CSRD
What is it?
The Corporate Sustainability Reporting Directive (CSRD) is a piece of legislation that was adopted by the European Union in 2021. The CSRD requires large companies and listed SMEs to report on their sustainability performance, as well as their overall ESG performance. The CSRD is a significant measure within the EU's existing Sustainable Finance Package in 2021 andt the CSRD entered into force in January, 2023.
Its ultimate aim is to help investors and other stakeholders assess the sustainability performance of companies, increasing trust that companies are taking serious action to address ESG risks and opportunities.
Who is it for?
The CSRD extends the scope and the reporting requirements of the NFRD and it is aimed at sizable public interest entities to report on their sustainability performance from 2018. In this sense, it aims to ensure that businesses report reliable and comparable sustainability information for investors to ensure they orient their investments towards more sustainable technologies and industries.
In detail, it applies to large companies, those with more than 250 employees and/or 40 million euros and/or 20 million euros in total assets. It is estimated that around 50000 companies across the EU will have to report under the CSRD, accounting for around 75% of all EU companies’ turnover. Companies with branches or subsidiaries in the EU and a net turnover of 150 million euros or more within the EU, will also be required to comply with CSRD.
Details of the CSRD disclosure:
Environmental information: This includes information on greenhouse gas emissions, energy and water consumption and pollution prevention strategies.
Social information: This includes information on employment such as working conditions and safety protocols, as well as training and development.
Governance information: This includes information on the company's board composition, risk management processes, and remuneration policies.
Anti-corruption and bribery measures: This includes explaining strategies to prevent corruption and bribery such as corporate governance and ethics training programmes.
Lastly, businesses will also have to report how the risks identified might affect their performance, in a more detailed reporting standard according to EU sustainability standards.
The CSRD will come into effect in 2024 for large companies and in 2026 for listed SMEs. Companies will be required to report on their sustainability performance for the financial year starting on or after 1 January 2023. The CSRD is a landmark piece of legislation that will help to improve the transparency and accountability of companies on ESG issues. It is also expected to have a significant impact on the investment landscape in the EU.