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This page provides an overview of the EU legal framework for sustainability reporting, under the Corporate Sustainability Reporting Directive (CSRD) and related European Sustainability Reporting Standards (ESRS). It also addresses the sustainability assurance requirements. Links are provided to EU primary sources, official guidance as well as to other useful supporting material.

In force since January 2023, the EU Corporate Sustainability Reporting Directive (CSRD) enhances rules relating to companies' disclosures of environmental, social and governance information, building on the EU Non-Financial Reporting Directive (NFRD).

The CSRD is a major milestone for sustainability reporting and assurance across Europe. The publication by companies of consistent, high-quality information on sustainability-related issues and the provision of appropriate assurance over that information underpins broader European efforts to move towards a net-zero economy. The CSRD has extraterritorial reach and will impact certain companies outside the EU.

ICAEW continues to closely follow developments related to the CSRD, including through our Corporate Reporting Faculty, Audit and Assurance Faculty and Financial Services Faculty. ICAEW is also actively engaged in related discussions taking place at Accountancy Europe.

CSRD: an overview

Building on the 2014 Non-Financial Reporting Directive (NFRD), the CSRD phases in new requirements for companies to report on their social and environmental risks and opportunities as well as on how their activities impact people and the environment. These sustainability statements will need to be published in a dedicated section of companies' annual management reports.

Companies subject to the CSRD are required to report according to European Sustainability Reporting Standards (ESRS). The ESRSs have been adopted by the European Commission following scrutiny by the European Parliament and Council of the EU and based on technical advice from the European Financial Reporting Advisory Group (EFRAG).

As well as requiring sustainability disclosures to be provided in a structured, machine-readable data format, the CSRD also introduces mandatory third-party assurance on the sustainability information reported by companies. It updates related EU legislative provisions on the education and training of statutory auditors. Public oversight and sanctions are integrated into existing rules in the Accounting Directive and the Statutory Audit Directive.

Policy objectives

The CSRD provides the broad legal framework for sustainability reporting in the European Union and the ESRS provide the exact detail which needs to be disclosed. It requires companies within scope to report such information as necessary for stakeholders to understand the company's impact on sustainability matters and how sustainability matters affect its development, performance and position. Such information is intended to provide insight into a company's sustainability impacts, risks and opportunities. The requirements include disclosures related to a company's business model and strategy, targets and progress, policies and governance, business relationships, incentive programs and value chain.

Companies are required to report according to ESRS. The use of ESRS aims to ensure that companies within the scope of the CSRD report comparable and reliable information. Sustainability statements must be disclosed in a separately identifiable section of the management report. Further ESRSs are under development:

  • Small and medium-sized entities (SMEs): the Listed SME (LSME) and Voluntary SME (VSME) standards were issued for public consultation in early 2024.
  • Sector-specific: ESRSs are to be developed for up to 40 different sectors.
  • ESRS for non-EU groups: a separate ESRS will be developed for EU branches or subsidiaries of non-EU companies generating over €150mn before 2026.

Scope and timing

The CSRD applies to a broad range of companies within the EU. It also has extraterritorial reach and will affect certain companies outside the EU. The scope is complex, especially within group situations and where there are non-EU country parents.

EU countries are expected to complete the transposition of the CSRD into national law by July 2024. The effective dates are being phased in over a number of years according to the type of company, starting with the first reports being required for financial years starting on or after 1 January 2024. These reports must be published together with the annual financial report.

Sustainability assurance

All companies in scope for CSRD are required to obtain limited assurance from a third-party assurance provider in their first reporting year.

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