CSRD : moving from non-financial reporting to “sustainability” reporting (Part 2)

Since the publication of the directive at the end of December 2022, what is expected of companies in terms of ESG information? We take stock in two practical sheets in the form of questions/answers. Here is our second part: the themes to be analyzed, the standards to be respected and the presentation to be adopted.


The philosophy in which the future sustainability report must adhere is that of double materiality, referred to as “double materiality” by the CSRD directive (Dir. (UE) 2022/2464 of the European Parliament and of the Council, 14 Dec. 2022 : JOUE n° L 322, 16 Dec.). In other words, the report must have two dimensions (Dir. 2013/34/EU, art. 19 bis amended):

  • “information that enables understanding of the company’s impacts on sustainability issues” (this refers to the impacts of the company’s activities on people and the environment);
  • and those which “allow to understand” the influence of these questions “on the evolution of the business, the results and the situation of the company” (in other words the risks for the company).


What will have to be declared in practice?

Depending on the general regime – on the different regimes see our first article – the report must contain the following information on the major topics related to sustainability:

Sustainability information to be described in the report (short, medium and long term) Details Examples or repositories
1. Business model and company strategy of which :

• its degree of resilience to risks;

•            opportunities;

• business plans;

• consideration of stakeholder interests and corporate impacts on sustainability issues;

• the implementation of the strategy on these issues.

examples of plans: • implementation actions; • financial plans; • related investment plans to ensure the transition to a sustainable economy, the limitation of global warming to 1.5°C (Paris Agreement of December 12, 2015) or the objective of climate neutrality by 2050 (Regulation (EU) 2021/1119); • possibility to use declarations linked to the Taxonomy.
2. Sustainability goals and timelines of which :

• absolute GHG reduction targets for 2030 and 2050.

to include :

• progress made;

• and a statement of whether the environmental objectives are based on scientific evidence.

3. Role of administrative, management and supervisory bodies in these matters of which :

• description of expertise;

• and skills that are current or in the process of being acquired.

4. Existence of incentive systems offered to members of administrative, management and supervisory bodies    
5. Company Policies    
6. Due diligence procedure implemented of which :

that resulting from the future European directive on the subject.

7. Main negative impacts (actual or potential) related to the company’s activities and its value chain (within the EU and third countries, if applicable) its operations, products and services;

its business relationships;

of its supply chain (if applicable).

include :

the measures taken to identify and monitor these impacts;

other adverse impact surveys required under other EU requirements.

8. Measures taken to prevent, mitigate, correct or eliminate adverse effects of which :

actual or potential impacts;

the result obtained.

to use :

the UN Guiding Principles on Business and Human Rights;

the OECD guidelines;

the OECD Due Diligence Guidance.

9. Main business risks of which :

main outbuildings;

how to manage these risks.

10. Indicators on all of these subjects    
11. Process used to determine all of this information    


The text specifies that “the sustainability information that is published must include forward-looking and retrospective information, as well as qualitative and quantitative information” (recital 33).


What about subsidiaries?

Concerning the subsidiaries which could be concerned by the legal system – because they would fall within the thresholds – the text specifies that they can be exempted from the presentation of a report, at their level. In this case, the information concerning them must be included in the consolidated management report of their parent company. Please note, however, that the exemption cannot apply to a large listed company subsidiary.


If the parent company is established in a third country, a subsidiary may remain exempt provided that:

either that the parent company produces consolidated information on sustainability in accordance with the future technical standards of the European Commission;

or that this information is provided in an equivalent manner to these standards.


In all cases, the subsidiary must nevertheless specify in its own management report:

the name and head office of the parent company (which publishes the consolidated information);

internet links to the consolidated report;

the statement that it is exempt.


What will SMEs have to declare?

For 2 years – in 2027 and 2028 (over the 2026 and 2027 financial years) – listed SMEs will not be required to produce a sustainability report within their management report. However, they must specify “briefly (…) the reasons why the sustainability information has not been provided”, mentions the directive (Dir. 2013/34/EU, art. 19 bis, § 7 amended).

From 2029, a lighter regime will be imposed on listed SMEs, small and non-complex credit institutions and captive insurance and reinsurance companies (see thresholds in our first article) . They should describe:

  • the company’s business model and strategy (in brief) in terms of sustainability;
  • company policies regarding sustainability issues;
  • the main negative impacts (actual or potential) on sustainability issues, and any measures taken to identify, monitor, prevent, mitigate or correct them;
  • the main risks that are linked to sustainability issues and how to manage them;

and key indicators.


What are the particularities for companies from third countries (unlisted)?

Companies from third countries that carry out a significant activity in the European Union (see thresholds in our first article) will be required to provide information on sustainability, in particular with regard to their impact on social and environmental issues.


Their sustainability reports must be published and made accessible by their European subsidiaries or branches. They will be developed in accordance with:

  • either to the standards which will be adopted by the Commission no later than June 30, 2024;
  • either to the standards applicable to companies established in the Union;
  • or to standards considered equivalent by virtue of an implementing act.


The text provides a solution in the event that the third-country company does not provide all the information required under the CSRD directive, despite requests from its subsidiary or branch to send it the necessary information. The subsidiary or branch concerned should then provide all the information in its possession and issue a statement indicating that the third-country company has not made available the rest of the required information.


How to concretely present the declared information?

On this point, the text remains vague. It refers to the development of technical standards – sustainability information standards – to be adopted by the European Commission (via delegated acts). Regarding the general scheme, these standards are expected by June 30, 2023 at the latest. They will enter into force, and must therefore be applied by companies, at the earliest 4 months after their publication.


To date, the EFRAG (European Financial Reporting Advisory Group), which advises the European executive in this area, has presented it with twelve draft European standards that companies subject to sustainability reporting may have to comply with (two relating to requirements and general information; five on the environment; four on the social dimension; one about governance).

Other delegated acts, specifying certain parts of the system, are also planned by June 30th, 2024, at the latest. They will concern the additional information to be provided by companies as well as sectoral issues. The EU executive must also present standards “proportionate and adapted to the capacities and characteristics” of listed SMEs, small and non-complex credit institutions as well as captive insurance and reinsurance companies by June 30th, 2024.


These information standards will address, in any event, the following subjects:

Factors Subjects
Environmental factors


climate change mitigation (including Category 1, 2 and 3 GHGs);

adaptation to climate change;

aquatic and marine resources;

resource use and circular economy;


biodiversity and ecosystems.

These topics are the same as those discussed in the “Taxonomy” statement.

Social and human rights factors


equal treatment and equal opportunities for all:

1. including gender equality;

2. equal pay for work of equal value;

3. training and skills development;

4. employment and inclusion of people with disabilities;

5. the measure to combat violence and harassment in the workplace;

6. diversity.

working conditions :

1. including job security,

2. working time,

3. decent salaries,

4. social dialogue,

5. freedom of association,

6. the existence of works councils,

7. collective bargaining (including the proportion of workers covered by collective agreements),

8. workers’ rights to information, consultation and participation,

9. work-life balance,

10. health and safety.

respect for human rights, fundamental freedoms, democratic principles and standards established in the International Bill of Human Rights and other fundamental conventions of the United Nations:

1. including the United Nations Convention on the Rights of Persons with Disabilities;

2. United Nations Declaration on the Rights of Indigenous Peoples;

3. the ILO Declaration on Fundamental Principles and Rights at Work;

4. the European Convention for the Protection of Human Rights and Fundamental Freedoms;

5. the European Social Charter;

6. the Charter of Fundamental Rights of the EU.

Governance factors


role of the administrative, management and supervisory bodies of companies with regard to sustainability issues:

1. whose composition of these bodies,

2. their expertise and skills (current or in the process of being acquired) concerning this role.

main characteristics of the company’s internal control and risk management systems (in relation to the sustainability information and decision-making process).

ethics and corporate culture:

1. including the fight against corruption,

2. the protection of whistleblowers,

3. animal welfare.

activities and commitments of the company linked to the exercise of its political influence (including the representation of interests).

management and quality of relations with customers, suppliers and groups affected by the company’s activities:

1. whose payment practices (date of payment),

2. and practices relating to late payment to SMEs (interest rate or compensation for recovery costs).


Is business secrecy “opposable” in terms of sustainability reporting?

The text of the directive mentions this possibility. Because the legal device “is not intended to require companies to disclose intellectual capital, intellectual property, know-how or the results of innovations that can be qualified as trade secrets”.


Where should sustainability information appear?

The information making up the sustainability report must be included in a specific section of the company’s management report. The management report must also be made public via the website of the entity concerned.

And upstream the report must have been certified by a statutory auditor or an audit firm. It is through this approach that the EU hopes to obtain reliable sustainability information from companies.


Sophie Bridier et Veronika Rébier