The EU Parliament has strongly approved the Corporate Sustainability Reporting Directive (CSRD). This new directive will update the EU’s current reporting framework for businesses on issues including modern slavery and exploitation in supply chains – a reporting framework which has until now been perceived as “largely insufficient and unreliable” according to an EU Parliament press release.
The Directive passed with an overwhelming majority: 525 votes to 60, with 28 abstentions.
As a result of CSRD, the number of corporations required to provide sustainability reporting will increase significantly: from 11,700 to 50,000. This will apply to all large businesses, those with at least 250 employees, as well as listed small-to-medium sized enterprises (SME). Non-EU corporations with a turnover of €150 million or more from EU markets will also need to comply.
The new CSRD reports will require more detail than present standards. These will outline a company’s impact on human rights, the environment, social standards, and sustainability risk projections. This will include disclosures on a company’s measures in preventing labour exploitation in their supply chains. In ensuring that companies are providing reliable information, companies will also be required to undergo independent auditing and certification.
The European Council, representing the Member State government, looks set to adopt the new legislation on 28th November. It will then be signed and published in the EU Official Journal. The council will then be formally enforce the directive 20 days following publication. Rules will come into force from 2024 for the largest companies, with a staggered grace period until 2028 for progressively smaller businesses.