A PDF version of this publication is attached here: What's CSRD? It's important to know (PDF 269kb)

Stakeholders around the world continue to call for transparency about companies’ environmental, social, and governance (ESG) risks and opportunities. In the United States (US), the Securities and Exchange Commission (SEC) is currently evaluating feedback on its March proposal on climate disclosures. And globally, the International Sustainability Standards Board (ISSB) is evaluating feedback received on its two exposure drafts on sustainability disclosures. But companies may have to contend with more than the proposed SEC and ISSB requirements.

In June, the Council of the European Union and European Parliament took steps to ensure that European Union (EU) ESG regulations will be a reality, reaching a provisional agreement that includes the scope and timeline for adoption of EU ESG reporting requirements that are expected to affect companies worldwide.

The EU regulations are part of the Corporate Sustainability Reporting Directive (CSRD), which will impact many more entities than are reporting under current EU non-financial reporting requirements, including certain US and other non-EU companies and their EU subsidiaries. By requiring more entities to provide mandatory sustainability disclosures, the CSRD is designed to drive changes in company behavior and bring sustainability reporting on par with financial reporting over time.

Determining whether a company or its subsidiary is captured by the scope of the proposed rules has some complexity. And even once in scope, the need to report at a global consolidated level, the standards required, and the effective date differ depending on the particular circumstances. What is clear, though, is that reporting could begin as early as fiscal year 2024, and the requirements are extensive.

The CSRD goes well beyond today’s non-financial reporting requirements in the EU. Companies that fail to appreciate the impact of the new requirements will find themselves scrambling to comply.