On 10 November 2022, the European Parliament formally adopted the Corporate Sustainability Reporting Directive (CSRD), which will extend sustainability reporting requirements to 38,000 public and private sector companies. Members of the European Parliament voted overwhelmingly for the new rules (525 votes in favour, 60 votes against and 28 abstentions). The legislation was proposed in April 2021 (see our earlier blog post) and agreed with amendments in June 2022 (see our earlier blog post).

New EU sustainability standards

The CSRD replaces the Non-Financial Reporting Directive (NFRD), which was widely acknowledged to have been ineffectual in driving sustainability disclosures by corporates. NFRD applied to 11,700 corporates, whereas the CSRD will catch 50,000. The CSRD introduces more detailed reporting requirements on companies’ impact on ESG standards, based on common criteria in line with the EU’s climate goals. The European Financial Reporting Advisory Group is expected to publish the draft sustainability reporting standards in the coming weeks, with the first set of standards to be adopted by 30 June 2023.

What happens next?

The Council of the EU is expected to adopt the proposal on 28 November 2022, after which it will be published in the Official Journal of the EU. The directive will enter into force 20 days after publication. EU Member States will then have 18 months to transpose the CSDR into their national laws.

Reminder of reporting timeline

From 1 January 2024 large public-interest companies (with over 500 employees) already subject to the existing NFRD, with reports due in 2025;

From 1 January 2025 for large companies that are not presently subject to the NFRD (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets), with reports due in 2026;

From 1 January 2026 for listed SMEs and other undertakings, with reports due in 2027. Non-listed SMEs can opt-out until 2028.

From 1 January 2028 for non-EU companies with substantial activity in the EU (defined as a turnover of more than €150 million in the EU). It is not yet clear when non-EU undertakings will have to report under the CSRD but is suspected to be in 2029.

The European Parliament press release is available here.