Non-financial reporting goes to a higher level

Sunday 11 December 2022
Sustainability

At the end of November, the Council of the European Union finally approved the Corporate Sustainability Reporting Directive, better known as the CSRD.

The obligation of financial reporting has been in force for the largest companies since 2018, in accordance with the NFRD directive. But soon it will be replaced by a new one - CSRD. Under the new rules, companies will have to publish even more detailed information related to sustainable development. The new regulations are intended to draw entrepreneurs' attention even more to issues related to sustainable development and to prevent the application of divergent standards in this area. Thanks to structured and standardized information, investors and other stakeholders will be able to make informed, sustainable business decisions.

What is CSRD all about?

The starting point for the work on the CSRD was the conviction that the current regulations on disclosure of non-financial information (NFRD) are largely insufficient and imprecise. The CSRD introduces more detailed reporting requirements on companies' environmental, human rights and social impacts. They are based on common criteria in line with the EU's climate objectives. What is important and what distinguishes CSRD from NFRD is, among others, the obligation for companies to undergo independent audits and certification. This will increase the importance of ESG reporting and investors will have comparable and reliable data.

Who will the CSRD cover?

The new act introduces more detailed reporting requirements and obliges large companies to publish information on sustainability issues such as environmental rights, social rights, human rights and corporate governance factors.

The new rules on sustainability reporting will apply to large utilities with more than 500 employees, all large utilities with more than 250 employees and a turnover of €40 million, and all listed companies with the exception of micro-enterprises. These companies are also responsible for evaluating information about their subsidiaries.

Unlike the NFRD, the new regulations also apply to small and medium-sized enterprises, but they will have a longer time to prepare for the new reporting requirements.

As for non-European companies, they also have to submit sustainability reports as long as they generate more than EUR 150 million in net sales in the EU and have at least one subsidiary or branch here. They should report on their impact on the environmental, social and corporate governance issues identified in the Directive.

When will the new reporting obligations start?

  • reporting in 2025 for the 2024 financial year for companies already subject to the Non-Financial Reporting Directive

  • reporting in 2026 for the 2025 financial year for companies not yet subject to the Non-Financial Reporting Directive

  • reporting in 2027 for the 2026 financial year for listed SMEs except for micro-enterprises, small and non-complex credit institutions and captive insurance companies

  • reporting in 2029 for the 2028 financial year for companies from third countries.

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