This report highlights the key features of the CSRD and outlines the impact it will have on the business community in terms of sustainability reporting requirements.

Key Points

• In line with the European Green Deal, the Corporate Sustainability Reporting Directive (CSRD) aims to modernise and improve the existing requirements of the EU’s Non-Financial Reporting Directive (NFRD), driving sustainable activities across the bloc.
• The directive significantly expands the scope of companies subject to EU sustainability reporting requirements, including a broader set of large companies and listed small and medium-sized enterprises (SMEs). Around 50,000 entities are likely to be covered, accounting for roughly 75% of EU companies’ turnover.
• Companies will be required to include sustainability-related information in their annual reports. These are to be submitted in electronic format in accordance with the European Single Electronic Format Regulation. The CSRD will also introduce a mandatory requirement for sustainability disclosures to be certified by an independent auditor.
• The new rules will go into effect during FY 2024; they will require companies already subject to the NFRD to publish reports in 2025.

Context

Environmental, Social and Governance (ESG) considerations are now an ever-prominent part of business operations. Globally, there is a growing number of stakeholders, from investors and shareholders to consumers and regulators, demanding improved transparency and corporate accountability concerning the ESG risks and opportunities facing companies.

As part of the European Green Deal, the European Commission (EC) adopted the Sustainable Finance Package on 21 April 2021, laying the foundations to improve capital flow towards sustainable activities and ensuring a green transition across the EU. One of the key policy initiatives proposed within the package was the CSRD. Arising at a critical juncture with regard to ESG’s maturity, this new directive…

‘…modernises and strengthens the rules about the social and environmental information that companies have to report.’

On 21 June 2022, the EC, European Council and European Parliament reached an agreement on the provisions of the CSRD, which was endorsed by EU member states on 30 June 2022. Reflecting the significant steps taken by the EU to materialise ESG into reporting requirements and regulations, the CSRD was then published in the Official Journal of the EU in December 2022, entering into force on 5 January 2023.