Last year, the European Commission voted for a European due diligence law. This law requires companies to investigate their production chain and correct abuses.
The law, The Corporate Sustainability Reporting Directive (CSRD) requires all large companies to publish regular reports on their environmental and social impact activities, and it helps investors, consumers, policymakers, and other stakeholders evaluate large companies’ non-financial performance.
With the exception of micro-entities, the CSRD proposals significantly expand the scope of the existing Non-Financial Reporting Directive (NFSD) rules to cover all large undertakings as well as all those listed on EU regulated markets.
Companies that CSRD is mandatory for include:
- all EU limited liability companies with 500 or more employees and €150 million or more in worldwide net turnover.
- limited liability companies operating in defined high-impact sectors, including mining and extractives, agriculture and textiles, that have more than 250 employees and a net turnover of €40 million or more worldwide.
- listed companies (Small and medium listed companies get an extra 3 years to comply)
We recommend all small and medium companies to do their due diligence.
Here is a brief overview of the key changes and impacts from the CSRD:
When will it be applicable?
2022 – Adoption EU-Directive in member states legislation
2023 – First set of Sustainability Reporting Standards (drafts standards available mid-2022)
2024 – Second set of Sustainability Reporting Standards
Which companies will be applicable?
All large companies meeting at least 2 out 3 criteria:
- >250 employees and/or
- >€40M Turnover and/or
- >€20M Total Assets
- Listed companies
How many companies are subject to the new directive (EU)?
Covering >75% of total EU companies’ turnover
What is the scope of the reporting requirements?
Companies should report on (adding additional information from current EU Directive):
- Double materiality concept
- Process to select material topics for stakeholders
- More forward thinking information e.g. targets
- Disclose information relating to intangibles
- Reporting in line with Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation
Is independent 3rd party assurance mandatory?
Mandatory – limited level of assurance
- Integration in Auditor’s Report
- Involvement of key audit partner
- Scope to include EU Taxonomy and process to identify key relevant information
Where should companies report?
Inclusion in the Management Report
What format should companies report?
To be submitted in electronic format
(in XHTML format in accordance with ESEF Regulation)
Do you need help with your sustainability reporting? As part of our services, we assist brands in consistently communicating their message based on facts and data. For more information, check out our service’s page or get in contact with us today!