Since the Paris Agreement in 2015, the European Council has been working on a European Green Deal. This includes several facets such as the `Farm to Fork` Strategy, the European Industrial Strategy, the Action Plan on the Circular Economy, Batteries and Waste Batteries and the Sustainable Chemicals Strategy.
The Sustainable Finance Action Plan is specifically designed to engage the financial sector in the Green Deal. An EU taxonomy was developed, which evolved into the Sustainable Finance Disclosure Regulation (SFDR) and the Non-Financial Reporting Directive (NFRD). The recently adopted Corporate Sustainability Reporting Directive (CSRD) will replace the NFRD.
Unlike the NFDR, the CSRD does not only affect public interest entities (PIEs). Large parts of the SME sector will also be subject to reporting requirements in the future. The key points:
– Companies must report on the impact of their activities on the climate and on human rights.
– To this end, the CSRD sets standards that are sector-neutral, sector-specific and company-specific (company type).
– From 2025, reporting obligations will apply to all companies that meet 2 of the following 3 criteria €40 million turnover, €20 million balance sheet total and 250 employees.
– Smaller listed companies will also be subject to the reporting requirements from 2026.
– Non-EU companies with significant operations in the EU (turnover of more than €150 million in the EU) will also have to comply.
– The reports will have to be audited by an external auditor.
– Reports will also have to be available in digital form.
The Council has signed the Directive and published it in the EU Official Journal, so it will enter into force 20 days after publication. The CSRD will be concretized by the European Sustainability Reporting Standards (ESRS), which are expected to be published in Q2 2023. It is planned that the individual regulations will come into force successively over a period from 2024 to 2028.
cleversoft will continue to monitor further developments regarding the CSRD. We expect to have more information on how to integrate the directive into our reporting tools shortly.
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