EU Commission publishes first set of standards for sustainability reporting

The new Corporate Sustainability Reporting Directive (EU) 2022/2464 has been in force since 5 January 2023 (see cepPolicyBrief). The CSRD replaces the Non-Financial Reporting Directive (NFRD, 2014/95/EU) and obliges a large number of companies to include sustainability-related information in their management reports.

The CSRD stipulates that the Commission, taking into account preparatory work by the European Financial Reporting Advisory Group (EFRAG), must adopt several delegated acts to specify the content and structure of sustainability reporting. EFRAG already submitted a technical opinion in November 2022.

According to the CSRD, the Commission was supposed to adopt a first set of sector-independent reporting standards by 30 June 2023. With a one-month delay, the Commission has now completed this step on 31 July (see here).

The first set of reporting standards now issued applies to all companies that fall within the scope of the CSRD, irrespective of the sector(s) in which the respective company operates. It is thus highly relevant for a large number of companies, in particular for

  • all capital market-oriented companies, banks and insurance companies with more than 500 employees,
  • Large companies, banks and insurance companies, regardless of their capital market orientation, with more than 250 employees, a balance sheet total of more than 20 million euros or an annual turnover of more than 40 million euros, and for
  • listed small and medium-sized enterprises (SMEs) as well as small and non-complex banks and captive insurance companies.

The first set of reporting standards consists of two cross-cutting standards and a total of ten standards on environmental, social and governance (ESG) aspects. It will apply to all companies already subject to the Non-Financial Reporting Directive (NFRD) from 1 January 2024. For all other companies subject to the CSRD, they will gradually become applicable at later dates.

In presenting the first set of reporting standards, the Commission now emphasises that it has once again noticeably streamlined these standards compared to EFRAG's proposals, in particular to ensure their proportionality. In doing so, it places particular emphasis on the following aspects:

  1. It puts more focus on the principle of materiality: All standards, disclosure requirements and data points are to be subjected to a materiality analysis. This does not apply to the standard on "general disclosures". Therefore, disclosures should only have to be made if they are actually material.
  2. It wants to introduce certain reporting requirements only gradually. This should make it easier for small and medium-sized enterprises (SMEs), in particular, to meet the reporting requirements. For example, companies with fewer than 750 employees can initially waive certain disclosures on Scope 3 greenhouse gas emissions and biodiversity. All reporting companies can also opt out of disclosing the expected financial impacts of non-climate related environmental issues.
  3. It expands the range of disclosures that companies can make voluntarily, i.e. some disclosures should not be mandatory, contrary to EFRAG's plans. This includes, for example, information on the companies' biodiversity plans.
  4. It also emphasises that it has designed the standards to ensure a high degree of coherence and interoperability with global standard-setting initiatives. The efforts of the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) are particularly noteworthy here. The ISSB has only published two first sustainability reporting standards on 26 June 2023 (see here).

The Commission intends to formally transmit the delegated act on the first set of reporting standards to the European Parliament (EP) and the Council in the second half of August. The EP and Council will then have a maximum of four months to examine it. They cannot amend it. If they do not reject it within the deadline, it is considered adopted. If they do not reject it, the act will apply from 1 January 2024 for financial years starting on or after 1 January 2024.


Philipp Eckhardt, Policy Analyst Financial Markets, eckhardt(at)cep.eu