- New sustainability reporting requirements in the European Union will fundamentally change the reporting landscape for US-based companies with EU operations.
- The Corporate Sustainability Reporting Directive (CSRD) will require sustainability reporting far beyond what most companies provide today and will apply to a substantial number of companies that previously were not subject to mandatory sustainability reporting. This will affect not only EU-based companies but all companies with significant operations in EU jurisdictions, including US-based companies with as little as one subsidiary or branch in the European Union.
- The CSRD’s scope is much wider than that of the existing Non-Financial Reporting Directive (NFRD) and extends to certain non-EU companies or subsidiaries not listed on a regulated market in the European Union. Companies with listed securities in the European Union, including small and medium-sized enterprises, are also included. Subsidiaries of a non-EU parent are exempt from disclosing information under the CSRD if the parent reports under ESRS or standards that the EC deems to be equivalent and the assurance statement or conclusion on the consolidated sustainability reporting is publicly available.
- However, an exempted subsidiary will be required to disclose certain information about its use of the exemption.
- For financial years starting on January 1, 2028, EU large and listed subsidiaries (or branches) of a non-EU ultimate parent that have more than €40 million net turnover will need to publish and make accessible a sustainability report of that parent at the consolidated level if that parent has generated a net turnover in the European Union of more than €150 million in each of the last two financial years.
- The sustainability report communicated by an EU subsidiary or branch is to be prepared in accordance with the sustainability reporting standards for non-EU companies that the EC is expected to adopt by June 30, 2024. Companies within the scope of the CSRD are required to provide certain disclosures.
Source Deloitte
