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TheCorporateCounsel

TheCorporateCounsel.net

A basis for research and practical guidance focusing on federal securities laws, compliance & corporate governance.

DealLawyers

DealLawyers.com

An educational service that provides practical guidance on legal issues involving public and private mergers & acquisitions, joint ventures, private equity – and much more.

CompensationStandards

CompensationStandards.com

The “one stop” resource for information about responsible executive compensation practices & disclosure.

Section16.net

Section16.net

Widely recognized as the premier online research platform providing practical guidance on issues involving Section 16 of the Securities Exchange Act of 1934 and all of its related rules.

PracticalESG

PracticalESG.com

Keeping you in-the-know on environmental, social and governance developments

Companies in the EU are preparing for the first round of reporting under the CSRD. Starting in 2025, companies that were previously subject to the NFRD must report under the new legislation. Companies are currently figuring out what data to collect and how, as 2025 reporting will be based on 2024 data. Responsible Investor recently reported on the mounting confusion as EU companies struggle to wrap their heads around the new reporting requirements. The article states:

“Ultimately, this is a complete rethink in corporate reporting, and there is a lot at stake. The Corporate Sustainability Reporting Directive (CRSD) is the biggest push for mandatory wide-ranging sustainability disclosures seen to date, with more than 50,000 companies to be covered. Investors are hoping it will generate a treasure trove of new, comparable double materiality data.”

RI reports that the CSRD could require companies to report on as many as 1,144 data points depending on the results of that company’s double materiality assessment. Materiality assessments as the threshold for reporting are relatively new. This was the result of a last-minute lobbying push that removed mandatory reporting regardless of materiality from the law limiting companies to only reporting on issues deemed “material” by their assessments. The trouble is, no one knows what the threshold for materiality is. For now, it would appear that companies can set their own thresholds as long as they explain their reasoning and provide ample data to support their conclusions. So while companies may not have to report on every one of the 1,144 data points, at a minimum, they will have to consider the materiality of those data points and report on their conclusions.

CSRD reporting is complex and extensive. The first several years of reporting are expected to yield less than stellar results as companies struggle to establish best practices. Hopefully, a mix of experience and additional EU guidance will stabilize the reporting landscape in time.

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The Editor

Zachary Barlow is a licensed attorney. He earned his JD from the University of Mississippi and has a bachelor’s in Public Policy Leadership. He practiced law at a mid-size firm and handled a wide variety of cases. During this time he assisted in overseeing compliance of a public entity and litigated contract disputes, gaining experience both in and outside of the courtroom. Zachary currently assists the PracticalESG.com editorial team by providing research and creating content on a spectrum of ESG… View Profile