In January 2023, the European Union (EU) rolled out the Corporate Sustainability Reporting Directive (CSRD) to ramp up corporate accountability and sustainability. This initiative, initially proposed in April 2021, has undergone significant changes since and aims to boost transparency, standardise reporting practices, and promote sustainable business conduct across the EU. 

What is the EU CSRD? 

It’s a sweeping revamp of the Non-Financial Reporting Directive (NFRD) from 2014, showing the EU’s strong commitment to sustainability reporting. The CSRD now broadens reporting obligations, detailing what large public-interest entities – including companies listed on EU-regulated markets, financial institutions, and insurance companies – need to share. 

Key Features: 

1. Expanded Scope: The CSRD covers all large companies – listed or not – with over 250 employees, regardless of their legal forms. This move ensures a diverse range of businesses actively contribute to sustainable development goals. 
2. Standardised Reporting Framework: CSRD brings in a unified European standard for sustainability reporting, making it easier for stakeholders – like investors, consumers, or policymakers – to compare and assess corporate sustainability performance. It’s all about empowering decision-makers with a clear view. 
3. Double Materiality Principle: A key feature of the CSRD is the double materiality principle aligning to the European Financial Reporting Advisory Group (EFRAG) guidelines. This means companies report not only on how their activities impact their own operations but also on society and the environment. It provides a more complete picture of a company’s sustainability performance by undertaking the assessment against European Sustainability Reporting Standards (ESRS) topics. 
4. Digital Reporting: The CSRD requires digital reporting in a machine-readable format, ensuring accessibility. This shift to digitalisation allows for the use of Artificial Intelligence (AI) and other tech tools to streamline the analysis of the extensive data generated by reporting entities. 

Who’s in the spotlight? 

The CSRD directly affects large companies operating in the EU across different industries. This mandate goes beyond publicly traded corporations to include private companies that meet the employee threshold. These entities are now obligated to integrate sustainability considerations, assess risks and opportunities, and report comprehensively on their sustainability performance. 

Qualification Criteria Breakdown: 

• Companies listed on regulated EU markets and large companies need to meet two out of three criteria: more than 250 employees, a turnover of over €40 million, or total assets over €20 million. 
• These companies also need to consider information at the subsidiary level. 
• Listed SMEs get a breather until 2026, with an option to opt out until 2028, but there are benefits to complying with the reporting. 
• Non-EU companies with a net turnover of €150 million in the EU, and with at least one subsidiary or branch in the union are included. 

What’s the impact and what’s next? 

The EU CSRD signifies a shift toward sustainable and responsible business practices globally. Positioned as a leader in corporate sustainability reporting, the EU sets a standard for jurisdictions worldwide. Anticipated outcomes include increased innovation, promotion of responsible investment practices, and empowering consumers to make environmentally and socially conscious choices. 

In conclusion, the EU CSRD is a turning point in corporate reporting, pushing businesses towards higher transparency and accountability. As companies adapt to the new reporting requirements, the EU leads the charge towards a more sustainable and resilient future, aligning economic activities with overarching environmental and social objectives.  

Get in touch with our sustainability team if you would like to learn more about how to navigate this new reporting requirement and enhance your ESG strategy and implementation plan!