CSRD reporting deadlines, coming into focus
October 2, 2024
By way of background, on November 10, 2022, the EU Parliament adopted the Corporate Sustainability Reporting Directive (“CSRD”), which is now being integrated into national law by EU member states. The CSRD creates new, detailed sustainability reporting requirements and will significantly expand the number of EU and non-EU companies subject to the EU sustainability reporting framework.
The required disclosures go beyond environmental and climate change reporting to include social and governance matters (for example, respect for employee and human rights, anti-corruption and bribery, corporate governance and diversity and inclusion). In addition, CSRD requires disclosure regarding the due diligence processes implemented by a company in relation to sustainability matters and the actual and potential adverse sustainability impacts of an in-scope company’s operations and value chain. Below is a reminder on the key reporting deadlines based on the type of reporting entity:
Starting on 1 January 2024
Large public-interest entities (i.e., companies) with over 500 employees that are already subject to the Non-Financial Reporting Directive (NFDR) must begin reporting for the 2024 fiscal year, with the report to be published in 2025.
Starting on 1 January 2025
From this phase on, the first set of companies that weren’t previously subject to the NFDR will need to comply with the CSRD requirements. This applies to large companies that meet at least two out of three specified requirements:
More than 250 employees; and/or
€50 million in turnover; and/or
€25 million total assets.
These reports must cover the 2024 fiscal year, to be published in 2026.
Starting on 1 January 2026
From this date, the CSRD will also apply to small and medium-sized enterprises (SMEs) listed on EU-regulated markets that exceed at least two of these thresholds :
more than 10 employees; and/or
more than €900,000 in net turnover; and/or
more than €450,000 in total assets.
SMEs and other small and non-complex institutions must implement the CSRD and align to the ESRS from the 2026 financial year 2026. However, they will have the option to opt out of the reporting rules until 1 January 2028.
Starting on 1 January 2028
From this date, CSRD will be applied to non-EU-country companies that meet the following requirements:
a net turnover exceeding €150 million in the EU; and
at least one subsidiary or branch in the EU.
The implementation of the CSRD represents a significant shift in how companies are expected to approach and communicate their sustainability practices. Companies will need to invest in robust data collection and management processes to ensure they meet the detailed reporting requirements. This may involve upgrading existing systems, training staff, and potentially hiring new expertise focused on sustainability. Additionally, companies will need to engage their entire supply chain to gather comprehensive data on sustainability impacts, which could lead to challenges in transparency and accountability.
Moreover, the increased reporting obligations may lead to heightened scrutiny from investors, consumers, and regulatory bodies, demanding greater transparency and adherence to sustainable business practices. This shift presents an opportunity for companies to enhance their reputation and demonstrate leadership in sustainability, potentially gaining a competitive advantage in markets increasingly driven by environmental and social considerations. However, companies must also prepare for the possibility of facing reputational risks if they fall short of the new standards, emphasizing the need for a strategic, proactive approach to compliance with the CSRD.
CPM
