On November 15, 2022, the European Parliament has adopted the so-called CSRD (Corporate Sustainability Reporting Directive). This will affect a number of both large and small Danish companies already from January 1, 2024, when the first parts of the directive are expected to come into force.
CSRD or 'Corporate Sustainability Reporting Directive' is the latest initiative in corporate sustainability reporting and is about how companies should report on their impact on people and the environment as well as their corporate governance - so-called ESG data.
The purpose of the directive is to ensure the reliability of the sustainability data provided by companies and thus help ensure that companies are accountable for their climate impact.
CSRD requires more detailed reporting on e.g. environmental conditions, social rights and human rights. In addition, it will be a requirement that the reporting is accompanied by an auditor's statement to ensure the credibility of the reports.
The detailed content of the reporting requirements will be set out in a series of EU standards currently under development (so-called European Sustainability Reporting Standards (ESRS)). It is expected that there will be both general cross-cutting standards and industry-specific standards. Among the requirements that follow from the draft standards are requirements for: description of strategy, goals, goal achievement and value chains, and requirements for the structure of the reports.
The fact that requirements for value chains are included in the reporting means that it must be expected that the new sustainability reporting requirements will not only affect the companies directly covered by the directive, but also many other companies that supply the directly covered companies. CSRD may therefore be relevant regardless of whether a company is directly or indirectly covered. The standards are currently in draft form and must be finally adopted by the European Commission, which is expected to happen in spring 2023.
CSRD amends the current directive on non-financial reporting from 2014, from which the rules on reporting are found in sections 99 a-b and 107 d of the Danish Financial Statements Act, and the new directive tightens the requirements. This means that many more companies will have to report their ESG data, and the requirements for what to report on will be stricter. It is expected that the reporting rules will cover approximately 50,000 companies in the future instead of the current 11,700 companies.
The CSRD is expected to take effect from January 1, 2024 and will be phased in over a period of 2 years, according to the following model:
From January 1, 2024, public interest entities (mainly listed companies, banks and insurance companies) with more than 500 employees will have to comply with the directive and include the reports for the first time from 2025.
From January 1, 2025, other large companies with more than 250 employees and/or €40 million in net revenue and/or €20 million in balance sheet total will have to comply with the directive and include the reports for the first time from 2026.
And finally, from January 1, 2026, listed SMEs will be covered. Details are awaited on the guidelines for their implementation of the reporting requirements.
