How CSRD Compares to the SEC’s Proposed Rule
- Both the CSRD and the SEC's proposed rule aim to standardize corporate sustainability disclosure.
- The SEC focuses mainly on "climate-related risks," while the CSRD has a broader scope, including social and environmental information.
- CSRD requires a "double materiality" perspective, meaning companies must report both how sustainability issues affect their business and how their business impacts people and the environment.
- CSRD mandates third-party audits of sustainability information, going beyond the SEC's proposed rule.
Why CSRD Matters to U.S. Companies
- CSRD applies to U.S. companies with substantial activity in the EU, including those with a net turnover of €150 million in the EU for each of the last two consecutive years.
- CSRD reporting covers the organization at a consolidated level, not just the EU-based subsidiary or branch. This means U.S. companies with significant turnover in the EU must publish sustainability information that covers their entire operations, including non-EU operations.
Important Dates and Reporting Information
- CSRD entered into force on January 5, 2023.
- By June 30, 2024, the European Commission will adopt CSRD sustainability reporting standards for non-EU companies.
- Starting January 1, 2028, U.S. companies meeting the criteria will have to start reporting according to the European Sustainability Reporting Standards (ESRS) at a consolidated group level.
Questions for U.S. Companies to Consider
- Companies should assess their current materiality data points with CSRD’s double-materiality requirements.
- They should also evaluate whether they have the right data solutions, controls, and partners to start collecting the required sustainability data and provide an audit of the information they report.