CSRD – Your questions answered?

Global IFRS Institute

• Why has the European Commission released these FAQs?

• What do you need to know?

• What’s next – Key actions for companies

To support companies in scope of the Corporate Sustainability Reporting Directive (CSRD), the European Commission (EC) has issued 90 frequently asked questions covering:

• which companies are in scope of the CSRD;
• details around the assurance of CSRD disclosures; and
• practical arrangements for publishing CSRD disclosures.

The EC is responsible for developing the CSRD and its ongoing maintenance. It asked the European Financial Reporting Advisory Group (EFRAG) to develop European Sustainability Reporting Standards (ESRSs) on its behalf.

The EC has released these FAQs to clarify the content already included in the CSRD. The FAQs provide guidance – without expanding the requirements – to help companies and their stakeholders to apply the requirements. They complement the implementation guidance and FAQs published by EFRAG on ESRSs.

Scoping

The guidance summarises the requirements in the CSRD for scoping and timing of reporting by individual companies, consolidated groups and ultimate non-EU parent companies.

When and to whom will the CSRD apply?

The CSRD applies for years beginning on or after 1 January 2024 (reporting in 2025). Phased introduction starts with Public Interest Entities (PIEs) and companies with listed securities on EU-regulated markets that are large and have more than 500 employees (e.g. those already subject to reporting requirements under the Non-Financial Reporting Directive).

Ultimately, ESRSs will be applied by companies, such as:

• large EU companies¹
• most companies with listed securities on EU-regulated markets (irrespective of whether they are based in the EU²); and
• ultimate non-EU parent companies⁴ with a combined group level turnover in the EU of more than EUR 150 million for each of the last two consecutive financial years.
   

Assurance

The FAQs provide detailed guidance on the practicalities for assurance including:

• who can provide assurance and the structure of the assurance report;
• how EU non-audit service restrictions are impacted; and
  
• that a combination of reasonable and limited assurance is permitted.
  

The FAQs confirm that companies which voluntarily comply with the CSRD are not required to obtain an assurance conclusion.

Assurance practitioners are required to express a limited assurance conclusion on whether:

• the sustainability statement, including the process to identify the information reported complies with:
  • ESRSs,
    
  • the requirement to digitally tag the information; and
    
  • the requirement to provide disclosures under the EU Taxonomy Regulation⁵; and
    
• the outcome of the process has resulted in the disclosure of all material sustainability-related impacts, risks and opportunities in accordance with ESRSs.

The European Securities and Markets Authority highlight that companies need to have robust governance, processes and controls over their sustainability reporting.

Practicalities

The FAQs confirm practical details about

• the language, location and timing of publication, including when the ‘reporting entity’ does not publish a management report or financial statements;
• digital tagging requirements;
  
• interaction with the EU Taxonomy Regulation, including for non-EU parent undertakings;
  
• what constitutes ‘reasonable effort’ in obtaining information from the value chain before relying on using estimates; and
  
• when standards for SMEs can be used.
  

• Read the FAQs to see if they answer your key questions.
  
• Track the transposition of the CSRD into legislation in the countries where you may be in scope. This will help you to understand if there are country-specific issues to consider.
• Discuss the assurance requirements with your assurance provider to make sure you are ready.
  
• See our ESRS Sustainability reporting page for information about implementing ESRSs.