The EU Corporate Sustainability Reporting Directive (“CSRD“) entered into force on 5 January 2023 and the associated European Sustainability Reporting Standards (“ESRS“) were adopted by the European Commission on 31 July 2023. Together, the CSRD and ESRS create detailed sustainability reporting requirements that will apply to a significant number of EU and non-EU companies and substantially increase the scope of their sustainability reporting.

Application of the rules is now imminent and, for some, CSRD reporting periods will begin from 1 January 2024.

In this update, we take a look at the implications of the CSRD for non-EU companies and what companies can do to prepare.

Overview of the disclosure requirements

Under the CSRD, in-scope companies will be required to disclose a wide range of sustainability-related information, including:

1. a description of the company’s business model, strategy and sustainability risks and opportunities;
2. ESG-related targets and annual progress on meeting these targets;
3. separate sustainability statements included in the company’s management reports, containing sector-agnostic, sector-specific and company-specific information, in accordance with the ESRS;
4. implementation plans in relation to the transition to a sustainable economy, measures taken to limit global warming in line with the Paris Agreement and to achieve climate neutrality by 2050 and exposure to coal, oil and gas-related activities;
5. sustainability matters that affect the company and the impact of the company on sustainability matters (the so called “double materiality” perspective);
6. greenhouse gas emission targets;
7. policies in relation to sustainability (including incentive schemes linked to sustainability matters);
8. EU taxonomy alignment data; and
9. due diligence processes implemented by the company in relation to sustainability matters and the actual and potential adverse impacts of the company’s operations and value chain.

Significant additional detail has been provided for in the ESRS, including two cross-cutting standards (ESRS 1 and ESRS 2) that provide general reporting concepts (including double materiality and reporting boundaries) and overarching disclosure requirements, and ten topical standards with specific disclosure requirements for ESG matters. For more detail on the disclosure requirements under the CSRD and the ESRS, please read our earlier updates here and here.

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