What is the status of the CSRD?
The Corporate Sustainability Reporting Directive (CSRD) is an important development in the world of sustainability reporting. It is an amendment to the existing Non-Financial Reporting Directive (NFRD) and aims to enhance the quality, consistency, and comparability of sustainability reporting across the European Union (EU).
The CSRD was proposed by the European Commission in April 2021 as part of the European Green Deal. The European Green Deal is a comprehensive plan to make the EU's economy sustainable and to achieve climate neutrality by 2050.
The CSRD builds on the existing NFRD, which was introduced in 2014 and required large EU companies to disclose non-financial information related to environmental, social, and governance (ESG) matters. However, the NFRD was criticized for its lack of consistency and comparability, making it difficult for stakeholders to assess and compare companies' sustainability performance.
The CSRD aims to address the shortcomings of the NFRD and improve sustainability reporting by introducing several key changes:
The CSRD will extend the reporting obligations to more companies. Currently, only large companies with more than 500 employees are required to report under the NFRD. The CSRD will lower this threshold to companies with more than 250 employees. Additionally, all listed companies, regardless of their size, will be required to report.
The CSRD will introduce a single set of standards for sustainability reporting, which will be developed by the European Financial Reporting Advisory Group (EFRAG). These standards will be aligned with international reporting frameworks, such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB), to ensure consistency and comparability.
The CSRD will require companies to report their sustainability information in a digital format using eXtensible Business Reporting Language (XBRL). This will enable easier access, analysis, and comparability of the reported data.
The CSRD will introduce mandatory assurance requirements for sustainability reports. Companies will need to have their sustainability information independently verified by auditors or other qualified professionals to enhance the credibility and reliability of the reported data.
The CSRD is currently in the proposal stage and needs to be approved by the European Parliament and the Council of the European Union before it becomes law. If approved, the CSRD is expected to be applicable from 2023, with a phased implementation over the following years.
The CSRD represents a significant step towards improving sustainability reporting in the EU. By expanding the scope, standardizing reporting, promoting digitalization, and introducing assurance requirements, the CSRD aims to enhance transparency, comparability, and credibility of sustainability information. Organizations should start preparing for the implementation of the CSRD to ensure compliance and to leverage the benefits of improved sustainability reporting.
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