Businesses say the EU’s new green reporting rules are ‘impossible’.

European business leaders have said their companies face an “impossible task” to implement the bloc’s new environmental reporting requirements.

The CFOs of BMW, Telefónica and BP urged the European Commission to improve guidance and delay the implementation of the EU’s sustainable investment rules, the so-called taxonomy, describing them as unclear, burdensome and of little value to investors. The purpose of this new report is to inform investors so that they can allocate money to sustainable activities.

“Rash implementation, unclear definitions and differing interpretations have resulted in reports that are not relevant, comparable or reliable enough to be useful to investors,” wrote BMW CFO Nicolas Peter on behalf of the European Industry Roundtable’s CFO Platform. ERT), which brings together the financial managers of around 30 companies.

“The taxonomy ignores and contradicts existing, robust EU legislation”, such as rules on harmful chemicals, Peter added.

A taxonomy is a classification system that sets thresholds for activities to indicate the extent to which they are beneficial or harmful to the environment. The regulation has already been embroiled in controversy after Brussels classified gas and nuclear investments as sustainable under certain criteria.

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In addition to the taxonomy, businesses must also comply with other new obligations that set standards for reporting on sustainability criteria.

The letter said companies and auditors would find it impossible to meet all the overlapping requirements. As a result, investors would receive poor quality reports that could not be compared to each other because the taxonomy definitions were too loose.

Additional legislation covering four environmental targets, including pollution prevention and marine life protection, is due later this year. However, Peter wrote in a letter to Financial Services Commissioner Mairead McGuinness that the current taxonomy “needs to be evaluated and improved before being extended to other environmental objectives”.

He added that the classification system is not the same as that of other jurisdictions, so multinational companies based in the EU have an extra burden of reporting standards that are not applied elsewhere. “EU definitions are often not relevant or applicable,” wrote Peter.

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It included a 22-page annex detailing proposals to improve the legislation, such as defining what is covered by the supply chain and clarifying the meaning of “do not cause significant harm”. Peter also pointed out that the taxonomy used definitions of operating expenditure and capital expenditure “which are complex and inconsistent with mainstream financial reporting”.

The components of a zero-emission vehicle would not be considered green, while the finished vehicle would be, Peter said.

The committee did not want to comment and said that they would respond to the letter in due time.

European industry, which is still struggling with the after-effects of Covid-19 and last year’s record high energy prices, is increasingly vocal about the bureaucratic burdens associated with compliance with EU rules. Ursula von der Leyen, the president of the commission, recently pledged to cut red tape by 25 percent and is expected to make a proposal to that effect later this year.

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When preparing their quarterly reports this year, companies spent up to 150 working days and around €150,000 on consultants to comply with the first two areas of the taxonomy, according to ERT data, even if their activities had only a limited connection to the system. the discussed criteria.