. The various changes in climate, biodiversity, inequalities, are underway. I wonder: to what extent do we still have time to postpone things? There is a balance to be found between the time to adapt and the temporality of biophysical and social issues. CSRD is a relevant entry point but should not be seen as an outcome.
What about the ISSB, the competing organization which also published its recommendations recently?
It remains on its position of financial materiality. The ISSB and Emmanuel Faber emphasized the importance of publishing scope 3, namely impact data on the entire value chain, from suppliers to customers, but with the sole angle of shareholder value. For example, schematically, if a large company is supplied with very carbon-intensive energy, this can weigh on its image, and therefore lower the share price. But the ISSB has never taken a position on alignment with the Paris Agreement, beyond wishful thinking. We then come to the subject of double materiality and the very usefulness of the publication of these data.
That’s to say ?
An indicator, whatever it is, has a nature and a function. The simple publication of scope 3 in itself has a limited scope and in 2023, we can no longer content ourselves with simple inventories of indicators: it must also have a purpose, a function, in particular to serve in the management of the business, strategy. However, the only response from the ISSB is that the function of this indicator is to maximize shareholder value. But we know that using climate information on the basis of a risk/opportunity analysis does not automatically lead to management aligned with the Paris Agreement.
Europe insists on the compatibility (“interoperability”) between its standard and that of the ISSB, an important point?
This is part of the major debates, so that these publications do not become a hell for companies, in particular those which will be subject to them from 2024. And let us emphasize that it is Europe which has done this substantive work, not the ISSB . It remains to be seen how the issue will be presented at the international level. Is the ISSB considered to set the fundamental standards, and the CSRD approach to be a plus? Or is CSRD a horizon to be reached, with ISSB standards as just a temporary milestone? It’s not the same way of seeing things. Emmanuel Faber tends to say that the ISSB is the standard, and produces a universal language, and that the CSRD approach is a plus, allegedly inaccessible for certain companies in the world. But some countries in Asia or Africa are thinking about the subject and do not necessarily want to go towards the ISSB’s proposals.
What is at stake?
If the ISSB wins, Europe will lose its weight in the economy of the future, of sustainability. Conversely, its role will be major if it wins the battle for standards. Whoever sets the standards will be the spearhead of the new economy, we do not measure it enough. Actors close to European spheres of influence must position themselves, it is necessary to support the EU. In France, for example, Emmanuel Faber is invited to express himself without opponent, without representative of Europe opposite! The risk is great that we are too naive, that we do not measure the geopolitical stakes. Emmanuel Faber defends a geopolitical agenda that is not that of the European Union, yet the only program based on sustainability aligned with scientific debates.