Submitted by Nasdaq
In a major step forward for international regulations towards ESG disclosure, the European Financial Reporting Advisory Group (EFRAG), the body responsible for developing the reporting standards for the CSRD, has released the latest draft of the European Sustainability Reporting Standards (ESRS) to the European Commission for consideration. These standards will, over time, form the mandatory disclosures of the Corporate Sustainability Reporting Directive (CSRD).
This development comes a month after the European Parliament announced their adoption of the CSRD, which builds on the EU’s pre-existing Non-Financial Reporting Directive (NFRD), extending the scope of the reporting requirement, requiring assurance of the data disclosed, providing greater specificity, verifying that the information disclosed is also present in published company reports, and promoting machine-readability. This latest move, meant to end greenwashing and empower the European Union’s (EU) social market economy, requires companies to disclose environmental, social and governance matters that align with the EU’s climate goals.
Who will be impacted?
With the hopes of expanding sustainability reporting globally, CSRD will impact approximately 50,000 companies in the EU that will now be required to collect and share sustainability information. Companies based outside of the EU but doing business in the EU may also be affected.
What is the impact on your business of the CSRD regulations?
The announced EU sustainability reporting requirements will apply to all large companies, both public and private. Companies with operations outside the EU that generate a net turnover of €150 million in the EU and have at least one subsidiary or branch in the EU will also be required to provide a sustainability report. The draft European Sustainability Reporting Standards (ESRS) have been released but are still pending adoption by the European Commission, which is scheduled for June 2023.
CSRD will then be phased-in starting in 2024:
To ensure that all companies are providing accurate and reliable information, companies must use an independent auditor or certifier.
With the EU’s goals to end greenwashing, be more transparent, and make sustainability reporting the norm, CSRD is one of several EU regulatory initiatives, including:
Non-financial vs. sustainability reporting: What’s the difference?
With a rapidly growing ecosystem of investors, regulatory bodies, frameworks, and raters and rankers, the term ‘ESG’ (Environmental, social, governance) and its related topics are now widely associated with a financial impact. In consequence, the European Commission’s assessment was that non-financial reporting no longer responded to the needs and language that many organizations, regulators and experts were using. In order to align better with the market, they shifted from addressing ‘non-financial’ reporting to ‘sustainability’ reporting with information relating to EU climate goals. Hence, the shift in focus from ‘Non-Financial’ Reporting Directive (NFRD) to the ‘Corporate Sustainability’ Reporting Directive (CSRD).
How can Nasdaq help my business meet the new requirements?
To ensure companies can successfully prepare to meet not only CSRD but these additional regulations, Nasdaq ESG Solutions can help you prepare:
As these announcements continue to evolve, please check back for more updates.
Are you prepared? Contact Nasdaq ESG Solutions
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