PwC Insights: What US companies need to know about the EU’s CSRD

Overview

The European Union's Corporate Sustainability Reporting Directive (CSRD) is set to revolutionize ESG reporting for companies operating within the EU, including US companies with significant EU operations. This directive mandates comprehensive sustainability disclosures, aiming to enhance transparency and drive sustainable business practices. In their recent insights, PwC provides companies with recommendations for understanding this directive.

The European Union's Corporate Sustainability Reporting Directive (CSRD) is poised to transform the landscape of ESG (Environmental, Social, and Governance) reporting. With its stringent requirements and broad scope, the CSRD is designed to ensure that companies provide detailed and transparent sustainability information. This article delves into the key aspects of the CSRD and what it means for businesses.

Scope and Applicability

The CSRD applies to approximately 50,000 companies, including those listed in the EU or with significant operations there. This includes US companies with EU subsidiaries that meet specific criteria. The directive's reach is extensive, covering a wide range of businesses and requiring them to disclose detailed sustainability information.

Comprehensive Disclosure Requirements

Under the CSRD, companies must provide granular disclosures across the entire spectrum of sustainability topics. These requirements are outlined in the European Sustainability Reporting Standards (ESRS), which cover environmental, social, and governance issues. Companies will need to report on their sustainability strategy, targets, progress, and the impact of their activities on society and the environment.

Double Materiality

A unique aspect of the CSRD is its embrace of "double materiality." This concept requires companies to report not only on how sustainability issues affect their business but also on the impact their business has on sustainability matters. This dual perspective ensures a comprehensive view of a company's sustainability performance.

Assurance and Compliance

The CSRD introduces a mandatory assurance obligation for all reported sustainability information. Initially, this will involve limited assurance, but it will eventually progress to reasonable assurance. This requirement underscores the importance of accuracy and reliability in sustainability reporting.

Preparing for Compliance

Given the complexity and scope of the CSRD, companies are advised to start preparing now. This involves understanding the specific requirements, gathering the necessary data, and ensuring that all relevant departments, including legal counsel, are involved in the reporting process. Early preparation will help companies avoid last-minute scrambles and ensure compliance with the directive.

The EU's Corporate Sustainability Reporting Directive represents a significant step forward in ESG reporting. By mandating comprehensive and transparent disclosures, the CSRD aims to drive sustainable business practices and enhance accountability. Companies that proactively prepare for these requirements will be better positioned to meet the challenges and opportunities of this new era in sustainability reporting.

Read the full insights here:

https://www.pwc.com/us/en/services/esg/library/eu-corporate-sustainability-reporting-directive