First Reading on Corporate Sustainability Reporting Directive in European Parliament scheduled for 9 November 2022


Time to read

2 Minutes


Valentin Jentsch
Tenure Track Assistant Professor of Corporate Law, University of St. Gallen
Thomas Berndt
Full Professor of Accounting, University of St. Gallen
Sara Fischer
Student Assistant, University of St. Gallen

In its Communication on the European Green Deal of 11 December 2019 (at 17), the European Commission announced its intention to review the Non-Financial Reporting Directive (2014/95/EU, NFRD), which lays down the rules on disclosure of non-financial and diversity information by certain large companies and amends the Accounting Directive (2013/34/EU), as part of its strategy to strengthen the foundations for sustainable investment. It was generally perceived that non-financial information currently provided by companies is not very reliable or comparable, despite the accompanying guidelines on non-financial reporting in general (here) and climate-related information in particular (here).

On 21 April 2021, the Commission adopted a Proposal for a Corporate Sustainability Reporting Directive (CSRD), which would amend existing reporting requirements of the NFRD. The Proposal extends the personal scope of application to all large companies and all companies listed on regulated markets, except listed micro-enterprises. The Proposal also requires an audit or assurance that the reported information is accurate and introduces more detailed reporting requirements, including a requirement to report according to mandatory sustainability reporting standards. The Proposal further ensures that all sustainability information is published in a dedicated section of companies’ management reports.

At the European Parliament, the file has been referred to the Committee on Legal Affairs, with MEP Pascal Durand as the rapporteur. On 16 November 2021, the rapporteur presented his Report, and on 14 December 2021, amendments were tabled in the Committee on Legal Affairs. The rapporteur’s proposal to amend the CSRD focuses on three main areas:

  • further developing and deepening the Proposal’s provision for a simplified common basis for non-financial reporting in terms of both the format and type of information to be taken into account for the development of reporting standards;
  • broadening the scope of the CSRD to address the information needs of investors and stakeholders on sustainability issues; and
  • allowing the opening-up of the sustainability audit market by promoting the emergence of independent assurance service providers and separating financial audits and sustainability audits.

Shortly thereafter, on 24 February 2022, the European Council adopted unanimously a General Approach on the proposed CSRD. While the Council largely endorsed the position of the Commission and the Parliament, it proposed changes to the subjective scope of the Directive in order to ensure that reporting requirements are not too burdensome for listed small and medium-sized enterprises.

Pursuant to a Press Release following negotiations in the trilogue, the Parliament and the Council reached a provisional political agreement on 21 June 2022. Pursuant to this agreement, the new rules will apply to all large companies and all companies listed on regulated markets, to listed small and medium-sized enterprises, taking into account their specific characteristics, and to non-European companies which generate a net turnover of at least EUR 150 million and have at least one subsidiary or branch within the European Union. In addition, reporting must be certified by an accredited independent auditor or certifier. The new rules are expected to become effective in three stages (2024, 2025 and 2026).

The debate in plenary session of the European Parliament is scheduled for 9 November 2022.

Valentin Jentsch is a Tenure Track Assistant Professor of Corporate Law at the University of St. Gallen and a Research Affiliate at the Max Planck Institute for Tax Law and Public Finance in Munich.

Thomas Berndt is a Full Professor of Accounting at the University of St. Gallen and a Director at the Institute of Public Finance, Fiscal Law and Law and Economics.

Sara Fischer is a Student Assistant at the University of St. Gallen.


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