Corporate Sustainability Reporting Directive CSRD act was adopted by the EU

On 11th November 2022, the EU parliament adopted the Corporate Sustainability Reporting Directive (CSRD) act. This act will require businesses to regularly publish information on their societal and environmental impact, which in return will make the businesses located in the EU region to be more publicly accountable. Thus, the EU's social market economy could be strengthened, and it could in the future lay the groundwork for sustainability reporting standards at the global level.   

The CSRD addresses the shortcomings found in the legislation on the disclosure of non-financial information (NFRD), which is believed to be insufficient and unreliable. The CSRD sets new standards and rules for better and more detailed reporting requirements on companies which would be in line with the EU climate goals.  

The CSRD has set requirements to ensure that companies are providing reliable information. These requirements include independent auditing and certification. Moreover, this directive will make digital access to sustainability information available. Furthermore, financial and sustainability reports will have equal conditions and investors will have comparable and reliable data. This directive will affect all large companies, whether listed on stock markets or not. Furthermore, companies which are not based in the EU will be affected if their turnover is more than €150 million euro in the EU. 

Timeline: 

It is expected that the European Council will adopt the proposal on 28 November 2022. After the approval of the proposal, it would be signed and published in the EU Official Journal. The directive will enter into force 20 days after publication. The following rules will apply to companies starting from 2024 to 2028: 

• From 1 January 2024, large public-interest companies with more than 500 employees will be subjected to the non-financial reporting directive. Moreover, companies need to submit their reports by 2025. 

• From 1 January 2025, large companies with more than 250 employees, or more than €40 million in turnover and/or €20 million in total assets will be affected by this act. Furthermore, these companies should not be presently subject to the non-financial reporting directive. If a company is categorized within this specification, their reports should be submitted by 2026. 

• From 1 January 2026, companies which are listed Small and Medium-sized Enterprises (SMEs) and other undertakings will be affected. If a company is categorized within this specification, their reports should be submitted by 2027. However, SMEs can wait to submit their report until 2028. 

 
The current rules cover 11 700 companies, compared to this the CSRD would include approximately 50 000 companies in the EU.