On 5 January 2023, the Corporate Sustainability Reporting Directive (CSRD) entered into force. This new directive modernises and strengthens the rules concerning the social and environmental information that companies have to report. 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 assess financial risks and opportunities arising from climate change and other sustainability issues. Finally, reporting costs will be reduced for companies over the medium to long term by harmonising the information to be provided.
The first companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025.
Companies subject to the CSRD will have to report according to European Sustainability Reporting Standards (ESRS). The standards were developed by the EFRAG, previously known as the European Financial Reporting Advisory Group, an independent body bringing together various stakeholders. They will be tailored to EU policies while building on and contributing to international standardisation initiatives.
On 6 June 2023, the Commission opened a four-week public feedback period on the first set of sustainability reporting standards for companies. These draft standards take account of technical advice from EFRAG in November 2022.
Following the feedback period, the Commission has considered the feedback received and adopted the ESRS as a delegated regulation. The Commission will submit the ESRS delegated act to the European Parliament and Council for scrutiny.
The CSRD also requires assurance on the sustainability information companies report and will provide for the digital taxonomy of sustainability information.
The ESG space is changing day by day, creating more uncertainty for decision makers
