18 Aug European Corporate Sustainability Reporting Directive (CSRD)
The Corporate Sustainability Reporting Directive (CSRD) is a European Union directive that came into force on January 5, 2023. This new directive modernizes and strengthens the standards for social and environmental information to be reported by companies.
Who is affected by the Corporate Social Responsibility Directive?
A broader set of large companies, as well as listed SMEs, will now be required to report on sustainability. The new rules will ensure that investors and other stakeholders have access to the information they need to assess the impact of companies on people and the environment and for investors to evaluate the financial risks and opportunities arising from climate change and other sustainability issues.
What are the reporting standards?
Companies subject to the CSRD will be required to report under the European Sustainability Reporting Standards(ESRS). The standards have been developed by EFRAG, formerly known as the European Financial Reporting Advisory Group, an independent body bringing together various stakeholders. The standards will be aligned with EU policies, while building on and contributing to international standard-setting initiatives.
On June 6, 2023, the Commission opened a four-week period to seek views on a first set of sustainability reporting standards for companies. These draft standards take into account EFRAG's technical advice in November 2022. Following the comment period, the Commission has considered the comments received and adopted The ESRS as a Delegated Regulation.
How is it being implemented?
The CSRD empowers the Commission to adopt delegated and implementing acts to specify how competent authorities and market participants are to comply with the obligations set out in the directive. On July 31, 2023, a Commission Delegated Regulation supplementing Directive 2013/34/EU as regards sustainability reporting rules was adopted, but will not be in force until it is published in the Official Journal.
In summary, the implementation of the CSRD involves several steps, including the development of the European Sustainability Reporting Standards by EFRAG, public feedback on the draft standards, the adoption of the ESRS as a delegated regulation by the Commission, and the adoption of delegated and implementing acts by the competent authorities. The first companies will have to apply the new standards to published reports in 2025.
Conclusion
The implementation of the CSRD is an important step towards greater transparency and accountability in corporate sustainability reporting. By requiring companies to report on their social and environmental impact, investors and other stakeholders will be able to make more informed decisions about their investments.