Unlocking a new era in sustainability reporting, the EU's Corporate Sustainability Reporting Disclosure (CSRD) isn't just a regional shift; its ripple effect extends globally - commonly referred to as the "Brussels effect". As of January 2023, the CSRD replaced the Non-Financial Reporting Directive (NFRD) with refined requirements that encompass a broader spectrum of companies. With a phased approach spanning from 2024 to 2030, this initiative impacts not only large EU-listed companies but also extends its obligations to non-EU entities, shifting the dial in global corporate sustainability.
In the dynamic landscape of corporate sustainability, a global push for regulatory unity has emerged, aiming to align disclosure standards across regions and nations. This collaborative effort seeks to streamline reporting practices and liberate companies from unnecessary compliance burdens as they navigate various jurisdictions. At the forefront of this movement is the European Union (EU), introducing the Corporate Sustainability Reporting Disclosure (CSRD), alongside the European Taxonomy and the Corporate Sustainability Due Diligence Directive (CSDDD). Within the EU, companies are not only tasked with disclosure but are also prompted to integrate specific elements from international law. Drawing from the OECD Guidelines on Multinational Enterprises, the UN Guiding Principles on Business and Human Rights, and the ILO Fundamental Labour Conventions, these companies embark on a journey where transparency aligns with global responsibility.
Since January 2023, the CSRD came into force, succeeding the Non-Financial Reporting Directive (NFRD). Rather than a mere update to the NFRD, the CSRD introduces refined sustainability reporting requirements, reaching out to a broader scope of companies. It provides a comprehensive framework, encouraging companies to specify their approach to environmental, social, and governance (ESG) matters within annual reports.
The route towards comprehensive sustainability reporting under the CSRD unfolds in phases. Starting January 2025, large EU-listed companies, previously in scope of the NFRD, are mandated to report on 2024 ESG-related performance in line with the CSRD. In the following years, the Directive expands to include non-NFRD large companies, SMEs, and entities beyond EU borders. To streamline reporting, the European Financial Reporting Advisory Group (EFRAG) is finalizing the European Sustainability Reporting Standards (ESRS). These standards form the basis of the reporting requirements under the CSRD.
The CSRD introduces a new dimension to the reporting landscape, expanding its obligations to international companies. This means that subsidiaries with a non-EU parent may be obliged to report under the CSRD, and the parent company is equally required to join this reporting journey, whether jointly or separately. To illustrate, if a parent company in New Zealand oversees operations with a subsidiary in the Netherlands, both entities may fall under CSRD obligations. The Dutch subsidiary, if within CSRD scope, must gather and disclose sustainability data following ESRS by 2026, reporting on the financial year 2025. Depending on its disclosure preference, the New Zealand company must report by 2029 on data from the financial year 2028. Amidst these shifts, the CSRD emphasizes that subsidiaries must also take the stage by publishing the sustainability report of their parent company. Step into this evolving narrative of global accountability and interconnected sustainability.
As mentioned earlier, the CSRD adopts a phased approach. Below a timeline depicting the phased approach of the CSRD, highlighting the implications for both EU and non-EU entities.
To facilitate the transition for (international companies), the EU has implemented a phased approach from 2024 to 2030. While consolidated global group disclosures become mandatory for certain companies in 2029, parent companies may voluntarily disclose at a consolidated group level before 2029 to exempt their large EU and EU-listed entities from gradual reporting requirements.
At &BLOOM, we are committed to helping you navigate regulatory developments. We assist corporations, financial institutions, and asset managers in measuring, disclosing, and enhancing their sustainability & ESG performance in line with new EU sustainable finance standards (EU Taxonomy, SFDR, and CSRD). Leveraging our international expertise, we support companies in reducing compliance costs, managing risks associated with evolving regulations, improving access to financing, and embracing sustainable value creation.
