The Corporate Sustainability Reporting Directive (CSRD) is a new directive that aims to improve the quality and comparability of corporate sustainability reporting in the European Union.
The CSRD was adopted by the European Parliament and the Council of the European Union in April 2021, and it is expected to enter into force in 2023.
The new directive builds on the existing Non-Financial Reporting Directive (NFRD), which was adopted in 2014. The NFRD requires large companies and listed SMEs to report on their environmental, social, and governance (ESG) performance.
However, the NFRD has been criticized for being too weak and for not providing enough detail on what companies should report.
This new directive aims to address these shortcomings by strengthening the requirements for corporate sustainability reporting.
The CSRD will require companies to report on a wider range of ESG issues, and it will provide more detailed guidance on how to report on these issues.
The CSRD will also introduce new requirements for the independent assurance of corporate sustainability reports.
It is expected to have a significant impact on corporate sustainability reporting in the European Union. The new requirements will make it more difficult for companies to greenwash their reports, and they will provide investors and other stakeholders with more information about the ESG performance of companies.
It is also expected to help to drive the transition to a more sustainable economy.
What are the key requirements of the Corporate Sustainability Reporting Directive?
The CSRD sets out a number of key requirements for corporate sustainability reporting. These requirements include:
- A wider range of ESG issues: It companies to report on a wider range of ESG issues than the NFRD. These issues include climate change, human rights, and supply chain management.
- More detailed guidance: It provides more detailed guidance on how to report on ESG issues. This guidance includes a taxonomy of ESG terms and a set of indicators that companies can use to measure their ESG performance.
- Independent assurance: It introduces new requirements for the independent assurance of corporate sustainability reports. This means that companies will need to have their reports audited by an independent third party.
What are the benefits of the CSRD?
The CSRD is expected to have a number of benefits, including:
- Improved quality and comparability of corporate sustainability reporting: The stronger requirements and more detailed guidance are expected to improve the quality and comparability of corporate sustainability reporting. This will make it easier for investors and other stakeholders to understand the ESG performance of companies.
- Increased transparency: The requirements for independent assurance are expected to increase transparency in corporate sustainability reporting. This will help to reduce greenwashing and make it more difficult for companies to hide their ESG risks.
- Drive the transition to a more sustainable economy: It is expected to help to drive the transition to a more sustainable economy. By requiring companies to report on their ESG performance, the CSRD will put pressure on companies to improve their ESG performance. This will help to create a more sustainable business environment.
The CSRD is a significant new directive that is expected to have a major impact on corporate sustainability reporting in the European Union. The CSRD’s stronger requirements and more detailed guidance are expected to improve the quality and comparability of corporate sustainability reporting.
The requirements for independent assurance are expected to increase transparency in corporate sustainability reporting. And the CSRD is expected to help to drive the transition to a more sustainable economy.
The CSRD can be a positive step towards a more sustainable future. However, it is important to note that the CSRD is only one part of the puzzle. Other measures, such as government regulation and consumer pressure, will also be needed to create a truly sustainable economy.
