03 February 2023

CSRD DIRECTIVE: HERE ARE THE KEY POINTS

On 16 December last year, the long-awaited 2022/2464 Directive, well known as ‘CSRD Directive‘, concerning corporate sustainability reporting was published in the Official Journal of the European Union. The new regulation amends Regulation (EU) No 537/2014, 2004/109/EC Directive , 2006/43/EC Directive and 2013/34/EU Directive and introduces the principle of double materiality whereby information must be reported on the basis of two criteria:

Financial materiality, i.e. relevance on a financial level;
Impact materiality, i.e. relevance in terms of impact on people or the environment.

The aim is to strengthen the existing rules introduced by 2014/95/EU (NFRD) Directive , to identify a common framework, thus standardising the standards currently used by companies for reporting and to increase transparency, thus counteracting practices such as greenwashing.

What specifically are the innovations introduced by the legislator? Let’s find out together.

EXTENSION OF THE SCOPE OF APPLICATION

The number of companies obliged to respond to the obligation to disclose information on environmental impact, social rights, human rights and governance factors increases more than fourfold, from around 11,700 to almost 50,000.

Indeed, the criteria for defining the scope have been modified as follows:

Large enterprises that exceed two out of three requirements between: balance sheet total 20,000,000 euro, net revenue from sales and services 40,000,000, number of employees 250;
Listed companies, including SMEs;
Non-EU companies with net revenues from sales and services exceeding EUR 150 million in the EU and having a ‘daughter’ company or branch in the EU.

REPORTED INFORMATION AND COMPLIANCE

Sustainability reporting must comply with the European Sustainability Reporting Standards (ESRS) and be certified by a third party such as the statutory auditor or an accredited certification body. As confirmed by EFRAG, the body responsible for the ESRS, they are and will be, as far as possible, aligned with the GRI standards.

Furthermore, the disclosure shall be included within the management report and published together with it on the certificate of compliance.

APPLICATION DATES OF THE CSRD DIRECTIVE

Companies that currently prepare the non-financial statement under the NFRD, with reference to the financial year 2024, will have to publish the first report in 2025
Other large companies, referring to the financial year 2025, will have to publish their first report in 2026
Listed SMEs* and non-EU companies listed on EU markets (possible derogation – opt out until 2028), referring to the financial year 2026, will have to publish their first report in 2027
Non-EU companies, with reference to the financial year 2028, will have to publish their first report in 2029

The CSRD entered into force on the 20th day following its publication in the Official Journal of the European Union and must be transposed by the states by 06 July 2024.