ThinkTWENTY20

In a major step forward for ESG reporting, The European Commission has adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), to replace its current Non-Financial Reporting Directive (NFRD). The CSRD will require the use of Inline XBRL (iXBRL) and marks a new chapter in environmental, social and governance (ESG) disclosure. It was announced as part of a sustainable finance package intended to foster sustainable activity. 

CSRD is intended to bring sustainability reporting on a par with financial reporting. Eventually, It will extend the European Single Electronic Format (ESEF), currently rolling out for financial reporting, to ESG. Powered by Inline XBRL, this will require companies to digitally tag sustainability information, making it machine readable and comparable. The Commission also envisages that CSRD disclosures will be made available through the developing European Single Access Point (ESAP).

CSRD will introduce mandatory EU-wide sustainability reporting standards, seeking to make data from across Europe comparable. These standards will be developed by the European Financial Reporting Advisory Group (EFRAG), with collaboration planned in efforts to develop a global standard. They will reflect Europe’s ‘double materiality’ principle, covering both risks to and impacts of companies.

One more point of note is that CSRD will bring a huge number of entities into the sustainability reporting fold, extending requirements to all large companies and all listed companies. It will apply to nearly 50,000 filers, from the current 11,000 currently subject to NFRD.