In January 2023, the European Union adopted the Corporate Sustainability Reporting Directive (CSRD), which requires EU and non-EU companies with activities in the EU to file annual sustainability reports alongside their financial statements.
From January 2024, large public interest companies (e.g. those with over 500 employees) that were already subject to the Non-Financial Reporting Directive (NFRD) must transition to CSRD, with first reports due in 2025.
Following recent legislative updates, large companies with more than 250 employees and/or more than €40 million in net turnover and/or more than €20 million in total assets must now comply from January 2027, with reports due in 2028. Listed SMEs will need to comply from 2028, with reports due in 2029 (although there is an option to opt out until 2029 for certain industries). Finally, from 2028 onwards, all non-EU parent companies with significant EU operations must comply with the directive.
These reports must be prepared in accordance with European Sustainability Reporting Standards (ESRS). Companies will need to report in compliance with new ESRS as early as the 2024 reporting period. The standards are notable for their breadth and granularity, going well beyond the reporting requirements in other mandatory and voluntary ESG reporting frameworks.
Under the CSRD rules, reporting entities will be required to report qualitative and quantitative information related to areas including their sustainability policies, goals and performance, greenhouse gas emissions, anti-corruption and bribery, diversity of company boards, human rights issues and double materiality.
Companies must conduct a double materiality assessment to determine which ESG topics of financial or impact significance require disclosure.
While this will require additional time and resource, the benefits of complying with CSRD include:
From January 2024, large public interest companies (e.g. those with over 500 employees) that are already subject to the Non-financial Reporting Directive (NFRD) must transition to CSRD, with first reports due in 2025. Large companies with more than 250 employees and/or more than €40 million in net turnover and/or more than €20 million in total assets must comply from January 2025 with report due in 2026. Listed SMEs will need to comply from 2026 with reports due in 2027 (although there is an option to opt-out until 2028 for certain industries. Finally, from 2028 onwards, all non-EU parent companies need to comply with the directive.
In January 2023, the European Union adopted the Corporate Sustainability Reporting Directive (CSRD), which requires EU and non-EU companies with activities in the EU to file annual sustainability reports alongside their financial statements.
Yes, the CSRD does apply in the UK, even though the UK has left the European Union. The CSRD applies to companies that may have subsidaries in the EU or have significant turnover in the EU.
From January 2024, large public interest companies (e.g. those with over 500 employees) that are already subject to the Non-financial Reporting Directive (NFRD) must transition to CSRD, with first reports due in 2025. Large companies with more than 250 employees and/or more than €40 million in net turnover and/or more than €20 million in total assets must comply from January 2025 with report due in 2026. Listed SMEs will need to comply from 2026 with reports due in 2027 (although there is an option to opt-out until 2028 for certain industries. Finally, from 2028 onwards, all non-EU parent companies need to comply with the directive.
Small and medium sized businesses who employ less than 250 people or have a turnover less than £44 million are exempt from CSRD.