Corporate Sustainability Reporting Directive: Schedule Confirmed, Reporting Obligation Extends to Listed SMEs
On 21 June 2022, the Council of the European Union and the European Parliament reached a provisional agreement on the content of the Corporate Sustainability Reporting Directive (the CSRD) and the schedule for its entry into force. According to the agreement, the reporting obligation would apply to all listed companies, except the smallest micro-enterprises, and non-EU companies that operate in the European internal market and have a revenue that exceeds certain limits. This approach deviates from the proposal published in the spring, according to which the listed SMEs would be exempt from the reporting obligation.
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The CSRD will enter into force in four phases:
- As of 1 January 2024, the Directive will apply to large companies that fall under the scope of application of the existing Non-Financial Reporting Directive (NFRD). These companies will have to publish their first reports in accordance with the Directive in 2025.
- As of 1 January 2025, the Directive will apply to other large companies, i.e. companies that do not fall under the scope of application of the NFRD and that meet at least two of the following criteria: at least 250 employees, revenue at least EUR 40 million or balance sheet at least EUR 20 million. The first reports must be published in 2026.
- As of 1 January 2026, the Directive will apply to listed SMEs, small and non-complex credit institutions and captive insurance undertakings. The first reports must be published in 2027. The Council and the European Parliament enable SMEs to deviate from the reporting obligation during a transitional period of two years. In that case, the reporting obligation would be mandatory as of 2028, and the first report would have to be published in 2029.
- As of 1 January 2028, the Directive will apply to non-EU companies that have a revenue of more than EUR 150 million in the EU and that have at least one large or listed subsidiary or branch in the EU (revenue at least EUR 40 million). The first reports must be published in 2029. The reporting obligation will apply to the subsidiary or branch located in the EU.
The reporting obligations applied to SMEs will be more limited, and SMEs that do not fall under the scope of application of the Directive can also voluntarily observe them as of 2026.