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EU | Effective: From 2024 for the financial year 2023

Corporate Sustainability Reporting Directive

The Corporate Sustainability Reporting Directive (CSRD) is a pivotal regulatory reform initiated by the European Commission aimed at improving the landscape of non-financial reporting. It significantly extends the existing Non-Financial Reporting Directive (NFRD) by expanding its scope, tightening reporting requirements, and integrating sustainability into corporate governance.

What companies are affected?

The breadth of companies affected by the CSRD is vast, encompassing nearly ten times the number of businesses covered by NFRD. It includes approximately 50,000 companies within the EU and an additional 10,000 companies headquartered outside the EU. Moreover, the scope is not confined to publicly listed companies. Entities, whether operating individually or as part of a consolidated group, across various categories may be subject to these reporting requirements.

When will reporting be required?

The reporting timeline differs based on the entity type. Entities classified as “large undertakings” with securities listed on an EU-regulated market and with over 500 employees, as well as those that are subject to NFRD will need report in 2024 with reports to be published by 2025. All other large companies will have their reporting deadline in 2025 with reports to be published in 2026. Reporting requirements for smaller entities will kick in a year later, companies headquartered outside the EU will need to report throught their EU subsidiaries in 2028, with the publication deadline in 2029.

What are the key reporting requirements?

CSRD breaks new ground for reporting requirements compared to NFRD that it replaces and many other national standards to date. Central to these requirements is the ‘double-materiality’ principle. It mandates companies to recognize not just the sustainability challenges posing risks to their operations, but also the global ecological and societal impacts generated by their business. The topics covered include climate change as well as additional environmental topics such as pollution and biodiversity, social topics such as own workforce and workers in the value chain, and governance topics such as business ethics and supplier payment

Companies will need to report in accordance with required standards depending on company location, size and sector. Some of these standards, such as European Sustainability Reporting Standards (ESRS,) have already been finalized, others are still in development.