European Union Sustainability Reporting Regulation
The Corporate Sustainability Reporting Directive (CSRD) entered into force on January 5, 2023 after approval by the European Union (EU) Commission. However, the European Directive does not directly create obligations for subject undertakings, those obligations will be created under each EU Member State’s national legislation adopted pursuant to the CSRD. EU Member States have until July 6, 2024 to transpose the CSRD into their national laws.
The CSRD creates sustainability reporting obligations for businesses that meet the specified criteria in the Directive.
Who’s impacted?*
- All companies with securities listed on an EU-regulated market
- "Large" EU companies that are not listed, with "large" defined as exceeding two of the three following metrics for two consecutive balance sheet dates:
- Total assets of €25 million
- Net turnover (revenue) of €50 million
- Average of 250 employees
- EU companies of a "Large group" and not listed, with "Large group" defined the same as above, but for the consolidated group
* The criteria listed here are guidelines only and should not be considered a substitute to professional / legal advice
What’s the latest?
As noted, the CSRD entered into force in January 2023. EU Member States have until July 2024 to transpose the CSRD into their national laws. The first set of 12 European Sustainability Reporting Standards (ESRS) were approved as final standards by the European Commission in June 2023 and with no objection from the European Parliament and European Council in October 2023, paving the way for the ESRS to be used in the CSRD.
What do Canadian CPAs need to know?
While the CSRD and therefore the ESRS do not directly apply to Canadian companies, Canadian companies with EU operations that meet the size requirements may be required to report sustainability information for their EU subsidiary(ies); or if on a consolidated basis the criteria for a large group is met, consolidated sustainability reporting would be required, inclusive of non-EU operations.
The extra-territorial impacts of the CSRD should not be understated and Canadian CPAs should be aware of the potential reporting requirements which could extend beyond EU subsidiaries.
It is not just companies that are subject to the CSRD regulation that will be impacted. The CSRD requires certain disclosures pertaining to the regulated entity’s value chain, which means companies that sit within the value chain of a regulated entity may be asked to provide information to the regulated entity. Refer to our article, Why Businesses Can’t Ignore Sustainability for more information.
Where can I learn more?
For more information, please refer to our At a Glance: Sustainability Reporting Standards and Regulations and related FAQs.
You can also refer to: