The Council of the EU Adopts the Corporate Sustainability Reporting Directive

 
 
 
 

On 28th November, the Council of the EU adopted the Corporate Sustainability Reporting Directive (CSRD), taking the EU a step closer to its climate neutrality goal.

The CSRD aims to end greenwashing, strengthen the EU’s social market economy, and lay the groundwork for sustainability reporting standards.

The CSRD will affect approximately 50000 companies, including:

  • EU Large undertakings (listed or not), whose securities are admitted to trading on a regulated market in the Union.

  • Large public-interest companies (with over 500 employees) already subject to the non-financial reporting directive.

  • Small and medium-sized undertakings, except micro undertakings, whose securities are admitted to trading on a regulated market in the Union.

  • Third-country undertakings whose securities are admitted to trading on a regulated market in the Union.

  • Third-country undertakings which have significant activity on the territory of the Union which generate more than EUR 150 million net turnovers in the EU (for each of the last two consecutive financial years) and that have at least one EU subsidiary (large or listed on an EU regulated market) or EU branch (more than EUR 40 million net turnovers in the preceding financial year).

Undertakings shall prepare their management report electronically, as required in Article 8 of the Taxonomy Regulation. The information shall be identified within the management report, through a dedicated section. Furthermore, undertakings falling under the scope of the CSRD will prepare the report following the double materiality approach on Environmental, Social and Governance matter.

NEXT

Member States are now expected to transpose the directive within 18 months of its publication in the EU Official Journal. The rules will start applying between 2024 and 2028 in the following order:

  • From 1 January 2024 for large public-interest companies with over 500 employees (undertakings that are already subject to the NFRD), with reports due in 2025;

  • From 1 January 2025 for all other EU large companies that are not presently subject to the NFRD (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets), with reports due in 2026;

  • From 1 January 2026 for listed UE listed SMEs, with reports due in 2027. SMEs can opt out until 2028 with an explanation of why the required information is not provided.

A steppingstone of the CSRD, however, is the introduction of sustainability reporting standards developed by the European Financial Reporting Advisory Group (EFRAG). EFRAG officially handed over the ESRS to the Commission on November 22nd: 12 sector-agnostic standards have been published, including both cross-cutting and topical disclosure requirements.

The ESRS will specify the information that companies must disclose concerning all sustainability topics. They are mandatory under CSRD and will allow for the first time to place sustainability and financial reporting on an equal footing. The EU standards include all sustainability issues under a double materiality perspective, in coherence with the rest of the EU legal framework (SFRD, EU Taxonomy etc.), and considering the technical discussions between EFRAG and the international standard-setters. The numerous feedback received by stakeholders in the summer has been included: EFRAG reduced the number of disclosure requirements and revised the materiality assessment approach, removing the rebuttable presumption principle.

The Commission will now work on the dossier and adopt through a delegated act the first set of standards by June 2023, while the second set of standards will be ready by 30 June 2024 together with sector-specific standards, standards for listed SMEs, standards for non-EU companies and other complementary information that companies should report on.

The ESRS will specify the information that companies should disclose concerning all sustainability topics. Furthermore, the Commission will review the standards every three years after the publication of the CSRD to consider new developments.

How CSR Europe can support your company

If your company would like to nderstanding, analysing and complying with the requirements set by policymakers on reporting, due diligence, tax transparency and so on, as well as meet the expectations of stakeholders, CSR Europe has developed the EU Alignment Service.

Companies that want to fill existing gaps in their strategy and processes can request the EU Alignment Service. The service aim is to analyse the expectations set by European legislators vis-á-vis the performance of your company. 

 
 

 

UPCOMING EVENTS