What is the CSRD timeline for 2024?

What is the CSRD timeline for 2024?

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The EU's Corporate Sustainability Reporting Directive (CSRD) is set to take effect in 2024, bringing significant changes to sustainability reporting standards. This directive builds upon the 2014 Non-Financial Reporting Directive (NFRD) and will impact nearly 50,000 companies, including non-EU entities operating within the EU. Initially, the CSRD will apply to EU companies compliant with the NFRD, with gradual inclusion of others by 2029.

Enhancing Sustainable Practices and Transparency

The primary goal of the CSRD is to enhance sustainable practices and bridge the gap between investor information needs and available corporate sustainability data. It introduces consistent standards to increase accountability, trust, and transparency, enabling better assessment of companies' societal and environmental impacts.

Under the CSRD, companies must comply with the European Sustainability Reporting Standards (ESRS), which are broad, sector-agnostic, and aligned with global standards. Reporting is based on the "double materiality" principle, considering both the impacts of activities and financial risks or opportunities from sustainability matters. An independent third party must assure the reported data.

The CSRD applies to large EU companies, EU-listed companies, and non-EU groups with significant EU activity. It also intersects with the Corporate Sustainability Due Diligence Directive (CSDDD), leading to some compliance overlaps.

Implementation Timeline

Member states are required to implement the CSRD by July 2024, with staggered reporting cycles starting from 2024. Initially, a "comply or explain" approach will be adopted.

The CSRD impacts both in-scope companies and those within their value chains, necessitating early preparation and adaptation to the new requirements.

Prior to 1996-97, some businesses voluntarily reported environmental and social impacts. The Global Reporting Initiative in 1997 began structured sustainability reporting. The European Commission proposed a directive for transparency in sustainability reporting in 2014, leading to the Non-Financial Reporting Directive (NFRD) in 2015.

In 2021, the European Commission revised the NFRD, leading to the CSRD. The CSRD enhances and replaces the NFRD, working alongside the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy.

The CSRD, effective January 2023, requires large EU firms to follow the European Sustainability Reporting Standards (ESRS), provide third-party assurance, and publish information digitally. It covers companies with over 250 employees, a turnover of more than €40 million, or total assets exceeding €20 million.

Starting January 2024, large companies already subject to the NFRD must comply, with subsequent phases including large public companies and SMEs through 2029.

Key Reporting Requirements

Developed by the European Financial Reporting Advisory Group (EFRAG), the CSRD focuses on Environmental, Social, and Governance (ESG) aspects. It includes company alignment with the goal of achieving climate neutrality by 2050, science-based targets, management roles, policies, impacts on fossil fuel reliance, risk management, and reporting methodology. The CSRD emphasizes both qualitative and quantitative data, covering various time horizons.

The CSRD applies a double materiality perspective, assessing both business sustainability impacts and external environmental and social effects. It requires detailed value chain and EU Taxonomy-related disclosures. Sector-agnostic standards were published on April 30, 2023, with sector-specific standards due by January 1, 2024.

The CSRD aims to enhance transparency and accountability in corporate sustainability reporting across the EU.

Since 2014, listed EU companies with over 500 employees have been covered under the EU Non-Financial Disclosure Directive (NFRD), encompassing about 11,000 entities. The CSRD extends to all listed companies, as well as large companies that exceed two of the following thresholds: balance sheet total over €20 million, net revenue over €40 million, or more than 250 employees, affecting approximately 50,000 companies.

In conclusion, the CSRD timeline for 2024 is significant for companies operating within the EU. The directive aims to enhance sustainable practices, transparency, and accountability in corporate sustainability reporting. It introduces consistent standards, requires compliance with the European Sustainability Reporting Standards (ESRS), and applies a "double materiality" principle. Companies must prepare for the CSRD's implementation by July 2024 and adapt to the new reporting requirements.

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