The EU Approves New Requirements for Corporate Sustainability Reporting

In 2022, the European Commission developed the Corporate Sustainability Reporting Directive (CSRD), which entered into force on January 5, 2023 for EU member states. The directive replaced the existing Non-Financial Reporting Directive - with updated edition and requirements. The preparation of corporate sustainability reports for entities using the relevant standard will become mandatory for the 2024 reporting period and will be submitted to local authorities from 2025. 

The new requirements will affect up to 50,000 entities across the EU. Under the CSRD, entities will be required to provide new sustainability disclosures if they: (1) are “large” EU entities and PIEs (including banks, insurance companies, accountable entities whose securities are admitted to trading on the stock exchange and entities defined as PIEs by local authorities) (2) are small and medium-sized entities (SMEs) listed on an EU regulated market (except micro-entities); or (3) are non-EU entities with an EU branch or subsidiary.

Companies subject to the CSRD will have to disclose information on how environmental and social issues affect the risks and challenges they face. In addition, they also have to disclose information on the impact their business model has on people and the environment.

The new regulatory framework will help investors, civil society, consumers, and other stakeholders to assess the company's sustainable development potential and current performance within the frames of EU legislative initiatives aimed at strengthening the green economy.