The Corporate Sustainability Reporting Directive to come into force

On 16 January 2022 the so-called Company Sustainability Reporting Directive (CSRD) (full name : Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting) was published in the EU Official Journal. This directive, which legally speaking enters into effect on 5 January 2023 (within 20 days after this publication), creates further sustainability reporting obligations for companies to support the EU Green Deal’s ambitions.

The new rules must be implemented by member states within the coming 18 months.

The CSRD introduces more detailed reporting requirements than the Non-Financial Reporting Directive (NFRD) and widens the scope of companies that will need to comply with the new rules.

The new sustainability reporting rules will apply to all large companies and to all companies (including SME's) listed on regulated markets except listed micro undertakings. These companies are also responsible for assessing the information applicable to their subsidiaries. An opt-out will be possible for listed SMEs during a transitional period, exempting them 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 EUR 150 million in the EU and which have at least one subsidiary or branch in the EU exceeding certain thresholds. These companies must provide a report on their environmental, social and governance (ESG) impacts, as defined in this directive.

The entities that fall within the scope will have to report on sustainability matters such as environmental rights, social rights, human rights and governance factors.

The new rules will apply in different phases:

  • reporting in 2025 on the financial year 2024 for companies already subject to the NFRD;
  • reporting in 2026 on the financial year 2025 for large companies that are not currently subject to the NFRD;
  • reporting in 2027 on the financial year 2026 for listed SMEs (except micro undertakings), small and non-complex credit institutions and captive insurance undertakings;
  • reporting in 2029 on the financial year 2028 for third-country undertakings with net turnover above 150 million in the EU if they have at least one subsidiary or branch in the EU exceeding certain thresholds.

Companies must report in accordance with the European sustainability reporting standards adopted by the EC via delegated acts after technical advice of the European Financial Reporting Advisory Group (EFRAG).

Focus Points

With a view to have an open eye on the future, we follow up on specific (legal) topics at the heart of modern businesses in transition.