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CSRD
Elevating Sustainability Reporting with CSRD
The Corporate Sustainability Reporting Directive (CSRD) is the much-anticipated successor to the EU's Non-Financial Reporting Directive (NFRD) of 2014. The CSRD sets forth new sustainability reporting requirements, mandating that all large companies in the European Union (EU) provide detailed accounts of their sustainability actions.
Transition from NFRD to CSRD: A Leap Toward Transparency
The European Commission recognized the limitations of NFRD in delivering the desired transparency in sustainability reporting. As part of the European Green Deal, the Commission proposed the CSRD, which took effect on January 5, 2023, as part of the EC's sustainable finance package.
The CSRD introduces significant enhancements over NFRD:
- Mandates a materiality assessment to identify significant sustainability topics for reporting.
- Requires the articulation of long-term environmental, social, and governance (ESG) objectives and policies.
- Implements ongoing due diligence processes for identifying sustainability risks and their potential negative impacts.
- Specifies detailed reporting requirements and mandates the use of European sustainability reporting standards.
- Aligns reporting with the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation.
- Requires auditing of information published under the CSRD.
- Demands "machine-readable" information inclusion in the European Single Access Point.
The Scope of CSRD: Broadening the Reporting Horizon
The CSRD's reach significantly exceeds that of the NFRD, with an estimated 50,000 companies within the EU expected to comply, in contrast to NFRD's application to less than 12,000 companies.
CSRD's Implementation Journey: From Proposal to Practice
As a directive, CSRD requires transposition into national laws. The European Commission is set to convert the final versions of the European Sustainability Reporting Standards (ESRS) into 'delegated acts' by the end of June 2023, which will directly apply across all EU member states.
FAQs
CSRD is a directive from the European Union that mandates large companies to report on their sustainability performance, aiming to increase transparency and guide capital towards sustainable activities.
CSRD extends the requirements of the NFRD by introducing a more detailed sustainability report, mandatory auditing, and the need for 'machine-readable' reported information. It also broadens the scope to include more companies.
CSRD became effective on January 5, 2023, as part of the EC's sustainable finance package, with the ESRS expected to be finalized by the end of June 2023.
CSRD applies to all large companies in the EU, both listed and unlisted, that meet certain criteria related to balance sheet totals, net turnover, and employee numbers.