Moving From Non-Financial to Sustainability Reporting: Analyzing the Eu Commission’s Proposal for a Corporate Sustainability Reporting Directive (Csrd)

Abstract

Non-financial reporting as established through the NFRD (2014/95/EU) has become a core element of the EU Commission’s ambitions to transform the European economy towards more sustainability. To address the increased criticism which meets the current reporting requirements, the EU Commission initiated the development of a new set of European Sustainability Reporting Standards, followed by issuing the proposal for a new directive to supersede the NFRD. This paper analyzed these proposals in the light of previous findings from academia and corporate practice, contributing to an ex-ante impact assessment. As a result, it shows that improving completeness, comparability and reliability are the two main goals of the EU Commission. However, many of the new proposed requirements are excessive and raise fundamental questions concerning acceptable levels of administrative burden for companies as well as necessary conceptual fundaments for a reporting framework.

¿Cómo opinan los auditores de la información sobre sostenibilidad? Una propuesta novedosa de informe de verificación en Europa

“…Además, los auditores opinarían sobre la calidad del sistema de control interno 17 sobre la información no financiera. De esta manera se atiende a (Baumüller & Grbenic, 2021;Cohen & Simnett, 2014).…”

A Review of Environmental, Social and Governance (ESG) Regulatory Frameworks: Their Implications on Malaysia

“…Compared to other regions, the European Union has a more comprehensive and mature legal frameworks of ESG, despite that most of the requirements are recent. The EU has recently passed several directives related to ESG, namely the EU Taxonomy promoting sustainable investments through establishing a classification system for economic activities according to their sustainability level [20], the Corporate Sustainability Reporting Directive specifying ESG reporting requirements [21], and the Sustainable Finance Disclosure Regulation to prevent greenwashing via enhancing the transparency of sustainable investment (also see Table 1) [22]. The EU's Corporate Sustainability Due Diligence Directive, which necessitates the exercising of due diligence by companies and their value chains to safeguard human rights and prevent environment risks, was also passed in 2023 but will only come into force in 2025 [23].…”

“…For instance, the EU's Non-Financial Reporting Directive introduced in 2014 requires the reporting of matters related to the environment, social responsibility, human rights and board diversity, similar to its latest ESG reporting requirements but is limited in its coverage of climate risks, anti-corruption measures and target-setting or metrics as well as its scope of companies. This is complemented by the Corporate Sustainability Reporting Directive which expands the scopes of reporting particularly to the environmental aspects, and the companies covered [21]. Similarly, the UK has an existing Streamlined Energy and Carbon Reporting Guidance produced in 2019 but it focuses on energy consumption and carbon emissions as well as measures to improve energy efficiency, and there is limited emphasis on the social and governance aspects (Table 1) [25].…”

“…Therefore, comparison was made against other requirements deemed to have more distinctive elements. The EU's Corporate Sustainability Reporting Directive was chosen due to its differentiated features while the UK's Disclosure Requirements include evaluation of investment products' risks and opportunities though it contains other elements which were modified from the TCFD's Recommendations [19,21]. The Brazilian Management and Disclosure of Social, Environmental and Climate Risks has an extended scope covering the social and environmental facets [32].…”

“…Governance is related to the approaches and visions of an organization on ESG which affect its subsequent implementation [8]. Table 2 shows that the frameworks have similar disclosure requirements for governance except that the Corporate Sustainability Reporting Directive requires the description of sustainability-related incentive schemes offered [21] and the Sustainability Disclosure Requirements cover product-level governance in addition to that of a firm, prompting board oversight of risks related to investment products [19]. The outlining of management's role is required by all frameworks in Table 2.…”