Corporate Sustainability Reporting Directive (CSRD)

The Corporate Sustainability Reporting Directive (CSRD) will be the largest European reform of so-called non-financial reporting. The CSRD will replace the existing Non-financial Reporting Directive (NFRD). Thus, for the first time, a uniform framework for the reporting of non-financial data will be defined by the European Commission. The aim of the CSRD is to create transparency and consistency with regard to sustainability information along the financial value chain. By expanding the reporting requirements and content, the aim is to gradually create equality between financial and sustainable non-financial indicators. The CSRD will include more than 140 sustainability indicators (KPIs) that a company must collect and disclose. In addition, the CSRD stipulates that key performance indicators must be included in the company's management report and must be certified by an auditor with at least a limited assurance opinion.

Even non-reporting SMEs that have a business relationship with a reporting company, such as customers, partners and suppliers, can be indirectly affected by the CSRD. This is because reporting companies must provide information about their suppliers and vendors along the entire supply chain. Thus, a scenario is conceivable in which companies affected by the CSRD will in turn require their business partners to disclose certain sustainability information in order to maintain the business relationship. Companies that do not comply with this request could run the risk of slipping down the priority list. This effect, whereby large companies that are subject to certain transparency obligations also pass on these standards within the value chain, is quite intentional on the part of the legislation and is referred to as the trickle-down effect.

The fact that the EU intends to channel capital flows predominantly into sustainable economic activities in the future will further strengthen this effect. Thus, SMEs will also be confronted with the disclosure of sustainability key figures much sooner in the areas of financing and insurance. A timely examination of the CSRD is therefore also recommended for companies that are not directly affected.

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To whom does the CSRD apply and from when?

- From 01.01.2024 for public interest entities with more than 500 employees that are already subject to the Non-Financial Reporting Directive ("NFDR") the reporting obligation starts in 2025

- From 01.01.2025 for large companies not currently subject to the NFRD (more than 250 employees and/or sales of more than EUR 40 million and/or total assets of more than EUR 20 million), the reporting obligation will start in 2026

- As of Jan. 1, 2026, for listed SMEs and certain other companies, the reporting requirement will begin in 2027, although SMEs may be exempt from the requirement until 2028

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