On November 28, 2022, the European Council approved the corporate sustainability reporting directive (CSRD). The CSRD strengthens the existing sustainability reporting requirements under the EU legislation and broadens their scope of application. It does so by modifying directives and regulations containing the current sustainability reporting rules, including the Non-Financial Reporting Directive (“NFRD”).
Under the CSRD a company must report the company’s impact, as well as how its development, performance and position is affected by sustainability matters. Such information shall be included in a dedicated section of the management report.
The CSRD requires an increasing number of companies to report sustainability information. While the NFRD reporting requirements are currently mandatory for large public-interest companies with more than 500 employees, the CSRD enlarges the list of entities subject to those requirements to:
- companies with more than 250 employees and a turnover of 40 million euros (so called large companies);
- all companies listed on regulated markets, including SMEs and with the sole exception of microenterprises; and
- non-EU companies generating a net turnover of 150 million euro in the EU and which have at least one subsidiary or branch in the EU exceeding certain thresholds.
In light of the above, the CSRD is expected to impact nearly 50,000 companies in the EU, compared to the approximately 11,000 companies already covered by the NFRD.
The new requirements will not be immediately mandatory, as the CSRD provides that the new sustainability reporting requirements will be implemented in a four-stage process here below summarized:
| Starting date | Financial Year | Entities subject to reporting requirements |
| January 1, 2025 | Financial years starting on or after 2024 | Companies already subject to the NFRD |
| January 1, 2026 | Financial years starting on or after 2025 | Large companies that are not currently subject to the NFRD |
| January 1, 2027 | Financial years starting on or after 2026 | Listed SMEs (with the sole exception of micro undertakings) and the remaining European companies that fall under the CSRD application |
| January 1, 2029 | Financial years starting on or after 2028 | Non-EU companies that fall under the CSRD application |
The European Commission, with the technical support of the European Financial Reporting Advisory Group (EFRAG), will adopt sustainability reporting standards.
The CSRD still needs to be signed and published in the Official Journal of the European Union and will enter into force 20 days afterwards. After that, each Member State will need to implement the CSRD into local law within 18 months.
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