The Corporate Social Responsibility Directive (CSRD) is a new European Union legislative proposal that aims to tighten the sustainability and social responsibility reporting requirements of companies operating in the EU. The Directive seeks to build on the existing framework established by the Non-Financial Reporting Directive (NFRD) and align it with the objectives of the European Green Deal and the UN Sustainable Development Goals.
CSRD was proposed by the European Commission in April 2021 as part of a wider sustainability agenda that aims to set Europe on the path to a sustainable future. The proposed directive will require companies to report on a wider range of environmental, social and governance issues. It will apply to companies that meet at least two of the following criteria:
One of the key features of CSRD is that it establishes a single set of standards for reporting on ESG issues. These standards are based on the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and the Sustainable Development Accounting Standards Board (SASB). The standards will be legally binding on companies that fall within the scope of the directive. This will facilitate the comparison of ESG parameters across companies and industries and help ensure that companies are accountable for their sustainability commitments.
The CSRD introduces new reporting requirements for companies that include:
Specific requirements include the obligation to set and report ESG goals, under which one can imagine a very important goal in the area of reducing greenhouse gas (CO2) emissions. Companies will be required to report annually on non-financial indicators, their long-term ESG goals, how ESG risks are managed and how sustainability issues are reflected in corporate governance.
The CSRD introduces some new corporate governance requirements. For example, it requires companies to establish a board-level sustainability committee and to appoint a sustainability officer who will be responsible for overseeing the company’s sustainability activities. These requirements are intended to ensure that companies have structures and processes in place to manage sustainability risks and opportunities.
CSRD will have a significant impact on corporate sustainability reporting and the wider sustainability agenda in Europe. It is a key part of the EU’s efforts to create a sustainable and resilient economy and is expected to help advance the goals of the European Green Deal and the UN’s Sustainable Development Goals. The proposed directive introduces a uniform set of standards for reporting on ESG issues and new requirements for corporate governance.
Due to the EU’s long-term goals, non-financial reporting will be an essential part of the everyday life of companies. In order to remain competitive, they will have to adapt to the new rules of the game and begin to monitor and report non-financial indicators and how to manage the risks associated with climate change.
Read more about the CSRD on the official EU website:
https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en
