Last week the EU Parliament announced the adoption of the Corporate Sustainability Reporting Directive (CSRD). The European Commission (EC) will adopt the first set of standards by June 2023.
According to the press release:
“To ensure companies are providing reliable information, they will be subject to independent auditing and certification. Financial and sustainability reporting will be on an equal footing and investors will have comparable and reliable data. Digital access to sustainability information will also have to be guaranteed…
The new EU sustainability reporting requirements will apply to all large companies, whether listed on stock markets or not. Non-EU companies with substantial activity in the EU (with a turnover over €150 million euro in the EU) will also have to comply. Listed SMEs [small- to medium-sized enterprises] will also be covered, but they will have more time to adapt to the new rules…
The Council is expected to adopt the proposal on 28 November, after which it will be signed and published in the EU Official Journal. The directive will enter into force 20 days after publication. The rules will start applying between 2024 and 2028:
– From 1 January 2024 for large public-interest companies (with over 500 employees) already subject to the non-financial reporting directive, with reports due in 2025;
– From 1 January 2025 for large companies that are not presently subject to the non-financial reporting directive (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets), with reports due in 2026;
– From 1 January 2026 for listed SMEs and other undertakings, with reports due in 2027. SMEs can opt-out until 2028.”
It is critical to note that non-EU companies with substantial activity in the EU (with a turnover over €150 million euro in the EU) will also have to comply. Among other things, this means that US companies that meet this threshold will have to report on their sustainability efforts regardless of what happens in the US political and regulatory environments. Just last week, we held a webcast on “ESG Legal Developments in the EU and Member States” where the panel talked about CSRD and a wide range of other EU-centric issues that US companies need to know about. PracticalESG.com members can access the webcast archive here.
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