## The European Sustainability Reporting Directive: A New Chapter for Businesses
In recent years, the growing awareness of environmental, social, and governance issues has led to the necessity for a significant change in how companies report their activities. The Corporate Sustainability Reporting Directive (CSRD) from the European Commission represents a crucial step in this direction, introducing stricter and more structured reporting requirements for businesses, especially in an ever-evolving global context.
### Evolution of Reporting Requirements
The CSRD reporting requirements will be implemented gradually, meaning different categories of companies will be affected at different times. Larger listed companies will need to comply with the new standards starting from the 2024 financial year, with public disclosures in 2025. Listed small and medium-sized enterprises (SMEs) will need to begin reporting in 2026 but will have the option to voluntarily opt-out until 2028. These SMEs will also have the opportunity to adopt separate standards, developed proportionally to facilitate this transition.
### Preparation and Publication of Standards
The preparation of the European Sustainability Reporting Standards (ESRS) has been accompanied by a complex process of review and consultation. Several documents have been published, including a Cover Letter and Due Process Note, which not only illustrate the process that led to the drafting of the standard drafts but also highlight the main differences compared to previous versions. To further facilitate understanding, a detailed explanatory note has also been provided, clarifying how the new standards meet the requirements established by the CSRD.
One crucial point is the principle of double materiality, which requires companies to consider not only the impacts of their operations on the environment and society but also how external factors can influence their business. This integrated approach is essential to ensure comprehensive and useful reporting, not only for regulators but also for investors and other stakeholders.
### The Role of EFRAG
To ensure the rigorous development of the ESRS, EFRAG (European Financial Reporting Advisory Group) has acted as a technical advisor to the European Commission. Its role has not been without challenges. During the spring, there were significant disputes, particularly from German and French companies, questioning certain aspects of the reporting standards.
However, a turning point was reached with the approval of the standards by the European Commission in July 2023. This approval was pivotal in establishing a clearer regulatory framework regarding the measurability and monitoring of sustainable practices.
### The Structure of the New Reporting
With the entry into force of the CSRD and the approval of the ESRS, companies will need to prepare detailed reports of their sustainability practices, following specific guidelines, for the 2024 financial year. This includes taxes, environmental costs, and investments in sustainable practices—essential aspects for authentic corporate transparency.
Companies already operating under the Non-Financial Reporting Directive (NFRD) and large non-European enterprises with over 500 employees will have to adapt to these comprehensive and updated regulations. This represents a substantial shift from previous approaches, marking a significant step towards greater corporate accountability in a global context.
### The Benefits of Sustainable Reporting
The adoption of sustainable practices and the transparent reporting of related progress are not only legal requirements but also represent an opportunity for companies to enhance their reputation. Businesses that actively communicate their sustainability commitments are more likely to gain the trust of investors, customers, and communities.
Furthermore, clear and well-structured reporting can help…
