knowledge 29 November 2022 |

Council of the EU adopts the Corporate Sustainability Reporting Directive (Updated 16 December 2022)

On 28 November 2022, the Council of the EU (the “Council”) announced its adoption of the corporate sustainability reporting directive (the “CSRD”) (here).

Background

The CSRD will amend the Non-Financial Reporting Directive1 (the “NFRD”) to introduce more detailed reporting requirements in respect of sustainability issues such as environmental rights, social rights, human rights and governance factors. The CSRD will oblige in scope companies to disclose information on their societal and environmental impact connected with their own operations and with their value chain.

Our earlier briefing (here) provides detail on the key aspects of the CSRD which companies should be aware of. In addition, our briefing (here) covers the European Sustainability Reporting Standards (the “ESRS”) which will underpin the CSRD and which were recently delivered to the European Commission for consideration.

Application of the CSRD

The CSRD will apply on a phased basis:

  • reporting in 2025 on the financial year 2024 for companies already subject to the NFRD;
  • reporting in 2026 on the financial year 2025 for companies that are not currently subject to the NFRD;
  • reporting in 2027 on the financial year 2026 for listed SMEs except micro undertakings, small and non-complex credit institutions and captive insurance undertakings. An opt-out will be possible for in scope SMEs for the first two years; and
  • reporting in 2029 on the financial year 2028 for in scope third-country undertakings.

Comment and Next Steps

The Council’s approval of the CSRD represents the final hurdle in the European legislative process. The adoption of the CSRD represents a significant milestone in European sustainability reporting and in scope companies should begin preparations for compliance as soon as possible.

Update 16 December 2022: The CSRD was published in the Official Journal of the European Union on 16 December 2022 (here). The CSRD will enter into force 20 days after publication. Member States will be required to transpose the CSRD by 6 July 2024.

  1. Directive 2014/95/EU

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.