Source:Council of the EU and the European Council
The Council gave its final approval to the corporate sustainability reporting directive (CSRD).
This means that companies will soon be required to publish detailed information on sustainability matters. This will increase a company’s accountability, prevent divergent sustainability standards, and ease the transition to a sustainable economy.
In practical terms, companies will have to report on how their business model affects their sustainability, and on how external sustainability factors (such as climate change or human right issues) influence their activities. This will equip investors and other stakeholders better for taking informed decisions on sustainability issues.
The CSRD amends the 2014 non-financial reporting directive (NFRD) and strengthens the existing rules on non-financial reporting, which are no longer tailored to the EU’s transition to a sustainable economy.
New reporting rules for companies
The CSRD introduces more detailed reporting requirements and ensures that large companies are required to report on sustainability matters such as environmental rights, social rights, human rights and governance factors.
The new sustainability reporting rules will apply to large public-interest companies with more than 500 employees, to all large companies with more than 250 employees and a EUR 40 million turnover, and to all companies listed on regulated markets except micro undertakings. These companies are also responsible for assessing the information applicable to their subsidiaries.
The rules also apply to listed SMEs, taking into account their specific characteristics. An opt-out will be possible for listed SMEs during a transitional period, exempting them from the application of the directive until 2028.
For non-European companies, the requirement to provide a sustainability report applies to all companies generating a net turnover of EUR 150 million in the EU and which have at least one subsidiary or branch in the EU. These companies must provide a report on their environmental, social and governance (ESG) impacts, as defined in this directive.
The European Financial Reporting Advisory Group (EFRAG) will be responsible for developing European standards, following technical advice from a number of European agencies.More info