ESG Reporting for EU and non-EU companies: Entry into force of the Corporate Sustainability Reporting Directive

On 5 January 2023, the long awaited Corporate Sustainability Reporting Directive (CSRD) has come into force throughout the European Union. The CSRD establishes sustainability reporting obligations for a large number of companies both within and outside of the European Union (EU). For some companies, the first sustainability reporting under the CSRD will have to be submitted already in 2025 for the financial year 2024. The majority of companies within the scope of the CSRD will have to begin reporting in 2026 for the financial year 2025.

Along with the EU Taxonomy Regulation (Taxonomy) and the EU Sustainable Finance Disclosure Regulation (SFDR), the CSRD forms part of the EU’s Sustainable Finance Agenda. The CSRD builds on the framework of the already existing EU Non-Financial Reporting Directive (NFRD), which has been in force since 2017 and established a minimum level of sustainability reporting obligations for certain companies. However, the CSRD significantly widens the scope of sustainability reporting, both with regard to covered companies and subject matters.

The central theme of the CSRD is that it no longer refers to ESG matters as being simply “non-financial”. Instead, the CSRD coins the term sustainability reporting, which underlines its significance and financial importance for profit-oriented companies. What’s more, the CSRD aligns corporate sustainability reporting with corporate financial reporting (technically, the CSRD is an amendment to the European Accounting Directive), a development evident from the fact that going forward, sustainability related information will have to be published as part of a company’s management report and may no longer be made available in a separate report.

The CSRD has yet to be transposed into the laws of each EU Member State. And the technical reporting standards on how to report still have to be adopted by the European Commission. There is therefore some uncertainty as to how sustainability reporting under the CSRD will actually play out. In this client briefing, we analyse this new legislative framework.

 To read the full briefing, please click here.