European Green Deal: Stricter CSR reporting requirements

May 12, 2021 Benn-Ibler Rechtsanwälte

Only a few years ago, with the so-called Corporate Social Responsibility Directive (CSR Directive), the EU Accounting Directive was supplemented by an obligation for larger companies to include a "non-financial statement" in their management report. The Commission is now presenting a proposal to reinforce this reporting requirement.

The planned changes to CSR reporting requirements are part of the European Green Deal and the Commission's 2020 work programme, which aims to transform the EU into a modern, resource-efficient and competitive economy with a balanced carbon footprint by 2050.

According to the previous CSR reporting obligation, the "non-financial statement" to be appended to the management report must contain „information to the extent necessary for an understanding of the undertaking's development, performance, position and impact of its activity, relating to, as a minimum, environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters” (Art 19a Accounting Directive).

The amendment to Art 19a of the Accounting Directive now proposed by the Commission modifies the CSR reporting requirement in several respects.

The personal scope of application of the reporting requirement is to be extended and in future cover all European companies (and thus, unlike previously, not just large ones) and companies whose shares are traded on EU markets.

The proposal also clarifies the information to be provided by the "non-financial statement". For example, the new directive would require an indication of how the company plans to ensure that its business model and strategy are compatible with limiting global warming to 1.5 °C under the Paris Agreement.

The proposed amendment empowers the Commission to adopt delegated acts setting specific standards for sustainability reporting in the area of sustainability. The proposed text of the Directive requires the Commission to adopt many such standards in the environmental, social and governance fields.

European Commission, Proposal for a Directive amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting, COM(2021) 189 final (21.04.2021)