European Commission proposes a Corporate Sustainability Reporting Directive
The European Commission announced on 21 April 2021 that it had adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), which would amend the existing reporting requirements of the Non-Financial Reporting Directive (NFRD).
- extends the scope to all large companies and all companies listed on regulated markets (except listed micro-enterprises);
- requires the audit (assurance) of reported information;
- introduces more detailed reporting requirements, and a requirement to report according to mandatory EU sustainability reporting standards; and
- requires companies to digitally ‘tag’ the reported information, so it is machine readable and feeds into the European single access point envisaged in the capital markets union action plan.
By way of background, some EU law has been carried over into UK law following Brexit. The European Union (Withdrawal) Act 2018 (EUWA) provides a new constitutional framework for the continuity of ‘retained EU law’ in the UK, replacing EU treaties that had until that point applied in the UK. Much EU legislation falls outside of the three categories of retained EU law. For the most part, EU directives are no longer applicable in the UK. Exceptions would be where domestic legislation has implemented them or where specific rights in the directives have been recognised by case law.
At this point, therefore, the European Commission’s proposal for a CSRD is an interesting development and one worth keeping in mind for UK corporates. It provides, at least, evidence of a desire to move towards a common standard for sustainability reporting for European corporates, mirroring initiatives elsewhere in the world.
More information on the proposal can be found here.
Published 29 April, 2021