What we know so far about the roadmap to CSRD

28 June 2022 – written by Rutger de Roo van Alderwerelt

Our previous article described the regulations around Corporate Sustainability Reporting Directive (CSRD). Companies are becoming increasingly aware of their business operations’ social and environmental impact, leading to the introduction of sustainability reporting standards, referred to as Environmental, Social, and Governance reporting (ESG).  This article describes the roadmap to Corporate Sustainability Reporting Directive (CSRD). As soon as the roadmap to CSRD changes, we will also publish an update.  

In December 2019, The EU Commission announced it would review the existing Non-Financial Reporting Directive in light of the European Green Deal. Throughout 2020, the EC launched public consultations with stakeholders and mandated the European Financial Reporting Advisory Group (EFRAG) to conduct preliminary action on expanding EU non-financial reporting standards. Based on the recommendation of the EFRAG to develop EU sustainability reporting standards, the EC made its first proposal for the Corporate Sustainability Reporting Directive (CSRD) in April 2021.  

This directive extends the existing reporting requirements of the Non-Financial Reporting Directive (NFRD), aimed to bring sustainability reporting to the same level as financial reporting. In February 2022, the CSRD was approved by the European Council (EC), after which it was submitted to the European Parliament (EP). In their submission, some amendments were proposed, including a delay for several deadlines and a smaller reporting burden for SMEs.  

 It was planned to be effective from 2024, reporting on Fiscal Year 2023. However, the European Council proposed delaying it to start in 2025, with different phases for specific companies.  

• Phase 1: 2025, report on FY2024 – Companies already complying with NFRD  
• Phase 2: 2026, report on FY2025 – Large companies that did not yet comply with NFRD  
• Phase 3: 2027, report on FY2026 – Listed Small to Medium-sized Entreprises (SMEs) & small banks and insurance companies 

In addition, a new deadline for reasonable assurance is requested to only be effective from 6 years after their starting point in complying with CSRD. E.g., when you start in 2026, the reasonable assurance would begin in 2032. We illustrate this timeline in the below figure:

In April 2022, the EFRAG published the first exposure draft of the European Sustainability Reporting Standards (ESRS). We attended several public consultations throughout Q2 and Q3 2022 of the EFRAG, where they received valuable feedback from different stakeholders.

In June 2022, the European Parliament and European Council reached a provisional political agreement on the CSRD, paving the way for the European Parliament to approve it. On 10 November 2022, the European Parliament approved the CSRD. Keeping this momentum, the EFRAG presented their first draft of the ESRS to the European Commission on 23 November 2022. The EP’s CSRD approval and the EFRAG’s presentation of the first ESRS drafts set the stage for the European Commission to consult EU bodies and member states on these drafts prior to adopting the first set of the ESRS in the second quarter of 2023.  After this, the EP and Council have a period of further examining the CSRD and the ESRS. You can also already explore the new draft on their website.

In the meantime, we keep you updated on all the CSRD developments and how our services and technology will help you prepare for the upcoming challenges of increasing data volumes and reporting processes.