Recap: EU Sustainability Reporting Requirements effective from 1 January 2024

Starting 1 January 2024, large public-interest entities falling within the scope of the Non-financial Reporting Directive (NFRD) must comply with revised requirements outlined in the Corporate Sustainability Reporting Directive (CSRD). Large public-interest entities with more than 500 employees as well as public-interest entities that are parent companies of a large group must include information essential for comprehending the entity’s impact on sustainability matters. Additionally, they must provide insights into how sustainability matters influence the entity’s development, performance, and position.

Public-interest entities, as per definition, encompass companies with securities listed in EU regulated markets, banks, insurance companies and any other companies designated by Member States. The first report must be submitted until 2025 for the fiscal year 2024.

Companies are mandated to disclose the impact of sustainability topics on their financial value (financial materiality), impact on the economy, environment, and people (impact materiality), and the interconnections between them.

Companies must provide qualitative and quantitative information on their:

Business model and strategy, along with its resilience to sustainability risks, opportunities, and transition plans;

targets and the progress made towards achieving those targets;

Role of the administrative, management and supervisory bodies and their expertise and skills to fulfil these roles;

Policies, processes, and incentive schemes;

Adverse impacts and actions to prevent, mitigate and remediate them;

Principle risks and their management.

Companies must report according to European Sustainability Reporting Standards (ESRS). The standards are developed by EFRAG (European Financial Reporting Advisory Group), a private association established in 2001. EFRAG, comprised of European stakeholders, national organizations, and civil society organizations, provides technical advice to the European Commission in the form of fully prepared draft EU Sustainability Reporting Standards and/or draft amendments. The first set of 12 sector-agnostic ESRS standards was already approved.
The CSRD came into effect on 5 January 2023, amending the Directive 2013/34/EU and the Member States of the European Union (EU) must transpose it into national legislation within 18 months (by 6 July 2024).