Throughout the EU, law requires certain large companies to disclose information on the way they operate and manage social and environmental challenges. This allows investors, consumers, policy makers and other stakeholders to evaluate the non-financial performance of these companies and encourage them to develop a responsible business approach. 

Last week, as part of these reporting laws, the EU introduced a new Corporate Sustainability Reporting Directive (CSRD) which will come into effect from 2025. The CSRD will replace the previous Nonfinancial Reporting Directive (NFRD) but will now apply to around four times as many companies than before. 

So, what exactly is the CSRD? And how will this affect ESG reporting for large EU companies?

Sustainable reporting

The CSRD brings sustainability reporting to the same level as financial reporting for the first time ever, which is fundamental to supporting the EU Green Deal’s ambitions and transforming Europe into the first climate neutral economy by 2050. 

Approximately 50,000 companies – compared to only 12,000 which had to adhere to the NFRD – will now have to disclose sustainability information in their management report and file it in a digital, machine-readable format. Whereas before, companies were able to publish an ESG report and choose what went into it, they will now have to comply with a mandatory list of factors. 

The reports will need to contain “all information necessary for an understanding of the company’s business performance, results, position and the impact of its activities.” This includes things such as environmental protection, social responsibility and treatment of employees, anti-corruption and diversity. 

The reporting obligations state that companies must start collecting the relevant data in the previous year to when they first make the information public. This means that those that have previously had to adhere to the NFRD will have to collect data from 2024, and other large businesses that are now included from 2025.

Who does the CSRD apply to?

The new reporting laws will apply to three types of company. One of these is large businesses that exceed two of these three size criteria: more than 250 employees on an annual average basis, a balance sheet in excess of €20 million or annual revenues of more than €40 million. 

Secondly, for financial years starting on or after 1 January 2024, it will apply to companies that are already subject to the NFRD. Thirdly, from 2028, non-EU companies with an annual EU-wide revenue of more than €150 million will be required to report. 

Now that the CSRD has been implemented, there is a lot for those 50,000 companies to familiarise with and it’s recommended that preparation and data collection work begins now. 

Of course, reporting is only one element of the puzzle, but the CSRD is a great step in the journey to reaching the EU Green Deal and ensuring a true and just transition toward a sustainable economy.

If you’d like help and advice from a Birmingham PR agency with communicating your business’ ESG credentials, don’t hesitate to get in touch!