The EU has adopted its proposed Corporate Sustainability Reporting (CSR) Directive which aims to make businesses more accountable as regards their social and environmental impact.
Although the Directive has not yet been published, some details have been provided by the EU of what it will involve. We've set out this information below.
Background
Across the EU, large public-interest companies, i.e. those with 500 or more employees listed on a stock exchange, are required to report on non-financial matters. This means that over 11,000 companies across the EU, such as listed companies, banks and insurance companies, have to publish information regarding:
This was a requirement of Directive 2013/35/EU, on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings.
As the UK was still part of the EU at the time the requirement came into force, it implemented these requirements through amendments to the Companies Act 2006.
What is the CSR Directive?
In April 2021, the EU proposed to extend these reporting requirements in a bid to ensure that all large companies in the EU disclose data on the impact of their activities on people and the planet, as well as any sustainability risks they are exposed to.
The proposed Directive was adopted by the EU on 10 November 2022, by a vote of 525 for, to 60 against. It is designed to make companies more accountable due to the fact they have to disclose information on their societal and environmental impact. It is hoped that this will also put an end to the recent trend of greenwashing - a process by which companies over-inflate their environmental credentials - and set the foundation for sustainability reporting standards globally.
The Directive will also impact on far more companies than the previous non-financial reporting requirements did as it will apply to all large companies, whether listed on stock markets or not. This means approximately 50,000 companies will be in scope.
It also covers listed SMEs, though not until 2026.
Will it affect the UK?
No, not directly. The UK is no longer part of the EU, so the new reporting requirements will not apply to large UK companies.
However, any non-EU company with:
will have to comply with the Directive.
When will it apply?
Whilst the Directive has been adopted, it has not yet been published. The European Council has to formally adopt the proposal, and this is expected to happen around 28 November 2022.
Once that happens, the Directive will be published in the Official Journal of the European Union and will become law. It is expected that it will come into force 20 days after publication and that from:
More information will be available once the Directive is published.
