New EU rules have signalled a new era for ESG reporting with large companies required to publish official reports on social and environmental performance.
Entering into force on 5 January 2023, but to be reported from 2024, the Corporate Sustainability Reporting Directive (CSRD) strengthens the rules about the social and environmental information that companies have to report.
About 50,000 EU companies and small and medium enterprises will be required to report social and environmental information.
The CSRD will allow the evaluation of non-financial performance, such as sustainability, and provide access to information to assess investment risks related to climate change and other EU sustainability reporting standards. Read the legislation.
The new rules replace and extend the scope of the existing sustainability reporting requirements under the EU’s current Non-Financial Reporting Directive (NFRD).
“This helps investors, civil society organisations, consumers and other stakeholders to evaluate the sustainability performance of companies, as part of the European green deal,” the EU states. The EU aims to be the first climate-neutral continent by 2050.
Non–EU companies with a significant presence in the EU or with securities listed on an EU-regulated market are to be subject to EU rules. (Go to Harvard Law School for a summary)
The EU states the CSDR “will also create a culture of transparency about the impact of companies on people and the environment.”
The first companies will have to apply the new rules for the first time in the financial year 2024, for reports published in 2025.
Companies subject to the CSRD will have to report according to European Sustainability Reporting Standards (ESRS), which the EU Commission is expected to adopt in mid-2023, based on draft standards published last year.
The CSRD will make it mandatory for companies to have a three-party audit of the sustainability information that they report. The required disclosures will also need to be published in a dedicated section of company reports, such as annual reports.
Accountancy Europe has provided comprehensive Q and A content on CSRD.
The Albanese Government recently closed consultation on a new Australian climate risk disclosure framework.
The move has been met with opposition from some business leaders who say legal protections are needed for companies.
