Overview of the legal framework of the Green Deal

Directive on Sustainability Reporting

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Directive on Sustainability Reporting

The Corporate Sustainability Reporting Directive (CSRD) specifies uniform mandatory European reporting standards (ESRS). Affected companies must disclose sustainability-related risks and opportunities in accordance with the principle of double materiality. This means that information must be presented that is material either for business success or from an environmental or social perspective. Both the internal and external perspectives must be taken into account in reporting.
In the outside-in perspective, companies report on the impact of sustainability issues on their own performance, position and development.
The inside-out perspective must transparently present the effects of the company's own business activities on people and the environment.

Objectives:

Increasing transparency Comparability of sustainable activities

The reporting obligation applies to two groups of companies: All companies listed on a European stock exchange (all SMEs except micro-enterprises) and all companies that fulfil at least two of the following criteria:


Net sales of 50 million euros

Balance sheet total of 25 million euros

More than 250 employees on average in the financial year
It also applies to all companies listed on regulated markets (with the exception of listed micro-enterprises) as well as large credit institutions and insurance companies of any legal form.

The disclosure obligation includes information on the following sustainability aspects:
  • General disclosure requirements (e.g. integration of sustainability into the business model, corporate strategy and governance mechanisms)
  • Thematic disclosure requirements based on the material topics and the resulting ESG criteria (environment, social and governance). The associated risks are wide-ranging in terms of content:
    • Environmental risks (e.g. CO2 emissions, energy and water consumption, environmental hazards, biodiversity, circular economy, climate change,…)
    • Social risks (e.g. social commitment, human rights, employee and customer relations)
    • Risks from corporate management/governance (e.g. ethical issues of corporate management, issues of strategy and risk management as well as inclusion, anti-discrimination, anti-corruption and transparency)
    To ensure CSRD compliance, sustainability reporting must be audited by an accredited independent auditing or certification body. For non-European companies, this auditing or certification body can be located either in Europe or in a third country.
Non-compliance with the CSRD may result in sanctions, possible loss of investments and the likelihood of having to pay fines.

The CSRD should:

Improve access to and comparability of non-financial information.
Disclosure should be made more efficient.
Sustainability reporting should be raised to the same level as financial reporting.

Further information:

[EUR-Lex] Directive on Sustainability Reporting