Are EU imposed reporting requirements actually worth it?

A report from the Warsaw Enterprise Institute. With some numbers and an interesting question:

New standards under the Corporate Sustainability Reporting Directive (CSRD) make it mandatory to report non-financial indicators to assess a company's impact on the world around it, including the climate and the environment.

As we all know, this is quite the modern insistence. At a superficial level, well, why not? More information is usually thought of as a good thing. And yet:

WEI warns in the report against extending, as some Eurocrats are proposing, ESG reporting to the entire economy. If CSRD were extended to all SMEs excluding sole proprietors with up to 9 employees, the annual direct burden would be between PLN 9.8 and 23.6 billion,

Well, not that many of us will have the zloty FX rate directly to hand but that last, and highest, number is some 5 billion euros. Around and about, good enough for us here. Polish GDP is, just to give an inaccurate sense of scale, around 500 billion euros, perhaps a little more. So, the costs here - at the extreme - are being noted at perhaps 1% of GDP.

This is to do nothing, nothing at all, except the paperwork. Nothing at all is produced other than a report. Nothing is done other than people shuffle paper.

We’re reminded of the solution to Blood Minerals that was instituted under Dodd Frank. Solving the problem of warlords enforcing slavery to mine coltan a system was instituted. In which every US listed company wrote to every supplier at a cost of $4 billion by the SEC’s own estimation. Nothing was achieved by the paperwork - the sales of the minerals simply go to Chinese companies who are not quoted in New York.

Of course, it is possible to argue that in a market economy more information is better. But we’ve also a method of working out how much more information is better - a market economy. If investors and consumers desire this information then those companies that provide it will gain more sales, those revenues will attract a higher multiple, the companies will be worth more. So, the market economy already contains the pressure to produce these figures if - and only if - consumers and investors desire it. If everyone’s Rhett Butler about it - no one gives a damn - then a market economy won’t produce such numbers and won’t carry such costs. After all, 1% of everything is rather a lot. Especially if no one other than the clipboard wielders gives that Rhett about it.

The voluntary revelation of such effects? Sure, go for it. The imposition of them - but the imposition is the proof that, in a market economy, no one is really interested. Because a market economy will already produce them if people are interested in having those numbers. QED.