The objective of the CSRD is to improve sustainability reporting to better exploit the potential of the European single market and to contribute to the transition to a fully sustainable and inclusive economic and financial system in line with the European Green Deal and the UN Sustainable Development Goals.  

The CSRD brings in more extensive mandatory sustainability reporting for a wide range of companies and requires assurance on this information.

The Regulations include the following:

• Extended scope of the CSRD requirements to all large public-interest undertakings as defined by the Accounting Directive and all large undertakings and undertakings that are listed on regulated markets in the EU (including all listed SMEs, but not micro entities). Certain third-country (non-EU) undertakings “generating a net turnover of EUR 150 million in the EU and which have at least one subsidiary or branch in the EU” should also provide sustainability information (see below).
• Updated and new reporting requirements on sustainability matters (such as environmental rights, social rights, human rights, work ethics and governance factors) and the process used to identify this information, using sustainability reporting standards developed by the European Financial Reporting Advisory Group (EFRAG).
• Audit and certification requirement for sustainability reporting to be provided by an accredited independent auditor (either the statutory auditor or another statutory auditor) or a certifier, and assurance to be obtained also on reporting by non-EU companies.
• Requirement to report as from
• 1 January 2024 for companies already subject to the EU non-financial reporting directive;
• 1 January 2025 for companies that are not presently subject to the EU non-financial reporting directive but fall within the CSRD’s enlarged scope;
• 1 January 2026 for EU listed SMEs, EU small and non-complex credit institutions and captive insurance undertakings, and if opt-out as from 1 January 2028 for SMEs
• 1 January 2028 for non-EU companies
• Once ready and translated, EU Member States will have 18 months to transpose the CSRD into their national rules.

For non-EU companies listed on EU regulated markets, it is expected that the requirements will be effective from 1 January 2025 (i.e. with periods ending 31 December 2025).

For other non-EU companies (referred to as third country undertakings in the Regulations), the requirement to provide a sustainability report applies from 1 January 2028 to all third country undertakings generating a net turnover of more than €150 million in the EU and which have at least one large or listed EU subsidiary or a EU branch generating a net turnover of more than €40 million.

It will be the EU subsidiary or EU branch of the non-EU undertaking that is responsible for publishing the sustainability report of the third country undertaking. The specific information required to be in these sustainability reports has not been finalised. The Regulation says it should be prepared in accordance to “standards to be adopted by 30 June 2024 by the EC”. There will also be the option to report in accordance with the EFRAG sustainability standards or standards which are deemed equivalent. What may be deemed ‘equivalent’ is yet to be determined by the Commission. 

For additional information, please see the press releases published by the two bodies on their websites.  The text of the CSRD is included below and within the European Council updated press release below:

• European Parliament
• European Council
• Text for the CSRD