EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD). The proposed Directive would amend the 2014 Non-Financial Reporting Directive, or NFRD, and aims to address shortcomings in the existing rules on disclosure of non-financial information.
The proposed Directive would introduce more detailed reporting requirements and ensure that large companies are required to report on sustainability issues such as environmental rights, social rights, human rights, and governance factors. The proposed Directive would also introduce a certification requirement for sustainability reporting and improve accessibility of information, by requiring its publication in a dedicated section of company management reports. The European Financial Reporting Advisory Group (EFRAG) will be responsible for establishing the European standards, following the technical advice from a number of European agencies. The proposed Directive applies to all large companies and all companies listed on regulated markets, including listed small and medium-size enterprises (SMEs) in the European Union. For non-European companies, the Directive applies to all companies generating a net turnover of EUR 150 million in the European Union and having at least one subsidiary or branch in the European Union. These companies must provide a report on their impacts on environmental, social, and governance (ESG). The proposed Directive:
- extends the scope of the reporting requirements to additional companies, including all large companies and companies listed on a regulated market (except listed micro-companies)
- requires assurance of sustainability information.
- specifies in more detail the information that companies should report and requires them to report in line with the mandatory European Union sustainability reporting standards.
- ensures that all information is published in a dedicated section of the company management reports.
The provisional agreement is subject to approval by the Council and the European Parliament. The proposed Directive will enter into force twenty days after its publication in the Official Journal of the European Union. With regard to implementation, the proposed rules will be applicable:
- for companies already subject to the Non-Financial Reporting Directive, by January 01, 2024.
- for companies that are not presently subject to the Non-Financial Reporting Directive, by January 01, 2025.
- for listed SMEs, small and non-complex credit institutions, and captive insurance undertakings, by January 01, 2026.
Related Links
Keywords: Europe, EU, Banking, Insurance, Securities, Corporate Sustainability Reporting Directive, CSRD, NFRD, Reporting, Sustainable Finance, ESG, EFRAG, European Council, European Parliament
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
David Fihrer
Skilled life insurance actuary; subject matter expert on IFRS 17 and source of earnings
Related Articles
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
MFSA Sets Out Supervisory Priorities, Issues Reporting Updates
The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023
German Regulators Issue Multiple Reporting Updates for Banks
Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
