Sustainability reporting

The CSRD: From paper tiger to transition instrument

October 19 2022
Education

On 21 April 2021, in the wake of the EU Green Deal, the European Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD) aimed at revising and strengthening rules introduced by the existing Non-Financial Reporting Directive (NFRD).

This proposal is intended to ensure that companies report reliable and comparable sustainability information necessary for stakeholders to evaluate companies’ non-financial performance. Its main purpose is to improve transparency for all stakeholders in order to re-orient investments towards more sustainable technologies and companies.

As noted in the No Escape report we issued in July 2021, the proposed directive entails a dramatic increase in the number of companies subject to the EU sustainability reporting requirements, with an estimated 49,000 companies in Europe and more than in the Netherlands being subject to the new mandatory reporting requirements.

In this publication, the level of preparedness of selected companies against critical elements included in the CSRD proposal was assessed. The research showed that none of the sampled companies’ 2020 Annual Reports included the level of detail required by the CSRD proposal. Moreover, this finding was stronger within the non-listed companies than within the listed companies.

A year later

This year, due to the growing momentum with respect to the CSRD, the same study population – the 24 listed companies in the Netherlands (AEX index) and the 22 large non-listed Dutch companies – was kept and studied using an updated methodology. The methodology was extended to conduct a high-level CSRD readiness assessment derived from the draft standards (Working Papers) released in March 2022 by the European Financial Reporting Advisory Group (EFRAG).

This paper aims to provide an overview of the level of preparedness against the main disclosure requirements of the CSRD, as included in EFRAG’s Working Papers. This report concludes with key findings and recommendations for companies to consider.

'Sustainability reporting The CSRD: From paper tiger to transition instrument' is one of the topics in the Open Topic modules of the ESG Innovation Intitute. The first Executive ESG topic module: ESG & Reporting starts at 12 December 2022.

The paper is previously published on www.kpmg.nl.

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