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Article | Global News Briefs

European Union: New Directive on mandatory sustainability reporting

By Ben Fidlow, FCAS, MAAA | March 29, 2023

The Corporate Sustainability Reporting Directive brings significant changes to sustainability reporting requirements for companies operating within the European Union.
ESG and Sustainability|Climate
ESG In Sight

Employer Action Code: Act

The Corporate Sustainability Reporting Directive (CSRD) is now in effect, with disclosure requirements phasing in between 2025 and 2029 for companies within the European Union (EU) and ultimately extending to non-EU companies with significant operations in the EU. The CSRD significantly expands the scope of both the companies affected and their required environmental, social and governance (ESG) disclosures, in comparison to the 2014 Non-Financial Reporting Directive (NFRD). The deadline for member States to transpose the Directive is July 6, 2024.

Key details

  • When fully phased in, about 50,000 EU companies will be in-scope for the CSRD (compared with under 12,000 currently for the NFRD). These include listed EU companies (except certain micro-enterprises) and “large” non-listed EU companies (including EU subsidiaries of non-EU parent companies) defined as meeting at least two of the following criteria: over 250 employees annual net revenue over 40 million euros, or total assets over €20 million. Subsidiaries (excluding large or listed ones) of non-EU companies are exempt only if the parent company issues consolidated disclosures meeting CSRD standards.
  • Larger in-scope EU companies will be required to start reporting in 2025 (based on 2024 information), and then the phase-in for other EU companies will proceed in steps in 2026 and 2027. In 2029, the CSRD will apply, on a simplified basis, at the consolidated level to non-EU companies with annual net revenue over €150 million from the EU and having at least one EU subsidiary (listed or large) or branch (with net revenue over €40 million).
  • The CSRD’s workforce-related disclosure topics include:
    • Equal treatment and opportunities for all, including gender equality and equal pay for work of equal value, training and skills development, the employment and inclusion of people with disabilities, measures against violence and harassment in the workplace, and diversity
    • Working conditions, including 1) secure employment; 2) working time; 3) adequate wages; 4) social dialogue; 5) freedom of association; 6) existence of works councils; 7) collective bargaining, including the proportion of workers covered by collective agreements; 8) the information, consultation and participation rights of workers; 9) work/life balance; and 10) health and safety
  • The specific ESG disclosure requirements and quantitative metrics under the CSRD have not been finalized. These have been drafted in detail by the European Financial Reporting Advisory Group (EFRAG) as part of its development of European Sustainability Reporting Standards (ESRS). The EU Commission is scheduled to decide on adoption of the ESRS by June 30, 2023 (and a sector-specific version by June 30, 2024). Simplified standards will apply for small and midsize, as well as non-EU, companies.
  • The CSRD notes that the required disclosures will be qualitative and quantitative; be retrospective and forward looking; consider both ESG effects on the company as well as company effects on the external environmental and social landscapes; and address the company’s whole “value chain” (or, if not available, explain why such information could not be obtained and the plans for obtaining it in the future). The disclosures must be included in the company’s management report and have received independent third-party limited assurance or audit.

Employer implications

Affected companies should prepare to make significant changes to the breadth and detail of sustainability information they disclose and their processes for developing and certifying the information.


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