What is the Corporate Sustainability Reporting Directive (CSRD)?
- To help improve the flow of money towards sustainable activities across the European Union, the European Commission adopted the ambitious and comprehensive Sustainable Finance Package on 21 April 2021. One of the proposed measures within the package is the Corporate Sustainability Reporting Directive (CSRD).
- The Corporate Sustainability Reporting Directive extends the scope and the reporting requirements of the existing Non-Financial Reporting Directive. This regulatory framework mandates sizeable public interest entities report on their sustainability performance since 2018.
- With its new requirements, the CSRD aims to ensure that businesses report reliable and comparable sustainability information so that investors can re-orient investments towards more sustainable technologies and industries.
Which companies have to comply with the CSRD?
- While the NFRD only requires companies with more than 500 employees to report on their sustainability performance, the CSRD will require all large companies to report on their sustainability.
- Companies with more than 250 employees and/or more than €40M turnover and/or more than €20 Million in total assets - and all listed companies (except micro-enterprises) will need to comply.
- As soon as it is put into force, nearly 50,000 companies in the EU will need to follow detailed EU sustainability reporting standards - that will correspond to 75% of all EU companies' turnover.
- Non-European companies with branches or subsidiaries with a net turnover of EUR 150 million in the EU will also have to report later.
What will have to be disclosed?
In addition to the NFRD disclosures, a company must disclose the following:
○ Environmental protection
○ Social responsibility and treatment of employees
○ Respect for human rights
○ Anti-corruption and bribery
○ Diversity on company boards
Businesses will also have to start reporting how sustainability risks might affect their performance.
- While the EU provides voluntary reporting guidelines for NFRD reports, the CSRD introduces more detailed reporting requirements and a requirement to report according to EU sustainability reporting standards.
- The CSRD reporting will align with the Sustainable Finance Disclosure Regulation and the EU Taxonomy.
What are the next steps?
As of today, the CSRD is still a proposal by the European Commission. The European Parliament and the European Council still have to agree on it. This is expected to be happening in the near future. Once that happens, these are the next milestones:
○ 2025: Businesses already subject to the NFRD will have to start reporting in the financial year 2024.
○ 2026: Large undertakings not currently subject to the NFRD will have to start reporting in the financial year 2025.
○ 2027: Small and medium enterprises and small and non-complex credit institutions, and captive insurance undertakings will have to start reporting for the financial year 2026 - with a further possibility of voluntary opt-out until 2028. The reporting standards for SMEs will be lighter.
○ 2029: Non-European companies that have branches or subsidiaries in the EU with a net turnover of EUR 150 million in the EU will have to start reporting.
What does the CSRD mean for your company?
2024 is closer than it seems. To be fully prepared, businesses should start collecting data now.
The clock is ticking! Start reporting on climate risk and sustainability by complying with the CSRD. Contact our policy experts to learn more about solutions adapted to your sustainability reporting needs.