Comprehensive EU Sustainability Disclosure Laws Finalised

Posted on November 18, 2022 by Editor

Four years since the process to replace the Non-Financial Reporting Directive (NFRD) began, last week the Council of the European Union and the European Parliament voted by a landslide (525 votes in favour) to adopt the Corporate Sustainability Reporting Directive (CSRD) into EU law. The first set of standards will be adopted by June 2023, with the new rules set to be phased-in in stages related to company size from 2024 – 2028.

The CSRD will replace the Non-Financial Reporting Directive (NFRD), addressing shortcomings in this legislation, which only covered 11,000 entities, had a narrow scope, and didn’t oblige the use of a consistent set of rules.

The directive introduces detailed reporting requirements for corporates to disclose their impact on the environment, human rights, and social standards. It will apply to all large companies with substantial activity in the EU, and in a simpler form, to small and medium enterprises (SMEs). The result? Over 50,000 entities across the EU, or 75% of EU turnover, will need to provide comprehesive disclosures in this field. Initially all public companies will be obliged to provide this information as an extension to the ESEF requirements, in Inline XBRL.

This means far greater transparency for investors, regulators, analysts and citizens. The CSRD represents the start of a surge of useful, comparable, sustainability information. It aims to improve capital allocation in support of EU sustainable economy targets, and is tangible further progress towards widespread digital, integrated capital markets information. The next step? Finalisation (next year) of the European disclosure standards.

Read more here.

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