EU Corporate Sustainability Reporting Directive

Environmental
:   
Frameworks and Standards
March 10, 2023

On 5 January 2023, the Corporate Sustainability Reporting Directive (CSRD) entered into force. This new directive modernises and strengthens the rules concerning the social and environmental information that companies have to report. A broader set of large companies, as well as listed SMEs, will now be required to report on sustainability.

The new rules will ensure that investors and other stakeholders have access to the information they need to assess the impact of companies on people and the environment and for investors to assess financial risks and opportunities arising from climate change and other sustainability issues. Finally, reporting costs will be reduced for companies over the medium to long term by harmonising the information to be provided.

The first companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025.

Companies subject to the CSRD will have to report according to European Sustainability Reporting Standards (ESRS). The standards were developed by the EFRAG, previously known as the European Financial Reporting Advisory Group, an independent body bringing together various stakeholders. They will be tailored to EU policies while building on and contributing to international standardisation initiatives.

On 6 June 2023, the Commission opened a four-week public feedback period on the first set of sustainability reporting standards for companies. These draft standards take account of technical advice from EFRAG in November 2022.

Following the feedback period, the Commission has considered the feedback received and adopted the ESRS as a delegated regulation. The Commission will submit the ESRS delegated act to the European Parliament and Council for scrutiny.

The CSRD also requires assurance on the sustainability information companies report and will provide for the digital taxonomy of sustainability information.

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Frameworks and Standards

European Sustainability Reporting Standards

The ESRS standards are reporting standards for sustainability within the EU. The ESRS standards are an integral part of the CSRD, the Corporate Sustainability Reporting Directive of the European Parliament and the Council. This means that the ESRS reporting standards are mandatory. The adoption of the first set of 12 standards by the Commission is considered a significant step to promote sustainable practices and transparency in companies and to contribute to their comparability. This is because the new reporting requirements herald major changes in sustainability reporting and these will affect around 50,000 companies based in the EU. However, subsidiaries, branches abroad and companies that carry out a large part of their business activities in the EU area may also be indirectly affected, which is why the scope of impact can be significantly broader.
Frameworks and Standards

European Financial Reporting Advisory Group (EFRAG)

EFRAG (European Financial Reporting Advisory Group) is an independent, non-profit organization that provides advice and support to the European Union (EU) on financial reporting and accounting matters.
Frameworks and Standards

Standards

Set of criteria used by investors and other stakeholders to evaluate a company's sustainability and social responsibility practices.
Frameworks and Standards

Frameworks

A framework is a set of guidelines, principles, or best practices that provide a general structure or approach for achieving a specific goal or objective.
Frameworks and Standards

GRI

GRI (Global Reporting Initiative) is the independent, international organization that helps businesses and other organizations take responsibility for their impacts, by providing them with the global common language to communicate those impacts.
Frameworks and Standards

Board Governance

The role of the board of directors in relation to sustainability is becoming increasingly important as businesses recognize the need to integrate environmental, social, and governance (ESG) factors into their strategies and operations.