The European Council green-lights the Corporate Sustainability Reporting Directive proposal

The Corporate Sustainability Reporting Directive (CSRD) intensifies the existing rules on non-financial reporting introduced in the 2014 Non-Financial Reporting Directive (NFRD).

Companies will soon be required to publish detailed information on sustainability aspects, increasing their accountability, preventing divergent sustainability standards and easing the transition to a sustainable economy.

Double materiality is key

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Companies will have to report on how their business model affects their sustainability (inside-out) and on how external sustainability factors (such as climate change) influence their activities (outside-in).

The regulation will be enforced in four stages for companies with a presence in the EU:

• From 1 January 2024 for large public-interest companies (with over 500 employees) already subject to the Non-Financial Reporting Directive, with reports due in 2025;
• From 1 January 2025 for large companies that are not currently subject to the NFRD, with reports due in 2026;
• From 1 January 2026 for listed SMEs (except micro undertakings), small and non-complex credit institutions and captive insurance undertakings, with reports due in 2027; and
• From 1 January 2028 for non-European companies generating a net turnover of EUR 150 million in the EU and which have at least one subsidiary or branch in the EU exceeding thresholds, with reporting in 2029 for the 2028 financial year.

The European Financial Reporting Advisory Group (EFRAG) was made responsible for developing draft European standards. The European Commission will adopt the final version of the standards as a delegated act, following consultations with EU member states and a number of European bodies.

The location of the disclosure of sustainability information is also specified in the CSRD. Apart from the (company) management report – which is required to be in a machine-readable format – there is also a mandatory audit by an accredited, independent auditor.

Reach out to us for a free consultation! We can help you filter through hundreds of pages of EU Taxonomy, CSRD regulation and ESRS standards. We will guide you through fields relevant to your company’s business activity, allowing you to focus on making optimal choices between sustainability reporting and financial return.

The Council of the EU published the press release on 28.11.2022.