The Corporate Sustainability Reporting Directive (CSRD) is part of the sustainable finance agenda and a key component in achieving the objectives of the EU’s Green Deal. The purpose of the directive is to make more information available about how companies impact people and the environment, and about how companies are impacted by environmental - issues in the form of the risks and opportunities these issues present for the organization.
What is the CSRD?
Companies and organizations that are subject to the reporting obligations will need to report in accordance with the European Sustainability Reporting Standards (ESRS). This entails a wider scope of the sustainability information that must be reported from across the entire value chain compared to previous requirements that focused solely on the company’s own activities. The sustainability topics that are to be included in the report are determined by conducting a double materiality analysis, the requirements of which are stated in the ESRS.
These standards are being developed by European Financial Reporting Advisory Group (EFRAG) , and there are currently 12 standards in existence, which were adopted as a Delegated Act to the CSRD in July 2023:
- 2 general standards (general requirements; general disclosures)
- 5 environmental (climate change; pollution; water and marine resources; biodiversity and ecosystems; circular economy)
- 4 social (own workforce; workers in the value chain; affected communities, consumers and end-users)
- 1 governance (responsible business conduct)
Due to the new standards, companies should be able to provide comparable, adequate, and qualitative information about their impact on people, the environment and the climate. This reporting will enhance transparency and comparability as companies will need to provide more comprehensive sustainability-related disclosures and information than is required by today’s reporting. Find out more about the different standards and their contents here.
Who is affected by the CSRD?
One major change is that more companies in the EU will be subject of CSRD than to its predecessor, the NFRD (Non-Financial Reporting Directive). Today, 11,700 companies are required to report on sustainability and this number will increase to about 49,000 companies once the CSRD has been fully implemented.
In Sweden, this will not make as big a difference in terms of which companies are affected as Sweden went further than the NFRD when the directive was incorporated into the Swedish Annual Accounts Act, by lowering the threshold values that determined which companies were required to prepare a statutory sustainability report. However, the sustainability report's scope will expand for companies required to report.
Timeline for the CSRD implementation
The CSRD came into effect on January 5, 2023, and the pertaining reporting standards (ESRS) were adopted on July 31, 2023. In addition to this, sector-specific standards, standards for listed small and medium companies, voluntary standards for non-listed small and medium companies, and standards for non-EU companies will also be developed and adopted. Currently, simplified standards for listed small and medium companies and voluntary standards for non-listed small and medium companies are available in draft form.
Each member state is now incorporating the directive into national legislation. Sweden has adopted the directive into Swedish legislation, and this came into effect on July 1, 2024. The Swedish law differs from the EU directive in terms of when the first group of companies (Public Interest Entities) will need to report under the CSRD. This means that in Sweden, the deadline was postponed by six months and the thresholds for large companies will be higher than the thresholds stated in the EU directive.
The CSRD will be introduced gradually, based on company size, starting with the 2024 financial year (FY), in other words for reports published in 2025. Below is a timeline of how the implementation will proceed including the types of companies impacted:
CSRS timeline
Reporting years and associated requirements
EU PIEs (Public Interest Entities) with more than 500 employees. In Sweden this applies to Public Interest Entities whose FY starts on or after July 1.
SLarge companies that fulfil at least two of the following criteria:
- more than 250 employees;
- more than EUR 40m in turnover; or
- more than EUR 20m in total assets.
In Sweden this applies to large companies that fulfil at least two of the following criteria:
- listed small and medium companies
- small and non-complex credit institutions, and
- captive insurers.
- Non-EU companies that have subsidiaries and branches in the EU generating a turnover of EUR 150m in the EU during the prior two years and that fulfil one of the following:
- a subsidiary that is subject to the reporting requirements for FY 2025–2026 (as described above).
- a branch that generates more than EUR 40m in turnover in the prior year.
* Small and medium companies and non-EU companies will report according to separate sustainability standards.
Exemptions and further rules may affect which companies and organizations will be obliged to report in accordance with the new standard.
How we can support you
Regardless of where your company is in the process, we can help you with preparing for and the implementation of CSRD.
Some of the areas we can assist you with include:
- Conducting a double materiality analysis (DMA), in accordance with the ESRS requirements, to define your reporting needs
- Conducting a gap analysis compared to the ESRS requirements, encompassing current reporting, availability of data and systems mapping, internal control processes, and more
- Developing strategies, priorities and project plans to close the gaps identified
- Supporting you to close the gaps identified, for example through data gathering, and developing policies, actions and targets
- Supporting with the EU taxonomy find out more here
Connect with our experts
Christopher Larsson
Sustainability Advisor & Auditor, Assurance & Sustainability Services
KPMG in Sweden
