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.
Keywords: Europe, EU, Banking, Insurance, Securities, Corporate Sustainability Reporting Directive, CSRD, NFRD, Reporting, Sustainable Finance, ESG, EFRAG, European Council, European Parliament
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