The EU has established new rules on corporate sustainability reporting Shutterstock

The EU has established new rules on corporate sustainability reporting

Olena Yatseno

Thanks to this, Europe is at the forefront of the international race for standards

The Council and Parliament of the European Union have reached an interim political agreement on the Corporate Sustainability Reporting Directive (CSRD).

Press service Euro Council reported about it on Tuesday, June 21.

The agreement aims to eliminate shortcomings in the current rules for the disclosure of non-financial information that was of insufficient quality for its investors to take due account of it. It is noted that such shortcomings hinder the transition to a sustainable economy.

This agreement is great news for all European consumers. They will now be better informed about the impact of business on human rights and the environment. It means more transparency for citizens, consumers and investors. It also means greater readability and simplicity of information provided by companies. Greening is over. Thanks to this text, Europe is at the forefront of the international race for standards, setting high standards in line with our environmental and social ambitions, "said Minister of Economy, Finance and Industrial and Digital Sovereignty Bruno Le Mer.

What new rules

The Corporate Reporting Directive amends the 2014 Non-Financial Reporting Directive. It introduces more detailed reporting requirements and ensures that large companies are required to report on sustainability issues such as environmental rights, social rights, human rights and governance.

CSRD is also introducing a certification requirement for sustainable development reporting, as well as improving the availability of information by requiring its publication in a special section of the company's management reports.

The European Financial Reporting Advisory Group (EFRAG) will be responsible for setting European standards on the technical advice of a number of European agencies.

To whom will this directive apply

EU rules on non-financial information apply to large public interest companies with more than 500 employees, as well as to all large companies and all companies listed on regulated markets. These companies are also responsible for evaluating information at the level of their subsidiaries.

The rules also apply to SMEs, taking into account their specific characteristics. During the transition period, small and medium-sized enterprises will be able to opt out, which means that they will be exempt from the directive until 2028.

For non-European companies, the sustainability report applies to all companies with a net turnover of € 150 million in the EU and having at least one subsidiary or subsidiary in the EU. These companies must report on their impact on the ESG, namely environmental, social and management impacts, as defined in this Directive.

Who ensures the quality of reporting

Reporting must be certified by an accredited independent auditor or certifier. To ensure that companies comply with the reporting rules, the independent auditor or certifier must ensure that the sustainability information complies with EU-approved certification standards. The reporting of non-European companies must also be certified by either a European auditor or an auditor registered in a third country.

From what date the rules apply

The application of the regulations will take place in three stages:

January 1, 2024 - for companies that are already covered by the Non-Financial Reporting Directive;
January 1, 2025 - for companies that are not currently covered by the Directive on non-financial reporting;
January 1, 2026 - for small and medium-sized listed companies, small and non-complex credit institutions and insurance companies.

It should be added that the interim agreement must be approved by the European Council and Parliament.

The Directive will enter into force 20 days after its publication in the Official Journal of the European Union.

Before EcoPolitics reported that the number of companies that appoint chief sustainability officers (CSOs) , in 2021 has tripled compared to the same period last year, although less than a third of them hold leadership positions.

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Krivoruchkina turned to colleagues from the European Parliament to get their application practice and rule-making experience