The EU Council on Monday announced its final approval of the Corporate Sustainability Reporting Directive (CSRD), marking the last major step in the overhaul and expansion of corporate sustainability reporting in the EU.
With today’s approval and the recent passage of the rules by the European Parliament, the legislative act has now been adopted. The rules will begin applying from the beginning of 2024 for large public-interest companies with over 500 employees, followed by companies with more than 250 employees or €40 million in revenue in 2025, and listed SMEs in 2026.
The CSRD is aimed as a major update to the 2014 Non-Financial Reporting Directive (NFRD), the current EU sustainability reporting framework. The new rules will significantly expand the number of companies required to provide sustainability disclosures to over 50,000 from around 12,000 currently, and introduce more detailed reporting requirements on company impacts on the environment, human rights and social standards and sustainability-related risk.
Following a recent agreement between the EU Parliament and EU Council, the rules will also require companies to have their reported sustainability information independently audited, and will apply to some large non-EU companies.
The CSRD will require disclosure under a common framework of European Sustainability Reporting Standards (ESRS), with the initial set of standards unveiled earlier this month by the European Financial Reporting Advisory Group (EFRAG). Under the new system, companies will be required to report on issues ranging from environmental sustainability and social rights to human rights and governance factors.
The legislation will be published in the Official Journal of the European Union after being signed by the Presidents of the EU Parliament and Council, officially entering into force 20 days later, with member states required to implement the new rules within 18 months.