EU Council Gives Final Green Light to Corporate Sustainability Reporting Directive

The Council of the European Union recently gave its final approval to the corporate sustainability reporting directive (CSRD). This, says its press release, “means that companies will soon be required to publish detailed information on sustainability matters. This will increase a company’s accountability, prevent divergent sustainability standards, and ease the transition to a sustainable economy.”

The CSRD strengthens the existing rules on non-financial reporting introduced in the Accounting Directive by the 2014 non-financial reporting directive (NFRD), which are no longer tailored to the EU's transition to a sustainable economy.

The Council believes that the new rules “will make more businesses accountable for their impact on society and will guide them towards an economy that benefits people and the environment. Data about the environmental and societal footprint would be publicly available to anyone interested in this footprint. At the same time, the new extended requirements are tailored to various company sizes and provides them with sufficient transition period to get ready for the new requirements.”

According to Jozef Síkela, Minister for Industry and Trade, “in practical terms, companies will have to report on how their business model affects their sustainability, and on how external sustainability factors (such as climate change or human right issues) influence their activities. This will equip investors and other stakeholders better for taking informed decisions on sustainability issues.”

The press release points out that the CSRD introduces more detailed reporting requirements and ensures that large companies and listed SMEs are required to report on sustainability matters such as environmental rights, social rights, human rights and governance factors.

The new sustainability reporting rules will apply to all large companies and to all companies listed on regulated markets except listed micro undertakings. These companies are also responsible for assessing the information applicable to their subsidiaries.

The rules also apply to listed SMEs, taking into account their specific characteristics. An opt-out will be possible for listed SMEs during a transitional period, exempting them from the application of the directive until 2028.

The European Financial Reporting Advisory Group (EFRAG) will be responsible for developing draft European standards. The European Commission will adopt the final version of the standards as a delegated act, following consultations with EU member states and a number of European bodies.

For more, see Council gives final green light to corporate sustainability reporting directive - Consilium (europa.eu).