In June 2022 political agreement on new rules for corporate sustainability reporting was achieved; as a result, from the 1st December 2022, the new Corporate Sustainability Reporting Directive (CSRD) will be adopted in the EU member states legislation, and will come into force in the EU on the 1st January 2024. This will amend not only the existing reporting requirements of the current Non-Financial Reporting Directive or NFRD (2014/95/EU) and the current legislation on social responsibility implemented in the Danish Financial Statement Act, but also the Accounting Directive (2013/34/EU).
The purpose of the new directive is to align data and make it transparent as well as to support companies in meeting the increasing demands in terms of sustainability information. Moreover, the CSRD will ensure that investors and other stakeholders are provided with reliable data that will allow them to compare the non-financial information across different businesses. Furthermore, being able to assess how companies create long-term value and contribute to society is another objective, as well as providing improved accessibility to information by making it part of the management report, together with the financial statement.
Therefore, the CSRD aims to define a common, standardised language for sustainability reporting, which must also be audited with limited or reasonable assurance.
The new CSRD and the derived reporting will be more profound within the three areas: Environmental, Social and Governance, each one of them containing diverse aspects undertakings will need to measure and report on. This is from environmental protection, alignment with the objective to achieve climate neutrality by 2050, diversity and respect for human rights to the new double materiality concept (sustainability risks affecting companies as well as companies´ impacts), information about intangibles and more forward-looking information in terms of targets, progress, etc.
The new legislation will have major impact on both companies and the audit business going forward. On the one hand, more specific and key requirements will be enforced regarding sustainability and ESG; on the other hand, but derived from the previous one, quality of the reporting must be ensured, and this is obviously something Mazars, as a leading international audit, tax and advisory firm, can relate to.
The CSRD will gradually be of application for diverse sizes of companies, starting in the financial year 2024, when the obligation to report will only apply to listed and larger companies (reports published in 2025). From that moment onwards and during some years the small and medium-sized companies will also be included in the sustainability reporting obligations.
Up until now, it has not been mandatory, but just advisable, for companies and public entities to have a report on sustainability or non-financial aspects. However, with the new CSRD, it will be gradually compulsory, since this legislation will introduce EU general reporting requirements for sustainability information that will need to be assured according to the above-mentioned standards. This assurance will be limited at the beginning, with prospects to make it reasonable after some years.
Mazars in Denmark, as a leading international audit, tax and advisory firm, embraces the new CSRD as a way to speed up the urgent green transition in the EU, and can definitely support businesses to both enhance their practices related to ESG and sustainability, as well as to report according to the new legislation.
If you find the new EU legislation confusing or find auditor’s statements difficult to comprehend, we can recommend you to read the publication: "Fakta om revisorerklæringer på bæredygtighedsrapportering" by FSR, that explains the different levels of assurance (limited or reasonable).
If you need any further information about CSRD/ESG and what it means for your business, please do contact us.
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