A new year comes with new resolutions. As we enter 2024, there is much to anticipate and more to navigate regarding sustainability. While ESG backlash dominated headlines in the US in 2023, new EU regulations aimed at combating climate change, fostering sustainable innovation, and steering Europe towards becoming the first climate-neutral continent by 2050 are taking effect. With these changes, companies and investors face new compliance obligations.
The EU Corporate Sustainability Reporting Directive (CSRD) is leading this charge, a key player in standardising corporate sustainability reporting akin to financial practices. Companies must now report using metrics set by the European Financial Reporting Advisory Group (EFRAG), incorporating qualitative and quantitative information. Compliance encompasses adhering to the EU Sustainability Reporting Standards (ESRS), the Sustainable Finance Disclosure Regulation (SFDR), and the EU Taxonomy Regulation.
The compliance timeline is as follows:
- January 1, 2024: Applicable to entities already covered by the Non-Financial Reporting Directive.
- January 1, 2025: Mandatory for all large entities.
- January 1, 2026: Enforced for all listed SMEs.
- January 1, 2028: Imposed on non-EU parent companies with a combined group turnover exceeding EUR 150 million in the EU.
For companies falling under these categories, it’s imperative to understand the new requirements, identify necessary reporting, and assess the practical impacts on your team, processes, and systems. The time to act is now.