EU gives final approval of Corporate Sustainability Reporting Directive (CSRD).
Last month it was announced that the EU was set to become a front-runner in global sustainability reporting standards by formally adopting the Corporate Sustainable Reporting Directive (CSRD). On Monday, the EU Council announced that CSRD was officially adopted and approved. This new directive will expand on the already existing Non-Financial Reporting Directive (NFRD). The hope is that CSRD will introduce more detailed reporting requirements on companies’ impact on the environment, human rights and social standards.
In summary, CSRD will provide the following the following:
Transparency on environmental, social affairs and governance matters to become the norm for large firms;
EU to become front-runner in global sustainability reporting standards;
Around 50,000 companies to be covered by new rules, up from the current 11,700.
Directly from the European Parliament, “The new EU sustainability reporting requirements will apply to all large companies, whether listed on stock markets or not. Non-EU companies with substantial activity in the EU (with a turnover over €150 million euro in the EU) will also have to comply. Listed SMEs will also be covered, but they will have more time to adapt to the new rules.
For nearly 50 000 companies in the EU, collecting and sharing sustainability information will become the norm, compared to about 11 700 companies covered by the current rules.”
Now that CSRD has been officially adopted, the rules that will be applied between 2024 and 2028 include the following:
From 1 January 2024 for large public-interest companies (with over 500 employees) already subject to the non-financial reporting directive, with reports due in 2025;
From 1 January 2025 for large companies that are not presently subject to the non-financial reporting directive (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets), with reports due in 2026;
From 1 January 2026 for listed SMEs and other undertakings, with reports due in 2027. SMEs can opt-out until 2028.
With the formal adoption of this new regulation, the application will roll in four set stages:
reporting in 2025 on the financial year 2024 for companies already subject to the NFRD;
reporting in 2026 on the financial year 2025 for large companies that are not currently subject to the NFRD;
reporting in 2027 on the financial year 2026 for listed SMEs (except micro undertakings), small and non-complex credit institutions and captive insurance undertakings;
reporting in 2029 on the financial year 2028 for third-country undertakings with net turnover above 150 million in the EU if they have at least one subsidiary or branch in the EU exceeding certain thresholds.
With this plan in place, by 2029 all organizations with net turnover above 150 million in the EU if they have at least one subsidiary or branch in the EU exceeding certain thresholds will be required to adhere to this new standard.
The legislation will be published in the Official Journal of the European Union after being signed by the Presidents of the EU Parliament and Council, officially entering into force 20 days later, with member states required to implement the new rules within 18 months.
Sources:
https://www.linkedin.com/posts/vdelamar_sustainable-economy-parliament-adopts-new-activity-6996906150893912064-sLvK/?utm_source=share&utm_medium=member_desktop
https://www.europarl.europa.eu/news/en/press-room/20221107IPR49611/sustainable-economy-parliament-adopts-new-reporting-rules-for-multinationals
https://www.esgtoday.com/eus-corporate-sustainability-reporting-legislation-adopted/
https://www.consilium.europa.eu/en/press/press-releases/2022/11/28/council-gives-final-green-light-to-corporate-sustainability-reporting-directive/
