Marking the EU Council's final ratification of the Corporate Sustainability Reporting Directive (CSRD), the last significant step in the EU's revamp and expansion of corporate sustainability reporting.
With this approval and the European Parliament's recent acceptance of the rules, the legislative act has now been approved. Beginning in 2024, the restrictions will apply to major public-interest corporations with over 500 employees, followed by corporations with over 250 employees or €40 million in revenue in 2025, and listed SMEs in 2026.
The CSRD is intended to serve as a significant update to the 2014 Non-Financial Reporting Directive (NFRD), the current EU framework for sustainability reporting. The new laws would dramatically increase the number of enterprises obliged to give sustainability disclosures from the present 12,000 to over 50,000 and establish more detailed reporting requirements on environmental consequences, human rights and social standards, and sustainability-related risk.
In accordance with a recent agreement between the EU Parliament and EU Council, the guidelines will also compel significant non-EU corporations to have their reported sustainability statistics independently audited.
The CSRD will mandate disclosure in accordance with a common framework of European Sustainability Reporting Requirements (ESRS), with the inaugural set of standards announced by the European Financial Reporting Advisory Group earlier this month (EFRAG). Companies will be expected to report on problems ranging from environmental sustainability and social rights to human rights and governance aspects under the new system.
After being signed by the Presidents of the EU Parliament and Council, the law will be published in the Official Journal of the European Union, legally entering into force 20 days later, with member states expected to implement the new rules within 18 months.
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