The European Commission has published a Proposal for a Directive amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting, which would amend the existing reporting requirements of the NFRD.
- extends the scope to all large companies and all companies listed on regulated markets (except listed micro-enterprises)
- requires a general EU-wide audit (assurance) for reported sustainability information. This will help to ensure that reported information is accurate and reliable. Although the objective is to have a similar level of assurance for financial and sustainability reporting, a progressive approach is needed. The Commission is proposing to start with a ‘limited’ assurance requirement. If the Commission does adopt sustainability assurance standards, then the legal requirement would automatically become a requirement for reasonable assurance instead of limited assurance. The Commission’s proposal allows the Member States to open up the market for sustainability assurance services to so-called ‘independent assurance services providers’. This means that the Member States could choose to allow firms other than the usual auditors of financial information to assure sustainability information.
- introduces more detailed reporting requirements, and a requirement to report according to mandatory EU sustainability reporting standards
- requires companies to digitally ‘tag’ the reported information, so it is machine-readable and feeds into the European single access point envisaged in the capital markets union action plan
Timing and next steps
The next step is for the European Parliament, and the Member States in the Council, to negotiate a final legislative text on the basis of the Commission’s proposal. In parallel, EFRAG will start work on a first set of draft sustainability reporting standards. These draft standards could then be ready for consideration by the Commission once the Parliament and Council have agreed a legislative text. EFRAG aims to have the first set of draft standards ready by mid-2022.
The final timetable will depend on how the Parliament and Council progress in their negotiations. If they reach agreement in the first half of 2022, then the Commission should be able to adopt the first set of reporting standards under the new legislation by the end of 2022. That would mean that companies would apply the standards for the first time to reports published in 2024, covering financial year 2023.
Consultation on CSRD proposal
This adopted act (CSRD) is open for feedback until June 22, 2021. All feedback received will be summarised by the European Commission and presented to the European Parliament and Council with the aim of feeding into the legislative debate.
Read more here.