The Council and European Parliament reached a provisional political agreement on the corporate sustainability reporting directive (CSRD) to address shortcomings in the existing rules on disclosure.
Bruno le Maire, Minister for economic affairs, finance and industrial and digital sovereignty said that the new rules will bring more transparency for citizens, consumers and investors as well as more readability and simplicity in the information provided by companies, who must play their full part in society.
“Greenwashing is over. With this text, Europe is at the forefront of the international race to standards, setting high standards in line with our environmental and social ambitions,” highlighted the minister.
The corporate sustainability reporting directive amends the 2014 non-financial reporting directive. It introduces more detailed reporting requirements and ensures that large companies are required to report on sustainability issues such as environmental rights, social rights, human rights and governance factors.
The CSRD also introduces a certification requirement for sustainability reporting as well as improved accessibility of information, by requiring its publication in a dedicated section of company management reports.
The European Financial Reporting Advisory Group (EFRAG) will be responsible for establishing European standards, following technical advice from a number of European agencies.
The EU rules on non-financial information apply to all large companies and all companies listed on regulated markets. These companies are also responsible for assessing the information at the level of their subsidiaries.
The rules also apply to listed SMEs, taking into account their specific characteristics. An opt-out will be possible for SMEs during a transitional period, meaning that they will be exempted from the application of the directive until 2028.
For non-European companies, the requirement to provide a sustainability report applies to all companies generating a net turnover of 150 million euros in the EU and which have at least one subsidiary or branch in the EU. These companies must provide a report on their ESG impacts, namely on environmental, social and governance impacts, as defined in this directive.
Reporting must be certified by an accredited independent auditor or certifier. To ensure that companies comply with the reporting rules, an independent auditor or certifier must ensure that the sustainability information complies with the certification standards that have been adopted by the EU. The reporting of non-European companies must also be certified, either by a European auditor or by one established in a third country.
The new rules will take effect for companies that are already subject to the non-financial reporting directive from January 2024. The provisional agreement reached today is subject to approval by the Council and the European Parliament.