The new Corporate Sustainability Reporting Directive CSRD came into force on 5 January 2023. It replaces the previous Non-Financial Reporting Directive (NFRD) from 2014. With the CSRD, the existing regulations on sustainability reporting are greatly expanded. Three main thrusts are the expansion of the scope, the concretisation of the reporting obligations (among other, with regard to goals and strategies or the coverage of the entire value chain) with uniform reporting standards as well as the anchoring of a mandatory external audit. The new provisions also increase the responsibility of executive board and supervisory board for sustainability reporting in the company.

Implementation of the CSRD through delegated act of the EU Commission
As a framework for reporting, companies have so far been able to choose freely from recognised national, EU or international frameworks. Numerous studies – for example, also an AK Study – show that most companies apply the Global Reporting Initiative (GRI) standards. The possibility of using different frameworks makes the comprehensibility of the information provided more difficult and leads to limited comparability of the reports. The EU Commission therefore commissioned the private association European Financial Reporting Advisory Group (EFRAG) to develop proposals for new uniform and mandatory European Sustainability Reporting Standards (ESRS). After a consultation and revision phase, EFRAG presented a proposal for a so-called 1st set of reporting standards in November 2022. According to the EU Commission's roadmap, the finalised ESRS are to be adopted by delegated act in July 2023. A feedback process on the draft of this delegated act took place until 7 July 2023, in which AK also participated with a statement. Subsequently, the EU Parliament and the Council have 2 months to raise objections.

Threat of weakening of CSRD through delegated act
However, compared to previous draft texts of EFRAG from April and November 2022, the delegated act has now resulted in a significant reduction of the disclosure obligations. From AK’s point of view, the following points are particularly critical:
 

• In future, the mandatory disclosures on environmental and social issues in the CSRD are to be subject to a materiality analysis: For example, companies would only have to report information on climate change, diversity, health, safety or education and training if these were identified as material issues in the materiality analysis.
   
• The planned change from previously mandatory report content to only voluntary information in connection with non-employees (e.g. temporary work, contract for work, remuneration, social security, etc.) should be viewed critically. Relevant information about these groups of employees will be lost.
   
• It is also to be feared that the planned reduction in the level of detail or the depth of information in a number of reporting obligations will lead to a significant loss of transparency and information.
   

From AK’s point of view, it must be ensured that the European Sustainability Reporting Standards also meet the information requirements of both public and stakeholders, especially trade unions, works councils and employees. In particular, there must be transparent and comparable reporting on working conditions and the associated sustainability goals and risks. From a democratic point of view, it also seems important that the final delegated act of the EU Commission does not subsequently restrict the CSRS negotiated by all three European institutions.

Further information:
EU Commission: Feedback process on delegated act for European sustainability reporting standards  
AK EUROPA Policy Brief: Challenges of the new European Sustainability Reporting Standards (ESRS)
AK Wien: Sustainability reporting enables co-determination (German only)
AK Wien: Corporate Sustainability Reporting: Far more than just new reporting obligations on sustainability (German only)
AK Wien: Corporate Sustainability Reporting Directive (CSRD): Implications for audit and supervisory board (German only)