The council and European Parliament reached a provisional agreement on the Corporate Sustainability Reporting Directive (CSRD) on the 22nd of June 2022. The agreement gives us a timeline for the implementation of CSRD.
What is the CSRD? When will you have to comply with it and what does it mean for your sustainability reporting?
CSRD: A summary
The CSRD will improve the current reporting requirements included in the EU Non-Financial Reporting Directive (NFRD). The companies that fall under the CSRD will be obligated to report in compliance with the European Sustainability Reporting Standards (ESRS).
Some of the key components are the following:
- Companies will apply double materiality to identify their material topics. Companies will have to identify their impact on people and environment, as well as the impact sustainability has on the business.
- Sustainability information will now be integrated into the management report.
- Parent companies in large groups must prepare a sustainability report for the group.
- Assurance of the sustainability information’s alignment with ESRS (limited vs reasonable assurance).
- Companies must understand, and include information, on their value chain, including their own operations and their due diligence processes
The CSRD will also cover more companies than its predecessor; it will cover all large companies and all companies listed on regulated markets, except micro companies. The NFRD had a 500-employee threshold, now the scope will include all EU companies that meet at least two out of three following criteria:
- More than 250 employees.
- Turnover that exceeds €40 million.
- Balance sheet that exceeds a total of €20 million.
Further, non-European companies must provide a sustainability report if:
- Their net turnover generated in the EU exceeds €150 million, and
- They have at least one branch or subsidiary in the EU.
The application of the regulation will take place in three stages:
- 1st of January 2024: for companies already subject to the Non-Financial Reporting Directive. First report in 2025.
- 1st of January 2025: for all large companies that are not presently subject to the Non-Financial Reporting Directive (NFRD). First report in 2026.
- 1st of January 2026: for listed SMEs, small and non-complex credit institutions and captive insurance undertakings. First report in 2027.
The provisional agreement is subject to approval by the Permanent Representatives Committee and will then be adopted by the member states. However, we recommend that you start preparing for compliance with CSRD even now, in order to have time to understand your impacts and value chain, as well as implement and adjust your business structures, policies and strategies.
You can also find and sign-up for one of our upcoming CSRD trainings here.