According to the Corporate Sustainability Reporting Directive adopted by the EU Parliament on 10.11.2022 (CSRD) enters the Reporting obligation from 2024 SMEs will also come into force for the first time. The approximately 1,200 large German companies that have already had to prepare annual ESG reporting in accordance with EU Directive 2014/95/EU (NFDR) since 2014 will be joined by a further 15,000 companies from Germany from 2024. They will have to prepare sustainability reports in accordance with the stricter directive. The extension of the reporting obligation is explained by the fact that listed SMEs and companies that meet two of these three criteria are now also included:
- If they employ more than 250 employees
- If their balance sheet total is higher than 20 million euros
- If your net turnover is over 40 million euros
Background to the CSRD reporting obligation
The new EU directive on sustainability reporting replaces the NFDR directive and is an important component of EU climate legislation with the aim of achieving climate neutrality by 2050. EU taxonomy it should offer greater transparency and comparability of the economic activities of all companies. This should ensure the flow of capital from private investors or financial companies towards an environmentally conscious and emission-free economy. The CSRD-Directive is therefore part of the EU's "Sustainable Finance" legislative package. In addition to the environmental aspects, the reports must also cover the areas of social responsibility, human rights and governance of the respective company and are then made available to the public. Standards for CSRD reports are currently being developed so that all financial market participants in the EU can meet their disclosure obligations in a uniform manner and there is complete transparency. These are due to be adopted by the EU Commission in summer 2023.
What content must be disclosed in the CSRD reports?
In addition to the areas that already had to be disclosed under the NFDR Directive (environmental, social, governance), sustainability reporting under CSRD now requires further information in the annual company report. This includes content on the taxonomy, business model with strategy and concept, supply chains, corporate goals, performance indicators, sustainable management, changes, handling opportunities and risks, decision-making processes and sector-specific information. All data must be collected and assessed within the company, which could be quite complicated and difficult due to the "double materiality". This means that external environmental impacts of the company's activities must also be assessed. All companies are also required to define targets and disclose their progress in the CSRD report.
Audit obligations and timings
In contrast to the previous EU reporting regulations, no negligent or frivolous reports are permitted now that the CSRD Directive has come into force. They must be included in the management report for the current financial year and must be audited by an independent service provider. All parties involved are subject to an external certification obligation and the balance sheet oath, which previously only applied to financial reporting, is extended to the CSRD sustainability report. They must then be integrated into the management report and submitted in electronic format. Companies that are already subject to the NFDR guidelines are obliged to start collecting data from 2024 so that they can prepare a CSRD-compliant report for the previous year in 2025. For all companies that are now required to report under the new directive, the entire process will be postponed by one year. By 2029 at the latest, companies whose parent companies are not based in the EU will also be subject to the CSRD reporting obligation and will have to publish their reports for 2028.