Focus on: The Corporate Sustainability Reporting Directive (CSRD)
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Corporate Sustainability Reporting Directive(CSRD)
In April 2021, the European Commission adopted the draft Corporate Sustainability Reporting Directive, or CSRD, which significantly strengthens the current sustainability reporting requirements of the Non-Financial Reporting Directive (NFRD) and expands the scope of companies concerned.
In practice, the CSRD intends to adopt prescriptive sustainability reporting standards that will be mandatory for all companies outlined in the scope of the directive, with businesses outside of this scope also encouraged to meet these standards. In the same way that IFRS provides a strict framework for financial reporting, these future sustainability reporting standards will provide precise rules on both what content information must be provided and how it should be provided.
Enabling the dissemination of reliable, relevant and comparable sustainability information among all economic and financial players is the cornerstone of Europe's sustainable development ambitions. Indeed, there can be no significant progress in achieving these collective objectives if the underlying issues are not uniformly understood, managed and shared. However, the current framework defined by the NFRD has left considerable leeway for the implementation of reporting obligations. This has resulted in a great deal of diversity in the information available, which is both expensive to produce, and ultimately not very useful.
The CSRD therefore aims above all to define a common, standardised language for sustainability reporting, which must also be audited.
By making standards clearer, the directive will benefit all economic and financial players, and in particular companies themselves.
Which companies are concerned?
The CSRD significantly increases the scope of companies concerned. Regardless of their legal status, this directive applies to the following companies:
- All companies listed on a European market (including non-European companies and SMEs, but excluding micro-enterprises with less than 10 employees)
- All large unlisted companies: defined as meeting two of the three following criteria: more than 250 employees, €20m balance sheet or €40m turnover
Unlisted SMEs will be encouraged to publish simplified information according to standards, proportionate to their needs and capabilities.
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