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Following the recent adaptation of the Corporate Sustainability Reporting Directive (CSRD) by both the European Parliament and the Council of the European Union in November 2022, the CSRD has been published in the EU Official Journal before the end of December 2022. This Directive shall enter into force on the twentieth day following its publication in the Official Journal of the European Union.
By extending the scope of the Non-Financial Reporting Directive (NFRD), the CSRD introduces more detailed reporting requirements on companies’ impact on the environment, human rights, and social standards, based on common criteria in line with the EU’s climate goals.
Member States will have 18 months to transpose the directive into national law. The rules will apply following a staggered approach, starting with companies with over 500 employees reporting as of the 2024 financial year (with the first sustainability reports to be published over the course of 2025), companies between 250 and 500 employees reporting with a one-year delay, listed SMEs reporting as of 2026 (first reporting due in 2027) and finally non-EU undertakings captured by the scope of the CSRD reporting as of 2028 (with the first report due in 2029). (Eurosif, 2022)
EFRAG Sustainability Reporting Board (EFRAG SRB) is planning on developing the 2nd batch of the European Sustainability Reporting Standards (ESRS) that will complement this directive in Oct. 2023. The first batch of ESRS (cross-cutting and sector agnostic) published is expected to be adopted in June 2023, following a consultation period.
“We’ve identified around 1,000 data points companies will need to report,” Patrick de Cambourg, chair of the EFRAG Sustainability Reporting Board, said in an interview as reported by Bloomberg Tax. (Michael Kapoor, 2022, Link) The article also points out that many companies in the scope of CSRD will have to comply with the EU rules ahead of global rules that are being drawn up by the International Sustainability Standards Board (ISSB), which will cover far fewer topics compared to the European Sustainability Reporting Standards’ current proposed content set. However, each enterprise will have to report around 300 of the ESG data points, with the rest required only if they are material, added by de Cambourg.
This constitutes a significant step towards establishing robust sustainability reporting at the European level. The new Corporate Sustainability Reporting Directive (CSRD) will ensure companies provide consistent and comparable sustainability information. (European Union, 2021) If you are wondering how the new CSRD will impact your businesses, please start your test here or scan the code below: