Deal on the EU CSRD: 5 key changes & missed opportunities

In June, the trialogue negotiations between the European Commission, Parliament, and Council concluded with an agreement for the EU Corporate Sustainability Reporting Directive (CSRD). The CSRD clarifies transparency obligations for large companies operating in the EU on their sustainability impacts, risks, and opportunities. We summarize the main changes in our briefing. 

1. The scope of the legislation is expanded to all large listed and non-listed companies with more than 250 employees.

• Listed SMEs were included in the initial proposal to report in a mandatory way as of 2026 following simplified standards. The final text allows them to opt-out until 2028, which will have major implications for SMEs’ readiness to leverage sustainable finance flows and their relationship with banks, public procurement opportunities or requests from business partners.

2. Companies’ reporting obligations have been specified, namely for the disclosure of:

• Transition plans to reach climate neutrality by 2050, including actions, investment plans and exposure to fossil fuels;
• Time-bound targets related to sustainability issues and companies’ progress to achieve them (including GHG emission reduction targets); 
• Sustainability due diligence information, i.e. transparency on the process and adverse impacts identified in the company’s value chain, and actions taken to address such impacts.

3. Mandate to develop and adopt EU Sustainability Reporting Standards based on double materiality (i.e. the disclosure of companies’ impacts on the planet and people as well as risks and opportunities to the company arising from sustainability matters). 

• Pursuant to the CSRD, EU standards will include quantitative and qualitative data, and cover both retrospective and forward-looking information; 
• Draft EU standards (sector agnostic) have been published and are open for public consultation until August. These have been designed by a multi-stakeholder expert group to be feasible, flexible and implementable by companies. The expert group, part of the EFRAG new Sustainability Reporting Pillar, will continue with technical proposals for sector-specific standards. 

4. The agreement delays application to 2024 for those companies already covered by existing legislation (the EU Non-Financial Reporting Directive) and 2025 for other large listed and non-listed companies (above 250 employees).

• While the initial proposal was set to be integrated in national law by the end of 2023, the deal now includes an 18-month transposition period. Member States should provide clarity to companies by making the necessary changes before January 2024. 

5. An assessment of the implementation of the Directive and adoption of standards by SMEs is requested of the European Commission before 2028.

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