The EU’s Corporate Sustainability Reporting Directive (CSRD) is a massive piece of disclosure legislation that sustainability professionals are struggling to wrap their heads around. Even as we work to understand and comply with the current European Sustainability Reporting Standards (ESRS), more complexity is on the way as phased-in implementation of CSRD ratchets up. One of the biggest challenges will be reporting for in-scope non-EU companies required to report on sustainability issues at their global enterprise level. While the final ESRS for Non-EU Groups (NESRS) will not be published by EFRAG until June 2026, EFRAG recently published exposure drafts, giving more details on what to expect. The NESRS are broken up into two documents NESRS 1: General Requirements and NESRS 2: General Disclosures. Ropes & Gray discusses the drafts in a recent memo stating:
“The working paper cross-cutting NESRS largely track ESRS 1 and ESRS 2. The differences primarily are to take into account the reporting requirements specific to non-EU parent groups contemplated by article 40a. Under article 40a, parent group-level reporting would cover impact but not financial materiality (i.e., not risk and opportunity). As a result, resilience, opportunities, principal risks and dependencies, which are related to financial materiality, have been excluded from the NESRS. Otherwise, the NESRS are structured in the same manner as the ESRS. A materiality assessment for impact would still be required under NESRS 1.”
It won’t just be non-European reporting adding complexity to the CSRD, EFRAG is also set to publish new sector-specific ESRS that will introduce new reporting requirements for certain sectors. The first round of CSRD reports are due to the EU authorities by January 1, once those are publicly available more best practices are expected to emerge. We’ll also see which areas draw enforcement scrutiny and how much leeway EU market authorities are willing to grant during the CSRD’s phase-in period.
Our members can learn more about the CSRD here.
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