The Council gave its final approval to the Corporate Sustainability Reporting Directive (CSRD).

This means that companies will soon be required to publish detailed information on sustainability issues. This will increase company accountability, prevent different sustainability standards and facilitate the transition to a sustainable economy.

In practical terms, companies will have to report on how their business model impacts on their sustainability and how external sustainability factors (such as climate change or human rights issues) impact on their operations. This will better equip investors and other stakeholders to make informed decisions on sustainability issues.

The CSRD strengthens the existing non-financial reporting rules introduced in the Accounting Directive by the Non-Financial Reporting Directive (NFRD) of 2014, which are no longer aligned with the EU’s transition to a sustainable economy.

New rules for reporting companies

The CSRD introduces more detailed reporting requirements and ensures that large companies and listed SMEs are obliged to report on sustainability-related issues such as environmental rights, social rights, human rights and governance factors.

The new sustainability reporting rules will apply to all large companies and to all companies listed on regulated markets, with the exception of listed micro-enterprises. These companies are also responsible for assessing the information applicable to their subsidiaries.

The rules also apply to listed SMEs, taking into account their specific characteristics. During a transitional period, it will be possible to opt out for SMEs listed on the stock exchange, 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 €150 million in the EU and which have at least one subsidiary or branch in the EU above certain thresholds. These companies must report on their environmental, social and governance (ESG) impacts as defined in this directive.

The European Financial Reporting Advisory Group (EFRAG) will be responsible for developing draft European standards. The European Commission will adopt the final version of the standards as a delegated act after consulting EU Member States and a number of European authorities.