European Council Approves Corporate Sustainability Reporting Directive

Published on:
by KnowESG
Picture of the European Council gives final approval to a new directive on corporate reporting, including on ESG matters.

The Council of the European Union has finally approved the corporate sustainability reporting directive (CSRD).

This means that companies will soon have to put out detailed information about how they are helping the environment. This will help a company become more accountable, stop different sustainability standards from popping up and make the transition to a sustainable economy easier.

Companies will have to report on how their business strategy affects their sustainability and how external sustainability factors (like climate change or human rights issues) affect what they do. This will give investors and other stakeholders more information about sustainability issues so that they can make better decisions.

The CSRD improves the existing non-financial reporting rules, which were added to the Accounting Directive by the 2014 non-financial reporting directive (NFRD) and are no longer geared toward the EU's transition to a sustainable economy.

The CSRD calls for more detailed reporting and requires both large companies and small and medium-sized enterprises (SMEs) that are listed to report on sustainability issues like environmental rights, social rights, human rights, and governance factors.

All large companies and companies listed on regulated markets, except for listed micro undertakings, will have to follow the new criteria for reporting on sustainability. The information that applies to their subsidiaries is also evaluated by these companies.

The regulations apply to listed SMEs as well, taking into consideration their unique peculiarities. Listed SMEs will be able to opt out during a transition phase, exempting them from the application of the directive until 2028.

All non-European companies with a net turnover of more than EUR 150 million in the EU and at least one subsidiary or branch in the EU that meets certain thresholds are required to provide a sustainability report. These companies must provide a report on their environmental, social and governance (ESG) impacts, as defined in this directive.

The European Financial Reporting Advisory Group (EFRAG) will be in charge of coming up with draft standards for Europe. After talking with EU member states and several European bodies, the European Commission will pass the final version of the standards as a delegated act.

For more regulatory news

Source: European Council

Click here to access the corporate sustainability reporting directive (CSRD)


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