EU Nears Adoption of Expansive Corporate Sustainability Reporting RequirementsProposed Directive would apply to public and private companies, including many non-EU companies Sullivan & Cromwell LLP - August 1, 2022
European Union leaders have reached a political agreement on a revised Corporate Sustainability Reporting Directive (“CSRD”) that would introduce detailed sustainability reporting requirements for all “large” EU companies and companies with securities (including low denomination debt securities or depositary receipts) listed on a regulated EU market. Non-EU companies would also be required to report on a consolidated basis if they generate more than €150 million of annual net turnover in the EU and have at least one large or listed EU subsidiary or branch.
The scope of reporting will significantly exceed that of any other ESG reporting obligations, including the U.S. Securities and Exchange Commission’s proposed climate-related disclosure requirements. The CSRD disclosure requirements will cover numerous environmental, social and human rights and governance factors and require attestation. Notably, reporting will be subject to the ‘double materiality’ standard, meaning companies will be required to consider not only the material ESG risks facing their own business and operations but also the material risks posed by their operations to society and the environment. Companies also will need to disclose their plans to ensure their business model and corporate strategy are compatible with limiting global warming to 1.5 °C.