EU legislators reach agreement on sustainability reporting, including rules on its assurance
On 21 June, the Council of the EU and the European Parliament (EP) reached a political agreement on the Corporate Sustainability Reporting Directive (CSRD).
This agreement is a major step as financial and sustainability information will be put on an equal footing for the first time in the EU and beyond.
On 29 June, the EU ambassadors approved the political agreement. The EP Legal Affairs (JURI) Committee is expected to vote on the provisional agreement on 14 July.
Some of the main changes the agreement brings are:
- scope enlarged to all large and all listed companies (250+ employees); non-EU companies (Euro 150 million net turnover)
- gradual approach to reporting:
- first reports are expected in 2025 (for financial year 2024) by companies covered by the Non-Financial Reporting Directive (NFRD)
- other large listed and non-listed companies will report in 2026 (for financial year 2025)
- listed small and medium-sized enterprises (SMEs) will report in 2027 (for financial year 2026), but can ‘opt-out’ from reporting requirements for a two-year transitional period
- non-EU companies will be expected to issue first reports in 2029 for the financial year starting 1 January 2028
- the EC shall adopt the first set of sustainability reporting standards by 30 June 2023; second set and sector specific standards as well as for SMEs – by 30 June 2024
- the CSRD introduces an EU-wide requirement for limited assurance on sustainability information with moving to reasonable assurance as an end goal
- the EC is empowered to adopt limited assurance standards before 1 October 2026 and has to adopt assurance standards for reasonable assurance no later than 1 October 2028, following an assessment to determine if reasonable assurance is feasible for auditors and companies
- the statutory auditor, another auditor or an independent assurance service provider (IASP) can conduct an assurance engagement
- sustainability assurance will be excluded from the Audit Regulation’s 70% cap on the provision of non-audit services to PIE audit clients
Easier access to corporate information for investors: Council agrees its position on ESAP
The Council has agreed its position on the European Single Access Point (ESAP) proposal.
The aim of this initiative is to improve public access to relevant corporate information. ESAP will centralise entities’ financial and non-financial information and present it in an easy to compare digital format. This will enable investors, financial analysts and intermediaries, public authorities and civil society to have a better understanding of the capital market and make informed decisions.
ESAP does not introduce new reporting obligations but builds on the disclosure requirements in the current EU legislation, including audit legislation. This means that the ESAP platform will contain already established types of data, as well as publicly available information, including:
- annual financial statements
- management reports
- transparency reports
- audit reports
- public register of auditors
- sanctions on auditors imposed by the competent authorities