Filip Gregor
Head of the Responsible Companies Team
The European Parliament has adopted the Corporate Sustainability Reporting Directive (CSRD), which clarifies transparency obligations for large companies operating in the EU on their sustainability impacts, risks, and opportunities. Pursuant to the CSRD, companies across all sectors will report against the European Sustainability Reporting Standards, which were developed by the European Financial Reporting Advisory Group (EFRAG), submitted to the European Commission and published on 22 November.
The new rules and EU standards will tackle major problems on the quality, consistency and comparability of sustainability information disclosed by companies, as well as root out widespread greenwashing practices.
Once the legislation is published in the Official Journal of the EU, Member States have a maximum of 18 months to implement CSRD into national law.
The swift CSRD implementation is key for a successful transformation of the EU's economy. To direct finance flows toward sustainability, private investors, banks and public institutions need consistent and reliable ESG data from companies.
Read our Brussels office's detailed analysis of the next steps needed here.
A company will report ESG information under the new standards if:
When do reporting obligations come into force?
The Directive is expected to enter into force in 2024, but some companies will be given extra time. The year 2024 is fully binding only for the largest EU companies, which have been required to report sustainability information under the previous NFRD legislation.
All companies under the CSRD scope will report sustainability data according to European Sustainability Reporting Standards. They will direct businesses on key ESG data and reduce companies’ administrative burden. Recently, the Board of the European Financial Reporting Advisory Group (EFRAG) approved cross-cutting reporting standards and submitted them to the European Commission.
Among other things, the standards require companies to report on their carbon footprint, analysis of climate transition risks, and the significant impacts on people and the environment in their supply chains.
The standards cover strategic cross-cutting ESG information and 10 thematic areas including climate, pollution, water resources, biodiversity, circular economy, own workforce, workers in the value chain, communities & consumers, and business conduct. They also reflect a number of international initiatives, including TCFD, GRI, emerging international standards under IFRS, plus UN and OECD standards for sustainability due diligence.
The European Commission is expected to adopt the standards in the first half of next year, while EFRAG is also starting work on follow-up standards for climate-risk sectors (energy, transport, agriculture, etc.) being the first in line. The adoption of sectoral standards by the European Commission is expected in 2024. Filip Gregor, Head of the Responsible Companies Section at Frank Bold, participates in the standards’ development as a civil society representative in the EFRAG's Sustainability Reporting Board.
Local groups and NGOs including Frank Bold, that is very active in the process, welcomed the Czech government’s decision to file a lawsuit at the European Court of Justice against the Polish government for the illegal operation of the Turów lignite coal mine, which has been dug right up to the Czech and German borders, damaging local water supplies for nearby communities. This is the first such legal case for the Czech Republic and the first in EU’s history where one member state sues another for environmental reasons.
Meeting the goal of the European Green Deal to achieve no net GHG emissions by 2050 requires at least half trillion euros of additional investments in the EU every year and will involve significant market and regulatory changes targeting every sector of the economy. This will profoundly change how companies and their directors need to integrate sustainability concerns in their strategies and business decisions.
Frank Bold organised two online events to present the results of the research on the disclosures made by 300 companies on climate and environmental matters providing targeted presentation and insights for companies in Southern Europe and Central and Eastern Europe.
