Sustainability reporting in 2023 - Proposals of the EU Commission for the revision of the CSR guidelines
This blog post is not up to date. Here you can find everything about the current developments regarding Sustainability Reporting and EFRAG taxonomy - to the current blog post
Detailed reporting with regard to the ESG (environmental, social, governance) factors of companies is becoming increasingly important. In addition to an increased awareness of the topic of sustainability in society as a whole, investors in particular are interested in the development of non-financial data. Through increasing reporting obligations, companies and financial market participants are to disclose in particular the extent to which their corporate actions affect the environment and society and to what extent there are opportunities for optimization.
In this context, the EU Commission is primarily aiming for greater transparency and quality in reporting in order to offer investors more security. The proposal to revise Directive 2014/95/EU could now help in this regard.
Proposal for the revision of Directive 2014/95/EU
On April 21, 2021, the proposals of the EU Commission for a revision of the CSR Directive 2014/95/EU ("Directive on the disclosure of non-financial information") were published. These are primarily aimed at increasing the transparency of companies in the sustainability area as well as the development of a comprehensive sustainability report.
To give you a complete overview of the upcoming changes, we have answered all the important questions briefly and compactly in this blog post:
1. When are the regulations expected to apply?
The member states envisage that the proposed regulations will be applied to financial years beginning on or after January 1, 2023. As of January 1, 2026, sustainability-related reporting requirements are then also to apply to capital market-oriented small and medium-sized enterprises.
2. Which content-related reporting fields are necessary?
Through Directive 2014/96/EU, companies have so far been required to report at least on environmental, social and employee issues, respect for human rights and the fight against corruption and bribery. These reporting fields remain in place, but are to be increasingly geared towards anchoring sustainability aspects and indicators in the company's strategy and management system. What is new, however, is reporting with regard to corporate governance. The so-called corporate governance factors are intended to provide information on the role of the administrative, management and supervisory bodies and relevant sustainability aspects in this respect, the composition of such bodies and the internal control and risk management systems of a company.
3. Who is affected by the new regulations?
The original proposed amendment required all listed companies and companies with more than 250 employees to provide comparable audited disclosures in inline XBRL/ESEF format. However, the update of the Non-Financial Reporting Directive (NFRD) by the Council of the European Union results in a change regarding the new disclosure requirements for companies. Private companies with more than 250 employees are now exempt from the requirement to provide disclosures in inline XBRL format, while the ESEF requirements for public companies remain in place.
4. What are the reporting formalities and where will the report be anchored?
Reporting is to be done in a standard electronic format according to ESEF Regulation (EU) 2019/815 for financial statements and management report. Therefore, the information is to be prepared in XHTML format and labeled according to a taxonomy. The corresponding categorization system is still being developed.
5. What are the practical implications of the amendments?
The implementation of the currently available amendment proposals would be of great importance for sustainability reporting and potential users. Companies therefore face a variety of challenges in the future. The expansion of the scope with regard to ESG reporting, the digital availability of the sustainability report as well as the redesign of the content and the external audit requirement for the sustainability report. The new CSR Directive also follows a dual materiality perspective. This means that companies must record the effect of sustainability aspects on the economic situation of the company and clarify the impact of operations on sustainability aspects.
Our SmartNotes customers have been steadily expanding their use of SmartNotes to include ESG reporting content for many years now. You can also see this in our success stories. AMANA strongly supports the proposal for collaboration between EFRAG and IFRS Foundation of Accountancy Europe and wants to contribute to sustainable reporting of the future.
Learn more in our webinar "ESG Reporting with AMANA: Automated Data Flow and integrated XBRL Tagging" on 07.09.22 from 14:00 - register now!