New directive takes EU corporate sustainability reporting to the next level

The European Commission (EC) has proposed the Corporate Sustainability Reporting Directive (CSRD) to strengthen sustainability reporting. This is fundamental for achieving a sustainable economy. It requires companies to share more targeted, reliable, and easily accessible information as the basis for sustainable decision-making. See also our accompanying statement on the EU’s progress on sustainability reporting standards.  

Accountancy Europe has been contributing to the sustainability reporting agenda for nearly two decades. Recently with a call to strengthen EU requirements (Oct 2019), responding to the relevant EC consultation and our position paper on achieving high-quality sustainability assurance (June 2020). Check out our related event on 29 April 2021 including speakers from the EC, European Parliament, and business. 

We commend the EC for proposing the CSRD and taking the lead in Europe and globally on the sustainability agenda. See below our views on the proposal’s specifics.  

Expand the scope 

The CSRD’s proposed enlarged scope is needed to cover more companies that significantly impact the environment and society. In line with the expansion of the scope, European sustainability reporting standards need to be developed quickly to meet the ambitious EC timeline whilst being of high quality and fit for purpose to different sizes of companies.

Simplify for SMEs  

We support developing a voluntary reporting standard for SMEs as the EC proposed. This can reduce their administrative burden and will assist SMEs in addressing information demands from financial institutions and companies that need sustainability data for their own compliance.

Mandate sustainability reporting standards  

The EU needs appropriate sustainability reporting standards for companies to comply with the CSRD and to ultimately achieve the Green Deal’s objectives. Such standards will also provide the basis for assurance and digitisation of sustainability reporting. See also our accompanying statement on the EU’s progress on sustainability reporting standards.  

Require third-party independent assurance 

Investors are voicing the need for third-party independent assurance to make sustainability reports more credible. We support the EC’s proposal to require ‘limited assurance’ over sustainability reporting. We find that the level of assurance should ultimately not differ from that on financial information. The EU should aim for ‘reasonable assurance’ as an end goal, for example, over three to five years (see our relevant position paper). 

Digitalise sustainability information  

We support the EC’s proposal to create a taxonomy that includes ‘tags’ as they will make sustainability reporting machine–readable. Digitalisation improves the access and efficiency of corporate reporting. 

Include disclosures in the management report 

We support the EC’s plans to require companies to report sustainability information in the management report. It will help improve integrating sustainability (non-financial) and financial disclosures and allow users to have direct access to sustainability information.