CSRD was adopted - New sustainability reporting obligations in the EU start

Redefined approach of sustainability reporting - more standardised reporting requirements

With the CSRD, the existing sustainability matters of ESG (environmental, social and governance) reporting will be expanded and standardised. 

A major contributing factor is the clarification of the principle of double materiality. This requires that the companies report information necessary to understand: 

• the impact the company has on sustainability matters (an “inside-out” perspective)
• how sustainability matters affect a company’s business development, performance, and position (an “outside-in” perspective)

Through the CSRD, mandatory European Sustainability Reporting Standards (ESRS) are introduced, based on the European Financial Reporting Advisory Group’s (EFRAG) recommendations. EFRAG agreed on 15 November, 2022, on the first set of 12 draft ESRS submitted to the European Commission and to be adopted by Delegated Acts (planned to be in June 2023). The submitted drafts provide a comprehensive coverage of ESG matters and a solid basis for the sustainability reporting and the double materiality notion. For their future applicability, their interoperability with the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) is essential.

The revised standards further contribute to:

• Alignment with existing sustainability frameworks, standards, and regulations in the EU (including final version of CSRD, International Sustainability Standards Board (ISSB) and Global Reporting Initiative (GRI));
• Harmonisation of the terminology used and structure of the sustainability reporting;
• Reduction of the disclosure requirements and data points from the original drafts by 40%;
• Clarification of the concept of double materiality and the approach to materiality including those items that must be reported irrespective of materiality.

CSRD Timeline including ESRS adoption

The CSRD will be applicable at 4 different dates depending on the undertaking status:

• FY 2024: Large EU PIE entities (already under NFRD).
• FY 2025:  All large undertakings, as well as all parent undertakings of a large group, as described above.
• FY 2026: Listed SMEs (with an opt out option until FY 2028).
• FY 2028 : All non EU undertakings as described above.

Assurance obligation

The CSRD includes a mandatory external assurance obligation for the reported sustainability information and the requirements begin with limited assurance and expand to reasonable assurance at a later date.The statutory auditor of the financial statements will be allowed to perform these assurance engagements.