The European Union has taken a decisive step forward in sustainability regulation with the adoption of the Corporate Sustainability Reporting Directive (CSRD). This directive, which came into force on January 1, 2024, begins to apply to the 2024 financial year.
The main aim of the CSRD is to establish a uniform framework for non-financial reporting throughout the European Union, thereby strengthening transparency and corporate responsibility towards sustainable development. This directive replaces and extends the requirements of the previous Non-Financial Reporting Directive (NFRD), insisting on clear and accurate communication of companies' sustainable performance.
The CSRD aims to provide investors and other stakeholders with reliable and comparable data for assessing companies' sustainable practices. The directive also plays a crucial role in assessing the financial risks and opportunities associated with climate change and other sustainability issues.
By harmonizing sustainability reporting across Europe, the CSRD aims to promote sustainable investment, thereby contributing to a carbon-neutral economy.
Who is concerned by CSRD?
The CSRD marks a significant expansion in scope compared with the NFRD, now applying to almost 50,000 companies, compared with around 11,600 previously. Companies covered include:
- All large companies and SMEs listed on the stock exchange.
- Companies exceeding two of the following three criteria: more than 250 employees, sales in excess of 40 million euros, and a balance sheet total in excess of 20 million euros.
It applies not only to EU-based companies, but also to non-EU companies with significant business activities in the EU and sales in excess of €150 million.
This extension of the CSRD's scope aims to ensure that sustainability reporting is not just a compliance obligation for large multinational companies, but becomes a mainstream standard for a majority of businesses.
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