The EU has politically agreed on the adoption of the Corporate Sustainability Reporting Directive (CSRD), and will likely adopt it before the end of 2022. The CSRD will overhaul the current sustainability reporting landscape for all multinational companies with significant activities in the EU, including those headquartered outside the EU. The reporting obligations of the CSRD will progressively come into force between 2024 and 2028.
Although the reporting obligations of the CSRD will not be immediately applicable, given the breadth of the reporting requirements, all multinational companies with significant activities in the EU should start planning now as companies will be required to report qualitative and quantitative information across a range of environmental, social, and governance (ESG) issues. As a first step, companies should determine to what extent they will be subject to the requirements of the CSRD. This will then enable them to prepare an optimal reporting strategy, ensuring compliance with these new obligations. Other considerations include ensuring that companies have clear baseline data against which they can monitor progress, that they have adequate systems put in place to measure the necessary data and that there are appropriate resources and a robust governance framework in place to enable meaningful reporting across the areas and geographies that may be required. Since the CSRD is part of a wave of new EU legislative initiatives transforming the ESG sphere from a mainly voluntary framework to compulsory requirements, companies should strive to adopt a holistic approach to compliance with EU ESG legislation, including but not limited to the CSRD, as this will be significantly more efficient and impactful, helping them achieve greater business sustainability and lowering compliance risks in a cost-effective way.
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