in a nutshell
The European Union is about to adopt the Corporate Sustainability Reporting Directive (CSRD) following a vote in the European Parliament on November 10, 2022. The CSRD expands the scope of companies required to disclose more detailed information about their impacts compared to previous directives. of activities on sustainability issues in management reports. CSRD’s goal is to provide transparency to the public about corporate sustainability motivations and efforts, and to assist investors and other stakeholders in assessing a company’s non-financial performance.
There’s more, but here are 10 things you should know about CSRDs.
- The CSRD captures a fairly large range of listed private companies and non-EU companies doing business within the EU. There are approximately 11,700 companies under current regulations, compared to 50,000.
- For sustainability issues (i.e. environmental, social, human rights, governance and sustainability factors), management reports should: (i) describe the main actual or potential impacts related to the company’s own operations; and (ii) implementation and results must be disclosed. A due diligence process for a company’s value chain, including products, services, business relationships and supply chains.
- The management report should explain the role of the management board and oversight board on sustainability issues. Expertise and skills on sustainability issues in the performance of the role should be outlined.
- In addition, management reports should be forward-looking, setting time-bound sustainability goals and reporting on progress toward those goals. Environmental targets should be substantiated with a statement confirming whether the target is based on conclusive scientific evidence.
- Dual materiality reporting obligations have been further clarified. Management reports should therefore provide information both on the impact of a company’s activities on sustainability issues and on the sustainability issues that affect the company.
- Companies should seek a “limited” assurance opinion from their statutory auditors on sustainability information reported in management reports. Such opinions should gradually transition to reasonable assurance opinions, the latter being the more demanding assurance process. The European Commission envisages implementing the standard for such a reasonable assurance opinion by October 2028.
- The CSRD requires member states to safeguard the quality of assurance in their sustainability reporting and is subject to investigations and sanctions.
- The CSRD requires that corporate sustainability reports are drafted according to detailed and comprehensive sector-specific reporting standards (the so-called European Sustainability Reporting Standards) and published in digital format. This allows for a better overview and comparison of reported sustainability. Business to Business Information.
- Covered companies must publish management reports on their website free of charge.
- Reporting requirements will be phased in between 2024 and 2028, allowing small businesses to adapt to the new rules until 2028. The CSRD is likely to be adopted by the European Union Council by the end of November, with the first set of reporting standards he expected to be adopted by the European Commission in June 2023.
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