All large companies in the EU will need to disclose data on the impact of their activities on people and the planet and any sustainability risks they are exposed to.

With 525 votes in favour out of 613, the Corporate Sustainability Reporting Directive (CSRD) adoption will make businesses more publicly accountable. This will force companies to regularly disclose information on their societal and environmental impact, leading to the end of greenwashing, bolster the EU’s social market economy and set the foundation for worldwide sustainability reporting standards.

New EU sustainability standards

These regulations will tackle the gaps in existing legislation on the disclosure of non-financial information (NFRD), perceived as largely insufficient and unreliable. Based on common criteria in line with EU’s climate goals, the CSRD introduces more detailed reporting requirements on companies’ effects on the environment, human rights and social standards. By Q2 of 2023, the Commission will have adopted the first set of standards.

To ensure reliability of information, companies will be subject to independent auditing and certification. Both Financial and sustainability reporting have equal weighting and investors knowing they have comparable and reliable data. Online access to data is also guaranteed.

Extending the scope

All large companies will adopt the new EU sustainability reporting requirements listed on stock markets or not. Non-EU companies with substantial activity in the EU (with a turnover over €150 million euro in the EU) will also have to comply. Listed SMEs will also be covered, however, they will have more time to adapt

As of now, about 11 700 companies are covered by the current rules, this will rise fivefold to nearly 50 000 companies in the EU as collecting and sharing sustainability information will become the norm.

Quote

Rapporteur Pascal Durand (Renew, FR) said: "Europe is showing the world that it is indeed possible to ensure finance, in the narrow sense of the word, does not govern the entire global economy."

Next steps

On the 28 November, the Council is expected to adopt the proposal, after which it will be signed and published in the EU Official Journal. The directive will enter into force 20 days after publication. The rules will start applying from 2024 to 2028:

• From 1 January 2024 for large public-interest companies (with over 500 employees) already subject to the non-financial reporting directive, with reports due in 2025;
• From 1 January 2025 for large companies that are not presently subject to the non-financial reporting directive (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets), with reports due in 2026;
• From 1 January 2026 for listed SMEs and other undertakings, with reports due in 2027. SMEs can opt-out until 2028.

Source: European Parliament