Industrial Pollution in Romania
On November 15, 2023, the Ministry of Finance published a draft order for public debate, based on which companies will be obliged to report on their sustainability. This includes their environmental and social impact, how much they pollute and what measures they take to address it, how much care they show for employees and the communities where they operate, and how attentive they are to company leadership and corruption prevention.
What should have been a transposition of European Directive 2464/2022, known as the CSDR (Corporate Sustainability Reporting Directive), appears instead to be a word-for-word translation of a pre-existing text that disregards the national context.
More serious, however, are the effects this order will have once it comes into force, if it remains in its current form. It abandons beneficial provisions we already had and introduces new, more permissive ones, with many exemptions, exceptions, and indulgences.
There are at least three major problems with this document:
1. IT ELIMINATES the reporting obligation for companies that are not "public interest entities"
According to the law, public interest entities mean companies listed on the stock exchange, banks, and insurance companies.
Authorities have often played with this term, "public interest entities," over time when transposing European directives that required companies to report on more than just financial impact.
In 2014, the term was first introduced into our legislation concerning non-financial reporting. Thus, ONLY companies listed on the stock exchange or banking institutions had such obligations.
In 2016, the term was retained in a new ministerial order.
Then, in 2018, the phrase "public interest entities" was eliminated, making all large companies with over 500 employees obliged to prepare sustainability reports, even if they were not listed on the stock exchange or banking institutions. The Department for Sustainable Development within the Government estimated at one point that there were 278 such companies in Romania.
And now, in 2023, the Ministry of Finance is reintroducing public interest entities into the law. This means that ONLY they will be obliged to report. And thus, it removes probably dozens of companies from the list that, despite polluting, will no longer have to answer to anyone.
Consequently, oil & gas companies, retailers, and major polluters are exempt from any reporting if they are not listed on the stock exchange.
2. IT ELIMINATES the reporting obligation for subsidiaries in Romania
According to the order, "a subsidiary is exempted from obligations if it and its subsidiaries are included in the consolidated management report of a parent company."
In other words, it will be sufficient for a multinational from Austria, France, or any other country to submit a single report for all countries where it has subsidiaries. Even if, for example, the subsidiary in Romania has 1000 Romanian employees, pollutes local rivers, and thus has a local environmental and social impact.
Theoretically, the subsidiary in Romania only needs to send data about its local impact to the parent company. In practice, sustainability specialists say they have seen cases where this local data got lost somewhere along the way and did not appear in the consolidated report of the large company in its country of origin.
Therefore, the fact that subsidiaries will no longer be obliged to report anything here in Romania facilitates the concealment of data that some companies do not want to make public.
3. Leaves the year 2023 uncovered for large companies
Large companies with over 500 employees are currently obliged to submit sustainability reports, according to the older Order 3456/2018.
In 2024, these companies should submit sustainability reports for 2023.
The new order, which does not yet have a number because it is in public debate, removes large companies with over 500 employees from the scheme. And it will apply starting from 2024.
Thus, next year, at least tens of companies, which have thousands of employees and an immense environmental impact, will no longer be obliged to report to anyone.
Hence the question: Is this merely negligence, because we are only translating instead of transposing, or did someone want to do a favor to a particular company?
Who benefits from the uncovering of 2023? Who did something bad this year that needs to be swept under the rug?
There are two possibilities:
- the polluters' lobby has already won, and the battle is lost - the transposition of the European directive is indeed just a copy-paste translation. Which is embarrassing, but it gives us another chance to fix things.
This document is open for public debate for only ten days. So, if you find it improper, hurry up and send your opinion to the Ministry of Finance at publicinfo@mfinante.gov.ro!
Maybe there's still a chance!
