The EU Commission Releases the CSRD FAQ to Assist Businesses in Adopting the New Sustainability Reporting Regulations

With the first reports scheduled to start the following year, based on the 2024 financial year, the European Commission today announced the release of a new series of frequently asked questions (FAQs) designed to assist businesses and other stakeholders, including auditors, in implementing the sustainability reporting requirements of the EU’s Corporate Sustainability Reporting Directive (CSRD).

The EU’s Non-Financial Reporting Directive (NFRD), the previous framework for sustainability reporting, was greatly updated with the CSRD, which increased the number of enterprises obliged to give sustainability disclosures from about 12,000 to over 50,000. The Corporate Sustainability Reporting Directive (CSRD) institutes more comprehensive reporting obligations on firm impacts on human rights, social standards, the environment, and sustainability-related risk. It is based on the new European Sustainability Reporting Standards (ESRS).

Large public-interest firms with more than 500 workers were subject to the CSRD starting in 2024; the first reports were due in 2025. firms with more than 250 employees or €40 million in sales were next in line, and listed SMEs were covered a year later.

The Commission states that the updated FAQ takes into account feedback from businesses and aims to “ensure the usability and comparability of the reported information on sustainability and to facilitate the compliance of stakeholders with the regulatory requirements in a cost-effective way.” It also aims to lessen the administrative burden on businesses by offering more clarity and certainty.

The FAQ addresses important issues such as the extent of the regulations, how to determine which company size categories to use for compliance dates, exemptions, which sets of ESRS to use, what to consider when using estimates in cases where companies cannot obtain value chain information, and what sustainability information SMEs should anticipate receiving as a result of the CSRD. The FAQ also addresses topics pertaining to assurance and auditing, such as independent assurance providers’ accreditation criteria and auditors’ approval and training needs.