EU Corporate Sustainability Reporting Directive: What non-EU companies should know
EU Corporate Sustainability Reporting Directive (“CSRD“) entered into force on 5 January 2023 and the associated European Sustainability Reporting Standards (“ESRS“) were adopted by the European Commission on 31 July 2023. Together, the CSRD and ESRS create detailed sustainability reporting requirements that will apply to a significant number of EU and non-EU companies and substantially increase the scope of their sustainability reporting.
Application of the rules is now imminent and, for some, CSRD reporting periods will begin from 1 January 2024.
Disclosure requirements will include a description of the company’s business model, strategy and sustainability risks and opportunities; ESG-related targets and annual progress on meeting these targets; sustainability matters that affect the company and the impact of the company on sustainability matters; greenhouse gas emission targets; among other requirements.
Non-EU companies with: (a) an annual net turnover at the consolidated or individual level in the EU exceeding EUR 150 million for each of the last two consecutive financial years; and (b) which have a qualifying EU subsidiary or a branch in the EU that generated an annual net turnover in excess of EUR 40 million in the preceding financial year as well as Non-EU companies with securities listed on an EU regulated market will be required to report under the CSRD.
CSRD will not operate in a vacuum. Non-EU companies will also need to comply with the developing and overlapping sustainability reporting rules in their local jurisdiction.
The CSRD, however, goes far beyond the SEC’s proposed rules, since, in addition to reporting on climate-related risks, companies are asked to report on (among other things) water and marine resources-related risks, biodiversity and ecosystems-related risks and risks in relation to workers in the value chain, all on a “double materiality” basis.
