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In depth

Deep dive into the key characteristics of the EU sustainable finance regulation

Corporate Sustainability Reporting Directive (CSRD)

Corporate Sustainability Reporting Directive (CSRD)

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The Corporate Sustainability Reporting Directive (CSRD – Directive (EU) 2022/2464) is a Directive introduced by the European Commission that requires private and public European companies, as well as non-EU companies with substantial presence in the European Union, to report on the impact of their activities on the environment and society and requires the audit of the reported information.

The CSRD amends the existing Non-Financial Reporting Directive (NFRD) and broadens its reporting requirements.

Companies subject to the CSRD must report according to European Sustainability Reporting Standards (ESRS). The ESRS are a set of standards defining the subjects and metrics that businesses must cover in their sustainability reports.

The first set of ESRS standards covers sector-agnostic topics such as climate change (ESRS E1), water and marine resources (ESRS E3), biodiversity and ecosystems (ESRS E4), workers in the value chain (ESRS S2), and business conduct (ESRS G2). Additionally, the ESRS widen companies’ reporting requirements by including the whole value chain and introducing the double materiality concept. The standards also greatly impact the extent, volume, and granularity of the information that must be provided.

It is foreseen that other three sets of ESRS standards will be developed to address reporting requirements specific to different sectors. The second set of standards is under development and is expected to cover sectors such as oil and gas, road transport, food and beverage, and textiles, accessories, footwear and jewellery.

The draft standards are developed by the European Financial Reporting Advisory Group (EFRAG).