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New rules on sustainability reporting by companies: provisional political agreement between the Council and the European Parliament

The Council and the European Parliament today reached a provisional political agreement on the Directive on corporate sustainability reporting (CSRD).

The proposal aims to remedy the shortcomings of the existing rules in terms of the publication of non-financial information, the quality of which was insufficient to enable them to be properly taken into account by investors. These shortcomings hinder the transition to a sustainable economy.

This agreement is excellent news for all European consumers. They will now be better informed about the impact of business on human rights and the environment. It is therefore more transparency for citizens, consumers and investors. It is also more readable and simpler in the information provided by companies. They must play their full role in society. Greenwashing is over. With this text, Europe is positioning itself at the head of the international race for standards, by establishing high standards in line with our environmental and social ambitions.

Bruno le Maire, Minister of Economy, Finance and Industrial and Digital Sovereignty

What are the new rules?

The Corporate Sustainability Reporting Directive amends the Non-Financial Reporting Directive of 2014. It introduces requirements more detailed in terms of reporting and ensures that large companies are required to publish information about sustainability issues such as environmental rights, social rights, human rights and governance factors.

The CSRD directive also introduces a certification requirement for published sustainability information as well as the better accessibility information, by imposing its publication in a specific section of the companies’ management reports.

The Financial Reporting Advisory Group in Europe (EFRAG) will be responsible for establishing European standards, on the technical advice of several European agencies.

Who will be covered by the directive?

EU rules on non-financial information apply to large public-interest companies with more than 500 employees and to all major companies and to all listed companies on regulated markets. These companies are also responsible for evaluating information at the level of their subsidiaries.

The rules also apply to SME taking into account their specificities. A derogation (“opt-out”) will be possible, during a transitional period, for SMEs, which means that they will be exempted from the application of the directive until 2028.

As it concerns non-European companies, the obligation to provide a sustainability report applies, for all companies generating more than 150 million euros of net turnover in the EU, and which have at least one subsidiary or branch in the EU . These companies must provide reporting on their so-called ESG impacts, ie on environmental, social and governance issues, as defined in this directive.

Who ensures the quality of reporting?

The reporting must be certified by a listener or one accredited independent certifier. In order to ensure that companies comply with the reporting rules, an independent auditor or certifier will ensure that the information on sustainability complies with the certification standards adopted by the Union. The reporting of non-European companies must also be certified by a European auditor or established in a third country.

From when do the rules apply?

The application of the regulation will be done in three stages:

  • 1erJanuary 2024 for companies already subject to the directive on the publication of non-financial information;
  • 1erJanuary 2025 for large companies not currently subject to the directive on the publication of non-financial information;
  • 1erJanuary 2026 for listed SMEs, as well as for small and non-complex credit institutions, and for captive insurance companies.

Next steps

The provisional agreement reached today will have to be approved by the Council and the European Parliament.

As far as the Council is concerned, the provisional political agreement will be subject to the approval of the Permanent Representatives Committee (Coreper), before moving on to the formal stages of the adoption procedure. The directive will enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

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