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Corporate Sustainability Reporting Directive published in the Official Journal

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On 16 December 2022, the Corporate Sustainability Reporting Directive (CSRD) was published in the Official Journal of the European Union. The adoption of this major ESG piece of legislation is a new step in the implementation of the European Green Deal aimed at the protection and enhancement of the EU’s natural capital as well as the protection of the health and well-being of EU citizens from environmental impacts.

Compared to the current Non-Financial Reporting Directive (NFRD), the CSRD will (i) extend the scope of the reporting requirements to additional categories of companies, (ii) specify in more detail the information that companies should report, (iii) require assurance of sustainability information and (iv) ensure that all information is published as part of companies’ management reports.

1. Extended scope of undertakings concerned

The existing NFRD regime only targeted large undertakings of public interest[1] employing more than 500 employees on average.

The reformed reporting obligations under the CSRD will now extend to a larger group of undertakings including:

EU companies

  • all large undertakings (listed or non-listed), meaning undertakings which exceed at least two of the three following criteria:
    • Net turnover of EUR 40 million; and/or
    • Total balance sheet of EUR 20 million; and/or
    • Average of 250 employees during the last financial year;
  • small and medium-sized undertakings (except micro undertakings) which are public-interest entities (although a transitional opt-out option exists until 2028);

Non-EU companies

  • undertakings with a net turnover of more than EUR 150 million in the EU for each of the last two consecutive financial years and who have a large EU subsidiary, a medium-sized EU subsidiary (except micro undertakings) which is a public-interest entity, or an EU branch generating a net turnover of more than EUR 40 million in the preceding financial year.

2. Scope of Sustainability Matters

The CSRD introduces a broad notion of sustainability matters, meaning environmental, social and human rights, and governance factors, including sustainability factors defined as environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters.

The reporting system put forth by the CSRD will also clarify the application of the double materiality principle. This means that the reporting obligations cover both the impact undertakings have on sustainability matters (inside-out) and the impact of such matters on the undertakings themselves (outside-in).

Moreover, in-scope entities will be required to publish information such as:

  1. key intangible resources;
  2. their business-model, strategy, time-bound targets, opportunities and resilience to sustainability risks;
  3. the role of their administrative, management and supervisory bodies;
  4. the due diligence process implemented with regard to sustainability matters, the main adverse impacts connected with the undertaking and with its value chain, and any actions taken to prevent, mitigate, remediate or bring an end to those impacts; and
  5. the process to identify the information they report.

The European Commission will further adopt delegated acts to detail the European Sustainability Reporting Standards, already approved by the European Financial Reporting Advisory Group.

3. Reporting Method

Sustainability reporting must be included in a dedicated section of the management report of the company concerned. An electronic platform will be put in place in order to allow for the information to be prepared in a single electronic reporting format. The reported information will also be digitally tagged with the purpose of making the published information easier to find, read and compare.

4. Assurance of Sustainability Information

The CSRD creates an obligation for statutory auditors and audit firms to express an opinion based on a limited assurance engagement as regards the compliance of the sustainability reporting with the reporting standards as required by the CSRD. In addition, Member States may allow a statutory auditor or an audit firm other than the one(s) carrying out the statutory audit of financial statements to express this opinion, or even an independent assurance service provider.

5. Coherence with the Sustainability Finance Disclosure Regulation and the Taxonomy Regulation

The CSRD will be the foundation of a consistent flow of information through the financial value chain and for other stakeholders, with information made available to analysts in banks, insurance companies, asset management companies or credit rating agencies, for end investors and for non-governmental organisations and other stakeholders that wish to better hold companies to account for their social and environmental impacts.

In particular, the CSRD will align company sustainability reporting to the needs of financial market participants subject to the Sustainability Finance Disclosure Regulation (SFDR). In fact, financial market participants subject to the SFDR do not always have adequate information from investee companies. The CSRD aims to ensure that investee companies report the information financial market participants need in order to fulfil their own SFDR reporting requirements.

The CSRD further aims to align the reporting requirements for companies with the Taxonomy Regulation (TR). The TR sets up a classification system for environmentally sustainable activities, with the aim of scaling up sustainable investments and combatting the greenwashing of ‘sustainable’ financial products. The alignment between the CSRD and TR will be achieved through the sustainability reporting standards.

6. What's Next?

Member States have 18 months after the entry into force of the CSRD to implement it into national law.
The application of the new reporting obligations will take place in four stages:

  1. 1 January 2024 for companies already subject to non-financial reporting obligations, with reports due in 2025;
  2. 1 January 2025 for large companies (listed and non-listed) that are not currently subject to non-financial reporting obligations, with reports due in 2026;
  3. 1 January 2026 for listed SMEs (except micro undertakings), small and non-complex credit institutions and captive insurance undertakings, with reports due in 2027. Listed SMEs have a possibility to opt-out until 2028, in which case reports are due in 2029; and
  4. 1 January 2028 for third-country undertakings that fall within the scope of the CSRD, with reports due in 2029.


The Lydian team will continue to monitor the entry into force and implementation of the CSRD, including the development of the European Sustainability Reporting Standards. Please contact the team should you have any questions or if you would like any further information on these matters.  

[1] “Public-interest” companies include listed companies, banks and insurance companies.