CSRD

The CSRD (Corporate Sustainability Reporting Directive) marks a significant step in the regulation of corporate sustainability reporting. Since the EU Commission proposed the CSRD in April 2021, the directive has caused extensive discussion in the business community. Companies that were not previously obliged to report on sustainability now have to adapt to new requirements. Read all the news about the CSRD from the Table.Briefings editorial team, its implementation in Germany and which companies are affected by the CSRD reporting obligation. What is the CSRD? The CSRD Directive is the successor to the NFRD (Non-Financial Reporting Directive) and aims to expand and standardize sustainability reporting in the EU. While the NFRD only required large companies to disclose non-financial information, the CSRD goes much further and covers more companies as well as more detailed and standardized reporting obligations. The idea is based on the requirement for companies to disclose not only financial, but also environmental, social and governance-related information. The aim is to create more transparency and better inform investors and other stakeholders about the sustainability practices of companies. Who is subject to CSRD? The CSRD significantly expands the group of companies subject to reporting requirements. While the NFRD only applied to large public interest entities (PIEs) with more than 500 employees, the CSRD will in future cover the following companies: The CSRD therefore applies to many companies that were previously not affected by the reporting obligation. For SMEs in particular, which previously only had limited reporting obligations, this means a considerable amount of additional work. Subsidiaries of larger groups that are not listed themselves could also be affected by the new reporting obligation, depending on their internal structure. However, it is important to note that the reporting obligations are not limited to companies in the EU. Companies with subsidiaries in the EU that meet the reporting obligation criteria must also report in accordance with the new standards. Non-European companies that operate in the EU and have a net turnover of more than EUR 150 million within the EU are also affected by the CSRD. This extension shows that the EU wants the CSRD Directive to have a global impact. Multinational companies in particular must ensure that their reports comply with the new requirements. When does the CSRD Directive come into force? The CSRD was adopted by the European Parliament in 2022 and will enter into force gradually. The deadline for the first reporting depends on the size of the company and the sector: however, companies should start reviewing their internal structures and reporting processes now, as the requirements for sustainability reporting are increasing significantly. The implementation of the CSRD in Germany is a decisive step towards integrating the new requirements into German law. Germany already has existing regulations on sustainability reporting, which must now be adapted to the CSRD. The Federal Ministry of Justice (BMJ) is responsible for implementing the directive. It is expected that the legislator will extend the existing requirements of the NFRD, which are anchored in the German Commercial Code (§ 289b HGB), to meet the requirements of the CSRD. Companies should prepare themselves for the fact that reporting will not only become more extensive in terms of content, but also more demanding in terms of form. In future, reports will have to be audited by an external auditor to ensure the quality and reliability of the data. Requirements for the CSRD reporting obligation The CSRD reporting obligation goes far beyond the previous requirements of the NFRD. Companies must provide comprehensive information on the ESG criteria (environmental, social and governance). This includes, among other things: Another important aspect of CSRD implementation in Germany is the integration of reporting into the annual financial statements. Companies must ensure that sustainability reporting is closely linked to financial reporting. The dual reporting of financial and non-financial information will therefore become standard. The CSRD marks a turning point in corporate reporting and forces many companies to present their sustainability practices more transparently and systematically. With the extension of reporting obligations to a large number of companies and the mandatory auditing of reports, sustainability reporting will become much more important in the coming years. Companies should prepare for the requirements at an early stage and ensure that they fully implement the new regulations on CSRD implementation in Germany in order to meet the requirements and be successful in the long term.