On 5 January 2023, the EU Corporate Sustainability Reporting Directive (CSRD) entered into force.
The CSRD is an EU “directive” (2022/2464) – a legislative act that sets out a goal that EU countries must achieve.
The CSRD supports the Union’s legal framework and the objectives of the EU Green Deal.
The EU Green Deal is the new growth strategy of the European Union, which aims to transform the Union into a modern, resource-efficient and competitive economy with no net emissions of greenhouse gases (GHG) by 2050, while leaving no person and no place behind.
It will contribute to the EU objective of building an economy that works for the people, strengthening the Union’s social market economy, helping to ensure that it is ready for the future and that it delivers stability, jobs, growth and sustainable investment.
To succeed the Green Deal, it is necessary for the EU to reorient capital flows towards sustainable investment in order to achieve sustainable and inclusive growth, manage financial risks stemming from climate change, resource depletion, environmental degradation and social issues, and foster transparency and long-termism in financial and economic activity.
Disclosing relevant, comparable and reliable sustainability information amongst companies is a prerequisite for meeting those objectives.
The EU Commission was therefore empowered to adopt mandatory common sustainability reporting standards, to ensure that information was comparable, and that all relevant information was disclosed consistent with EU needs.
Building on the double materiality principle, the standards needed cover all information that is material to users of that information.
The development of mandatory common sustainability reporting standards was also necessary to
✔ Enable the assurance and digitalisation of sustainability reporting
✔ Facilitate its supervision and enforcement
✔ Reach a situation in which sustainability information has a status comparable to that of financial information
The adoption of such mandatory common sustainability reporting standards was completed by means of a delegated act on the first set of European Sustainability Reporting Standards (ESRS) on 31 July 2023.
ESRS is now to be used for sustainability reporting by all undertakings subject to the CSRD.
These mandatory sustainability reporting standards (ESRS) specify the information that undertakings are to report in accordance with CSRD articles 19a and 29a-b.
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