Corporate Sustainability Reporting Directive (CSRD)
The Corporate Sustainability Reporting Directive expands the obligations and scope of sustainability reporting for EU companies.
What do I need to know?
The Corporate Sustainability Reporting Directive (CSRD) is the amendment to the Non-Financial Reporting Directive (NFRD) and was finally ratified by the EU parliament November 2022. Both directives set the framework and rules for all reporting other than financial reporting. The CSRD differs from the NFRD by broadening the scope of application.
The biggest gamechanger in the CSRD, which will force a radical change in the quality of reporting, is the demand for independent third-party audits. To ensure that companies comply with the reporting requirements, an independent auditor or certifier must ensure that sustainability information complies with the certification standards adopted by the EU.
Companies that fall within the scope check 2/3 of the following criteria:
- A net turnover of €40 million
- A balance sheet total of €20 million
- 250 employees on average during the fiscal year
The CSRD expands the scope from approximately 11,700 EU companies to approximately 50,000 EU companies.
Most importantly, the CSRD places a much greater emphasis on responsible, sustainable business practices and reporting.
Is it relevant for me?
How and when CSRD could potentially hit your business depends on both size and type of business. The timeline for reporting is as follows:
- 1 January 2024 for companies already subject to the non-financial reporting directive
- 1 January 2025 for companies that are not presently subject to the non-financial reporting directive
- 1 January 2026 for listed small and medium enterprises (SMEs), small and non-complex credit institutions and captive insurance undertakings
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The aim of this Directive is to promote sustainable and responsible corporate action and to anchor human rights and environmental aspects in the business activities and corporate governance of companies.
The EU taxonomy creates a common language and set of standards to define what is actually green and sustainable.