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Key Takeaways:
Transparency on environmental, social affairs, and governance matters to become the norm for large firms
Around 50,000 companies are to be covered by new rules, up from the current 11,700
Timeline
The Corporate Sustainability Reporting Directive (CSRD), adopted by EU MEPs with 525 votes in favor, 60 votes against, and 28 abstentions, will make businesses more publicly accountable by obliging them to regularly disclose information on their societal and environmental impact.
From 1 January 2024, large public-interest companies (with over 500 employees) are already subject to the non-financial reporting directive, with reports due in 2025. From 1 January 2025 for large companies that are not presently subject to the non-financial reporting directive (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets), with reports due in 2026.
Reporting Framework
The EU Commission will adopt the first set of European Sustainability Reporting Standards (ESRS) for the disclose of CSRD by June 2023, which has been carried out by the European Financial Reporting Advisory Group (EFRAG) as mentioned in the latest updates on EU CSRD: EFRAG’s Draft European Sustainability Reporting Standards:
During September and October 2022 EFRAG started building sector communities of stakeholders that have a particular interest in each of these specific sectors. During October and November 2022 workshops are being organized to discuss i) the sustainability matters and applicable regulations or legislation and ii) potential disclosure requirements for each sector. The final ESRS (Set 1) is expected to be issued no later than the end of June 2023 as stipulated in the CSRD.
NEW UPDATES ON ESRS: On Nov 23, 2022, EFRAG has delivered the first set of draft ESRS to the European Commission.
Next steps:
The Council is expected to adopt the proposal on 28 November, after which it will be signed and published in the EU Official Journal. The directive will enter into force 20 days after publication. The rules will start applying between 2024 and 2028.
The European Commission will now consult EU bodies and Member States on the draft ESRS standards, before adopting the final standards as delegated acts in June 2023, followed by a scrutiny period by the European Parliament and Council. The reporting requirements will be phased in over time for different kinds of companies. The first companies will have to apply the standards in financial year 2024, for reports published in 2025. Listed SMEs are obliged to report as from 2026, with a further possibility of voluntary opt-out until 2028, and will be able to report according to separate, proportionate standards that EFRAG will develop next year.
GC Insights offers the timely analysis and reporting assistance needed for corporates seeking to comply with the Corporate Sustainability Reporting Directive and/or prepare to assess and get ready for the everchanging ESG reporting landscape. Stay tuned for our upcoming analysis of how European Sustainability Reporting Standards unfold.