In April 2021, the European Commission issued its proposed changes to sustainability reporting in the EU. The new paper’s name that will replace the current Non-Financial Disclosure Directive (NFD) is the Corporate Sustainability Reporting Directive (CSRD). Except for micro-entities, the new CSRD sets out the non-financial information that companies should report in far greater detail. The CSRD’s purpose is to make Sustainability Reporting Data as reliable, verified and comparable as P&L data.

Depending on the EU’s decision and approval speed, companies may have to start reporting to the new sustainability reporting standards as early as 2024, using the information from the 2023 financial year.

The new law affects companies to which at least two of the following three points apply:

  1. €40 million in net turnover
  2. €20 million in assets
  3. 250 or more employees

An additional criterium is whether or not the company is stock-listed. The requirement currently affects those companies listed on regulated stock exchanges but may include companies listed on a Multilateral Trading Facility (MTF) such as, e.g., Nasdaq First North.

What’s the principal difference between NFD and CSRD:

NFD focused on risk and was largely qualitative, with few companies taking a quantitative approach to risk reporting. This is going to change with CSRD.

The CSRD will require company sustainability data to be submitted in a standardized digital format to allow for easier checking and comparison in the European single access point database. This is meant to provide a clear format for company sustainability reporting allowing for better understandability of the data and easier comparison between companies. The submitted data will then be subject to “limited third-party assurance,” meaning that an auditor will need to review and evaluate the accuracy of the data.

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