CSRD : moving from non-financial reporting to “sustainability” reporting (Part 1)
Since the publication of the directive at the end of December 2022, what is expected of companies in terms of ESG information? We take stock in two practical sheets in the form of questions/answers. First part, the companies concerned, the regime that will apply to them, and the date on which they will have to comply with the European text.
The EU is changing standards and methods. On December 16, 2022, the directive concerning the publication of information on sustainability by companies, known as the CSRD directive (for Corporate Sustainability Reporting Directive), was published in the Official Journal of the EU (Dir. (EU) 2022/2464 of the European Parliament and of the Council, 14 Dec. 2022: OJEU No. L 322, 16 Dec.). This text modifies, among other things, the requirements introduced by the directive concerning the publication of non-financial information to be presented by certain large companies and certain groups, called the NFRD directive, for Non-Financial Reporting Directive (Dir. 2014/95/UE of the European Parliament and of the Council, 22 Oct. 2014: OJEU n° L 330, 15 Nov.).
The directive opens a new era, both in terms of the number of companies soon to be affected by the exercise (around 50,000 compared to 10,000 in the EU, according to the European executive) and the elements to be declared and audit. It will no longer only be a question of environmental and social issues, respect for human rights and the fight against corruption.Corporate governance will also become a salient feature of sustainability reporting. As for the information on environmental, social and governance (ESG) factors to be declared, it will require entering into an almost surgical level of precision. Because the objective of the text is to lead to the publication of “relevant, comparable and reliable information” on the subject, to put an end to greenwashing and the opportunity shots that certain economic players may try to play. It is therefore a logic inspired by accounting and finance that is now essential in terms of extra-financial reporting. Explanations of the fundamental elements of the process that companies will soon have to undertake.
Which companies are affected and when will they be?
Under the NFRD regime, still applicable today, large companies that are public interest entities – i.e. companies listed on an EU regulated market, credit and insurance companies – and which employ on average more than 500 employees, must publish non-financial information. As well as the listed parent companies1 of a large group employing more than 500 employees on a consolidated basis. The obligations incumbent on them in this area, if they originate in EU law, have been translated into national law. In France, it is the non-financial performance declaration (DPEF) regime that is therefore imposed on them for the moment.
With the entry into force of the CSRD directive, significant changes are to come.
Here is the list of companies soon to be affected and the duty type that will apply to them:
| Type of companies | Treshold | Duty Type | Date |
|---|---|---|---|
| Large listed companies (including those from third countries) |
|
General scheme | from 2025 (fiscal year beginning January 1, 2024) |
| Listed parent companies of a large group (including those from third countries) |
|
Consolidated reporting | from 2025 (fiscal year beginning January 1, 2024) |
| Large unlisted and listed companies (including large listed third country companies) | Exceeding at least two of the following three criteria:
|
General scheme | from 2026 (fiscal year beginning January 1, 2025) |
| Listed parent companies of a large group (including those from third countries) | Exceeding at least two of the following three criteria:
|
General scheme | from 2026 (fiscal year beginning January 1, 2025) |
| Listed SMEs (including those from third countries) | Not exceeding two of the following three criteria:
|
Simplified reporting | from 2027 (fiscal years beginning January 1, 2026) possibility of derogating from it (“opt-out”) for the 2026 and 2027 financial years |
|
Small and non-complex credit institutions when they are listed SMEs or large companies (including third-country listed institutions) |
Thresholds for listed SMEs or large companies | Simplified reporting | from 2027 (fiscal years beginning January 1, 2026) |
|
Captive insurance or reinsurance companies when they are listed SMEs or large companies (including listed companies from third countries) |
Thresholds for listed SMEs or large companies | Simplified reporting | from 2027 (fiscal years beginning January 1, 2026) |
| Third country companies |
|
sustainability reporting for third country companies | from 2029 (fiscal years beginning January 1, 2028) |
The text specifies that micro-enterprises are excluded from the CSRD system.
Pay attention to the taxonomy! The directive also states that: “Companies which are now affected by the sustainability information requirements will also have to comply with Article 8 of Regulation (EU) 2020/852 on taxonomy (recital 17 of the CSRD Directive ).
Sophie Bridier and Veronika Rébier