On 14 November 2022, the European Parliament adopted the Corporate Sustainability Reporting Directive (CSRD). It aims to make corporate disclosures of environmental, social and governance (ESG) information more coherent and comparable, as well as more reliable by means of mandatory limited assurance. It also requires a wider range of companies to report such information than before. The disclosures under the CSRD will be framed by a set of European Sustainability Reporting Standards (ESRS) being developed by EFRAG. The European Commission is expected to formally adopt these standards by June 2023.

The CSRD will apply in multiple stages. Companies that are already subject to the Non-Financial Reporting Directive, the former Directive requiring companies to report on sustainability, will have to comply with the new obligations as soon as January 2025 (FY 2024 reporting). The scope then progressively broadens to include other large companies in 2026 and listed SMEs in 2027. Reporting obligations for non-European companies – provided they meet certain criteria – will apply starting January 2028. 

Future report preparers should use that time to lay the groundwork for their first sustainability reports. Long-standing sustainability reporting standards, such as GRI, have influenced the development of the ESRS and make for a good starting point. The ABBL can help. Our Corporate Social Responsibility Handbook covers the subject of voluntary sustainability reporting and allows readers to understand its normative landscape fast.

The Council of the EU is yet to adopt the final text of the Directive. Once published in the EU Official Journal, Member states will have 18 months to transpose the CSRD into their national law. This phase allows them certain flexibilities. For instance, it would be up to Member states to decide whether companies’ ESG disclosures may be audited by an assurance provider other than the statutory auditor of their financial statements.

These new reporting obligations pave the way for a greater availability of the much-needed ESG data to feed, inter alia, financial product disclosures under the Sustainable Finance Disclosure Regulation. In the meantime, all eyes now turn to the unfolding discussions between the European co-legislators on the proposal for a Corporate Sustainability Due Diligence Directive.

The ABBL’s Corporate Sustainability Working Group, which has been following these developments closely, will analyse the final provisions in detail.

Thomas Collin, Sustainability/CSR Officer