September 20, 2022
The world of sustainability is so full of acronyms (ESG, CSR, SFDR, TFCD) that it can be hard to navigate. Continuing our series on EU sustainability regulation, the following article breaks down the acronym du jour: CSRD.
The Corporate Sustainability Reporting Directive (CSRD) is a proposed EU legislation to implement EU sustainability reporting standards for large companies operating in the union, replacing and extending the scope of the existing Non-Financial Reporting Directive (NFRD). The proposal for CSRD was adopted by the European Parliament in April 2021.
An estimated 50,000 companies will need to report and comply. Currently, the scope of the directive extends to all companies with:
The goal of the CSRD is to standardise sustainability reporting, so that the information provided by companies is of consistently high quality and can be easily compared. In order to do this, the European Financial Advisory Group (EFRAG), was commissioned to develop sustainability reporting standards to be used by companies to comply with the CSRD
Although the exact criteria of the reporting standards are not yet known, the European Sustainability Reporting Standards (ESRS) will cover the following:
In addition to these reporting topics, a key component of the proposed directive is the requirement for the sustainability information contained within the report to be digitally tagged, so as to be easily incorporated into the future “European Single Access Point”. The digital categorisation system is being developed at the same time as the sustainability reporting standard.
Moreover, the EU’s aim is to make sustainability reporting of the same quality as financial reporting, third party assurance is likely to be required by the directive. In practice, this means that an external party will need to provide “reasonable” assurance of the information provided in any sustainability report.
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