Preparing for the Corporate Sustainability Reporting Directive (CSRD)
The CSRD heralds a new pace of regulatory change, and many companies are affected, facing transformative changes intended to strengthen the importance of sustainability issues within their strategy, governance and risk management. So how can business leaders ensure they start preparing now, and remain on track to meet this new directive? Our experts have outlined what companies need to do to act now for what’s next. Download our guide below.
Why this new directive?
The core objective of the CSRD is to define a standardised and common language for sustainability information, bringing sustainability reporting to the same level as financial reporting. This move takes significant steps toward the goals of the European Green Deal, and to make the EU continent climate-neutral by 2050.
The directive focuses on improving the quality of reported sustainability information, by imposing the use of the European Sustainability Reporting Standards (ESRS) for all companies within the scope of the CSRD.
Which companies/groups are affected?
The new directive extends the scope of companies subject to mandatory sustainability reporting obligations, with around 50,000 companies having to comply with the new rules. Other companies outside the scope will likely face increased pressure to provide sustainability information in view of the obligation to consider the entire value chain. Download our guide below for the full criteria.
What information will companies need to report on?
Companies in the scope of CSRD will need to report on their impacts on sustainability matters, and how sustainability matters affect the company's development, performance and position (known as “double materiality”).
Will there be compulsory assurance on this reporting?
The sustainability statements and the information they contain will be subject to compulsory assurance, starting with limited assurance with an expected evolution towards reasonable assurance from 2028 (after an assessment to determine the feasibility of reasonable assurance for auditors and companies). This will have to be monitored by the company’s audit committee.
What adoption process has been followed for this directive?
On December 16, 2022, the final text of the Corporate Sustainability Reporting Directive (CSRD) was published in the Official Journal of the European Union (OJEU), replacing the current Non-Financial Reporting Directive (NFRD). This release is the culmination of a process that lasted several months, from the CSRD proposal by the European Commission (EC) in April 2021, to the political agreement reached in June 2022 on a slightly revised version of the initial CSRD proposal and finally the formal adoption by the Parliament and then the Council.
This new directive came into force 20 days after its publication in the OJEU, i.e. on January 5, 2023. Member States have 18 months to transpose it into their national law (by July 6, 2024 at the latest). This transposition will be the final step to specify the scope of the CSRD requirements and its implementation schedule.