At Least 10,000 Foreign Companies to Be Hit by EU Sustainability Rules

A Refinitiv analysis has identified thousands of companies subject to the coming EU rules. About a third are American, 13% are Canadian and 11% are British.

Thousands of American, Canadian and British companies will have to step up their sustainability reporting under European Union rules set to take effect starting in the next few years, in a regulatory effort to boost visibility on everything from companies’ greenhouse-gas emissions to gender pay differences.

The Corporate Sustainability Reporting Directive, or CSRD, will likely require at least 10,000 companies outside the EU to make and independently verify a number of sustainability disclosures, and about a third of those are in the U.S., according to estimates by financial data firm Refinitiv provided to The Wall Street Journal.

EU officials have estimated more than 50,000 European companies will have to report, but they haven’t said how many non-EU businesses they expect to be covered by the rules.

The rules will apply to businesses based outside the EU including:

• Companies that have listed securities, such as stocks or bonds, on a regulated market in the European Union
• Companies that have annual EU revenue of more than €150 million, or about $163 million, and an EU branch with net revenue of more than €40 million
• Companies with an EU subsidiary that is a large company, defined as meeting at least two of these three criteria: more than 250 EU-based employees, a balance sheet above €20 million or local revenue of more than €40 million

The data from Refinitiv, which is part of London Stock Exchange Group PLC, indicates there are nearly 10,400 foreign companies that have an EU stock listing and more than 100 companies that aren’t listed in the EU but have more than €150 million in local revenue. Of the total number of companies Refinitiv has identified, 31% are American, 13% are Canadian and 11% are British.

The estimates exclude foreign companies that are subject to the reporting requirements due to other conditions, such as having an EU bond listing. Additional non-EU companies will likely be bound by the rules, said Refinitiv’s director of sustainable finance, Elena Philipova.

The CSRD’s first batch of standards is expected to be published in June, but Ms. Philipova, who was part of a recent EU experts group on sustainable finance, said she doesn’t expect the rules to be much different from those in a draft released in November.

However, they might be trimmed back as part of an initiative European Commission President Ursula von Der Leyen announced in March to simplify and reduce reporting requirements across the bloc.

The draft includes 82 annual disclosure requirements, each of which can involve separate metrics and explanations. The rules include disclosures on greenhouse-gas emissions and plans aligned with the 2015 Paris agreement to reduce those emissions, as well as things like pollution entering waterways and gender pay differences. Depending on industry-specific standards that are still being developed, companies will have to report different types of data. Companies will also need to have a third party audit their data.

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