Inside the EU's corporate social responsibility rules

New EU regulations require disclosure of corporate environmental and social responsibility metrics

What you probably already know: Unless you’re doing business in Europe, you may not already know that the European Union recently approved a Corporate Social Responsibility Directive that is now being rolled out. The rules require companies to take into consideration the environmental and human rights impacts of their products and their full supply chain, and report those impacts to the public. The rules are already resulting in lawsuits as groups see the public reports and then challenge companies’ claims made in advertising and marketing.

Why? A group called Plastic Pollution Coalition has filed a lawsuit against Danone Waters of America alleging its marketing of Evian bottled water as “sustainable, natural and healthy” is false and deceptive marketing, and that the bottles and packaging are not recycled, thus contributing to plastic pollution. Experts expect more lawsuits against companies in the near future. “With the latest directive approved from the European Parliament and Commission, Europe is leading this new approach to environmental and social culture,” said Giorgia Butturi, a certified public accountant and auditor who works with companies in Europe on ESG compliance.

What it means: The new rules are compulsory in Europe, Butturi says, and companies based there will have to comply. But the rules tie to what has been in place in the U.S., so Butturi says she expects companies should be able to comply with both. There has been significant pushback against ESG in the U.S. and some in Europe, however, and that has some companies pulling back. Employees, however, are now expecting their companies to take a stand on reducing environmental impact, and failing to do so can quickly become a hiring issue, Butturi says.

What happens now? “The best firms I know, they don’t care about pulling back because they found a way to obtain better revenues in working together with the employees and the stakeholders to get a better future for everyone,” Butturi says. “So, not even considering the obligation of the law, the better firms already started voluntarily with this kind of approach.”

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