The European Parliament adopted the Corporate Sustainability Reporting Directive (CSRD), on Nov. 10, which will require multinational companies to regularly disclose information on their societal and environmental impact. The new environmental reporting rules were voted with 525 votes in favor, 60 votes against, and 28 abstentions.
The directive aims to address shortcomings in existing legislation on the disclosure of non-financial information (NFRD). The CSRD establishes more detailed reporting requirements on businesses’ impact on the environment, human rights, and social standards in line with the EU’s climate goals. The Commission will adopt the first set of standards by June next year.
Companies will be subject to independent auditing and certification, with public digital access to sustainability information.
The new requirements will apply to all large businesses, and non-EU companies with a turnover over €150 million ($154,3 million) in the European Union will also have to comply. Listed small and medium-sized companies will also be covered, but they will be allowed more time to adapt to the new reporting rules.
The current rules cover about 11,700 companies, while with the new CSRD, nearly 50,000 companies in the EU will have to collect and share sustainability information.
“Europe is showing the world that it is indeed possible to ensure finance, in the narrow sense of the word, does not govern the entire global economy,” said EU member of parilament Pascal Durand.
The Council is expected to adopt the proposal on Nov. 28, and then it will be signed and published in the EU Official Journal. The new set of rules will enter into force 20 days after publication and start applying between 2024 and 2028:
- From Jan. 1, 2024 for large public-interest companies (with over 500 employees) already subject to the non-financial reporting directive, with reports due in 2025;
- From Jan. 1, 2025 for large companies not presently subject to the non-financial reporting directive (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets), with reports due in 2026;
- From Jan. 1, 2026 for listed small and medium-sized enterprises (SMEs) and other undertakings, with reports due in 2027. SMEs can opt out until 2028.