EU’s proposed new Corporate Sustainability Reporting Directive could affect Australian entities
In April 2021, the European Commission proposed a new Corporate Sustainability Reporting Directive (CSRD). The purpose of the new CSRD is to revise and strengthen the existing requirements of the Non-Financial Reporting Directive (NFRD). It will also ensure that companies report reliable and comparable sustainability information that investors and other stakeholders need.
The new CSRD would expand the sustainability information reported on. It would affect about 49,000 companies, including all large companies meeting two out of the following three criteria
- More than 250 employees
- More than €40 million turnover
- More than €20 million total assets.
Depending on the type of entity, these sustainability reporting requirements will likely apply to years ending 31 December 2024, 2025, and 2026 onwards.
European Sustainability Reporting Standards (ESRS) would be required and the information disclosed by companies would need to be assured. This would initially be limited assurance, with reasonable (or audit) assurance later on.
The European Commission’s proposals have been subject to review by the European Parliament and the European Council, which is made up of representatives from each EU Member State. Both the Parliament and the Council have proposed amendments to the Commission’s proposals, some of which are significant. The status as at the end of April 2022 is that the so-called ‘Trilogues’ are in progress. These are discussions among the European Parliament, the European Council, and the European Commission at which a compromise is sought to finalise the requirements of the new legislation.
Status of the proposals
It is currently anticipated that the final CSRD will be published before the end of June 2022.
BDO’s latest International Sustainability Reporting Bulletin (ISRB) includes:
- An overview of the key changes drafted by the CSRD
- A high-level overview of the proposed amendments from the European Council and the European Parliament.
How will these proposals impact Australian entities?
Australian entities that sell goods and services in Europe need to take note of these proposals, as they will also need to provide sustainability reporting disclosures.