Governance Briefing — April 21, 2021
The European Commission proposed the Corporate Sustainability Reporting Directive on April 21, 2021, expanding EU sustainability reporting to nearly 50,000 companies with assurance and EU sustainability standards.
Executive briefing: On 21 April 2021 the European Commission unveiled the Corporate Sustainability Reporting Directive (CSRD) proposal as part of its sustainable finance package. The draft directive would extend reporting obligations beyond large public-interest entities to all large EU companies and listed SMEs (excluding micro-enterprises), require limited assurance, and mandate the use of European Sustainability Reporting Standards.
Key provisions
- Expanded scope. Approximately 49,000 companies would be covered, including EU subsidiaries of non-EU groups and listed SMEs subject to proportionate standards.
- Assurance and digital tagging. CSRD would require limited assurance over sustainability information and xHTML reporting with digital tagging aligned to the European Single Electronic Format.
- Standard setting. EFRAG was tasked with developing EU sustainability reporting standards covering governance, strategy, risk management, and metrics, embedding double materiality.
Implications for boards
- EU issuers. Boards must integrate sustainability governance into enterprise risk management, aligning oversight structures with forthcoming ESRS governance disclosures.
- Non-EU parents. Multinationals need group-level data governance and controls to consolidate EU subsidiary reporting within the CSRD timetable.
- SMEs and public bodies. Listed SMEs and state-owned enterprises should plan proportional reporting roadmaps and evaluate opt-out options during the transitional period.
Action checklist
- Conduct a gap analysis comparing existing sustainability reporting to anticipated ESRS governance, strategy, and risk management disclosures.
- Establish data assurance workstreams with finance and internal audit to prepare for limited assurance engagements.
- Plan digital reporting processes that support xHTML publication and ESRS taxonomy tagging.
Sources
- Proposal for a Corporate Sustainability Reporting Directive
- Sustainable finance package: Commission proposes new Corporate Sustainability Reporting Directive
Zeph Tech supports EU and multinational issuers in designing CSRD governance structures, data controls, and assurance roadmaps ahead of ESRS adoption.