As the deadline for implementing the Corporate Sustainability Reporting Directive this year approaches, companies are stepping up their efforts to comply with the new requirements imposed by the EU. This transition period is crucial to ensure that companies are ready to provide complete and compliant reporting, thereby contributing to the European Union’s long-term sustainability objectives.
But let’s take a step back and see how we got here.
On 28 November 2022, the European Council gave its final approval to the Corporate Sustainability Reporting Directive (CSRD).
This directive was created with the aim of improving and expanding the existing regulatory framework on sustainability reporting, going beyond the guidelines of EU Directive 2014/95/EU, known as the Non-Financial Reporting Directive (NFRD).
The CSRD is a significant step towards greater transparency of corporate practices in terms of sustainability, making it easier for stakeholders to access detailed information on companies’ environmental, social and governance (ESG) performance.
More companies involved and increased disclosure obligations
One of the main innovations introduced by the CSRD is the extension of the number of companies subject to reporting obligations.
Currently, the NFRD imposes these obligations on around 11,700 companies and corporate groups across the European Union.
With the entry into force of the CSRD, this number is expected to increase significantly, reaching up to around 49,000 companies.
This expansion will include not only large companies, but also listed small and medium-sized enterprises (SMEs), ensuring greater coverage and completeness of the information available to investors and other stakeholders.
The CSRD aims to make mandatory the disclosure of a wide range of information relevant to sustainability.
These disclosure obligations include details on corporate strategy, the business model, corporate governance, environmental and social impacts, the risks and opportunities linked to sustainability, the policies adopted, the targets set, the performance achieved and the metrics used to monitor these aspects: detailed reporting that will allow companies to provide a complete and transparent picture of their sustainable activities, improving the trust of investors and consumers.
Compliance with Standards and Regulations
The sustainability information reported by companies will have to comply with the regulations and standards established by the European Union.
The CSRD introduces significant changes to the requirements of the Directives on Accounting, Transparency and Audit, ensuring that ESG (Environmental, Social, Governance) reporting is aligned with the reporting standards of the European Commission (EC).
This alignment will ensure the consistency and comparability of information across different companies, making it easier for stakeholders to analyse and assess their sustainability performance.
CSRD and the European Green Deal
The CSRD is a key component of the EU’s sustainable finance package and plays a crucial role in implementing the European Green Deal.
This ambitious agreement aims to make Europe the first climate-neutral continent by 2050.
The CSRD directive will contribute to this goal, encouraging companies to adopt more sustainable practices and to improve the transparency of their activities in relation to climate and environmental objectives. Detailed, standardised reporting of sustainability performance will allow for a better assessment of progress towards achieving the Green Deal’s objectives, promoting a greener and more resilient economy across the EU.
