corporate sustainability reporting directive 2022

The requirement provided for in this amending Directive that also large undertakings whose securities are not admitted to trading on a regulated market in the Union should disclose information on sustainability matters is mainly justified by concerns about the impacts and accountability of such undertakings, including through their value chain. 6. Regulation (EU) 2020/852 provides a classification of the environmental objectives of the Union. Directive 2013/34/EU requires Member States to ensure that the statutory auditor or audit firm checks whether the non-financial statement or the separate report has been provided. Member States should consider introducing measures to support small and medium-sized undertakings in applying the sustainability reporting standards. Sustainability reporting requirements concerning forced labour should not free public authorities of their responsibility to address, through trade policy and diplomatic means, the import of goods produced as a result of human rights abuses, including forced labour. Regulation (EU) 2020/852 of the European Parliament and of the Council(6) creates a classification system of environmentally sustainable economic activities with the aim of scaling up sustainable investments and combatting greenwashing of financial products that unduly claim to be sustainable. Acting in accordance with the ordinary legislative procedure(2). Building on the double materiality principle, standards should cover all information that is material to users of that information. A Member State may register a third-country audit entity for the purpose of the audit of financial statements only if: the majority of the members of the administrative or management body of the third-country audit entity meet requirements which are equivalent to those laid down in Articles 4 to 10, with the exception of Article7(2), Article8(3) and the second subparagraph of Article10(1); the third-country auditor carrying out the audit on behalf of the third-country audit entity meets requirements which are equivalent to those laid down in Articles 4 to 10, with the exception of Article7(2), Article8(3) and the second subparagraph of Article10(1); the audits of the annual or consolidated financial statements referred to in paragraph 1 of this Article are carried out in accordance with international auditing standards as referred to in Article26, as well as the requirements laid down in Articles 22, 22b and25, or with equivalent standards and requirements; the third-country audit entity publishes on its website an annual transparency report which includes the information referred to in Article13 of Regulation (EU) No537/2014 or it complies with equivalent disclosure requirements. Furthermore, if they allow independent assurance services providers to carry out the assurance of sustainability reporting, Member States should also allow a statutory auditor, other than the one(s) carrying out the statutory audit of the financial statements, to express an assurance opinion on sustainability reporting. Information should also be harmonized, comparable and based on uniform indicators where appropriate, while allowing for reporting that is specific to individual undertakings and does not endanger the commercial position of the undertaking. 1. That period shall be extended by two months at the initiative of the European Parliament or of the Council.. Reporting carried out on social factors, as well as on environmental and governance factors, should be proportionate to the scope and the goals of this amending Directive. Reporting must be certified by anaccredited independent auditororcertifier. This would also favour opening up the assurance market even when not all Member States allow for the accreditation of independent assurance services providers in their territory. (36)Directive 2007/36/EC of the European Parliament and of the Council of 11July 2007 on the exercise of certain rights of shareholders in listed companies (OJL184, 14.7.2007, p.17). After lengthy negotiations between the European institutions, which included amongst other things the timetable and the wide scope of the directive and a preliminary political agreement in June 2022, the Corporate Sustainability Reporting Directive (CSRD) was adopted on 10 November 2022. Such measures shall, where appropriate, include carrying out additional assurance work, either directly or by outsourcing such tasks, in the relevant subsidiary. The assurance report on sustainability reporting referred to in Article28a of Directive 2006/43/EC shall be disclosed in full to the public together with the annual financial report. (*23)Directive 2013/34/EU of the European Parliament and of the Council of 26June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and83/349/EEC (OJL182, 29.6.2013, p.19).;". The European Parliament and the Council have adopted a number of legislative acts as part of the implementation of the Action Plan on Financing Sustainable Growth. Sustainability reporting standards shall not specify disclosures that would require undertakings to obtain information from small and medium-sized undertakings in their value chain that exceeds the information to be disclosed pursuant to the sustainability reporting standards for small and medium-sized undertakings referred to in Article29c. A9-0059/2022. Member States should set out requirements that ensure the quality of the assurance of sustainability reporting carried out by independent assurance services providers and consistent outcomes in the assurance of sustainability reporting. in Article19(1), the following subparagraph is added: Large undertakings, and small and medium-sized undertakings, except micro undertakings, which are public-interest entities as defined in point (a) of point (1) of Article2 shall report information on the key intangible resources and explain how the business model of the undertaking fundamentally depends on such resources and how such resources are a source of value creation for the undertaking.; Article19a is replaced by the following: 1. That audit committee should be assigned with certain tasks with regard to the assurance of sustainability reporting. Regulation (EU) No537/2014 requires statutory auditors to report irregularities to the audited entity and, under certain circumstances, to authorities designated by the Member States as responsible for investigating such irregularities. ", (*16)Commission Recommendation 2013/179/EU of 9April 2013 on the use of common methods to measure and communicate the life cycle environmental performance of products and organisations (OJL124, 4.5.2013, p. Member States shall ensure that the independent assurance services providers referred to in the third and fourth subparagraphs acquire the necessary knowledge in sustainability reporting and the assurance of sustainability reporting via the continuing education requirement referred to in point (b) of the first subparagraph. The coordination measures prescribed by Articles 40a to 40d shall also apply to the laws, regulations and administrative provisions of the Member States relating to subsidiary undertakings and branches of undertakings which are not governed by the law of a Member State but whose legal form is comparable with the types of undertakings listed in Annex I. WebWith its work on a new Corporate Sustainability Reporting Directive (CSRD) the European Commission seeks to increase the number of companies that will have to The topics to be discussed will cover: The final CSRD (including scope, timeline and related standards) The ESRS exposure drafts That Directive also requires Member States to organise an effective system of public oversight, and to ensure that regulatory arrangements for public oversight systems permit effective cooperation at Union level in respect of Member States oversight activities. 2. Those guidelines should only apply to the supervision of undertakings whose securities are admitted to trading on a regulated market in the Union. ", (*2)Regulation (EU) No575/2013 of the European Parliament and of the Council of 26June 2013 on prudential requirements for credit institutions and amending Regulation (EU) No648/2012 (OJL176, 27.6.2013, p. The conclusion of a reasonable assurance engagement is usually provided in a positive form of expression and results in providing an opinion on the measurement of the subject matter against previously defined criteria. The amount of work in a reasonable assurance engagement entails extensive procedures including consideration of internal controls of the reporting undertaking and substantive testing, and is therefore significantly greater than in a limited assurance engagement. Achieving a climate neutral economy requires the alignment of GHG accounting and offsetting standards. On 21 April 2022, the European Union put forward a proposal for a corporate sustainability reporting directive (CSRD) [1] to revise and strengthen the existing rules introduced by the Non-Financial Reporting Directive (NFRD) on sustainability reporting. It will therefore help to protect and enhance the access of smaller undertakings whose securities are admitted to trading on a regulated market in the Union to financial capital, and avoid discrimination against such undertakings on the part of financial market participants. 2. In the Green Deal the Commission committed itself to support businesses and other stakeholders in developing standardised natural capital accounting practices within the Union and internationally, with the aim of ensuring appropriate management of environmental risks and mitigation opportunities, and reduce related transaction costs. On 21 April 2021, the Commission adopted a P roposal for a Corporate Sustainability Reporting Directive (CSRD), which would amend existing reporting requirements of the NFRD. The information listed in the first subparagraph of this paragraph shall include information related to short-, medium- and long-term time horizons, as applicable. In the third episode of the webcast series entitled, How the Corporate Sustainability Reporting Directive will transform your organization, which ran live on 05 April and is now available on-demand, panelists explored the impact of the Corporate Sustainability Reporting Directive (CSRD) and how it marks a step change in Member States may choose not to apply the coordination measures referred to in the first subparagraph of this paragraph to the undertakings listed in points (2) to (23) of Article2(5) of Directive 2013/36/EU of the European Parliament and of the Council(*3). For the same reason, the Commission should also be empowered to take the necessary decisions on the equivalence of sustainability reporting standards that are used by third-country issuers. Directive 2006/43/EC should apply where the assurance opinion on sustainability reporting is expressed by a statutory auditor or an audit firm. That gap has significant negative consequences. They can have significant positive and negative impacts via their lending, investment and underwriting activities. In addition, mandatory sustainability reporting standards for Union undertakings should be commensurate with the level of ambition of the Green Deal and the Unions objective of climate neutrality by 2050 as well as with the intermediate targets under Regulation (EU) 2021/1119. Therefore, a progressive approach to enhancing the level of the assurance required for sustainability information should be considered, starting with an obligation on the statutory auditor or audit firm to express an opinion about the compliance of the sustainability reporting with Union requirements based on a limited assurance engagement. Such obligation would also help to clarify the role of national competent authorities in supervising sustainability reporting, as part of the management report prepared in accordance with Directive 2004/109/EC. 27th December 2022. There is also growing awareness of the risks and opportunities for undertakings and for investments resulting from other environmental issues, such as biodiversity loss, and from health and social issues, including child labour and forced labour. 15). The amendments to Directive 2013/34/EU provided for in this amending Directive are expected to increase the comparability of data and harmonise standards. ", (*19)Directive (EU) 2019/1937 of the European Parliament and of the Council of 23October 2019 on the protection of persons who report breaches of Union law (OJL305, 26.11.2019, p.17).;". Directive 2013/34/EU should therefore be amended to take account of that change in terminology. Sustainability reporting standards should also take account of internationally recognised principles and frameworks on responsible business conduct, That review shall take into account the national regimes applicable to independent assurance services providers and assess whether and to what extent those national regimes contribute to opening up the assurance market. The Green Deal is the new growth strategy of the Union. Member States should be able to inform the Commission on an annual basis of the subsidiary undertakings or branches of the third-country undertakings that fulfilled the publication requirement and of the cases where a report was published but the subsidiary undertaking or branch of the third-country undertaking has stated that it could not get the necessary information from the third-country undertaking. The assurance file shall be closed no later than 60 days after the date of signature of the assurance report on sustainability reporting referred to in Article28a. 10. Undertakings shall report the information referred to in paragraphs 1 to 3 of this Article in accordance with the sustainability reporting standards adopted pursuant to Article29b. Member States should be free to assess the impact of their national transposition measures on small and medium-sized undertakings, in order to ensure that they are not disproportionately affected, with specific attention to be given to micro-undertakings and to avoiding an unnecessary administrative burden. Undertakings should also be able to report on possible risks and trends regarding employment and incomes. For the purposes of point (c) of the first subparagraph of this paragraph, the group auditor shall request the agreement of the independent assurance services provider(s), third-country auditor(s), statutory auditor(s), third-country audit entity(ies) or audit firm(s) concerned to the transfer of relevant documentation during the conduct of the assurance of consolidated sustainability reporting, as a condition of the reliance by the group auditor on the work of those independent assurance services provider(s), third-country auditor(s), statutory auditor(s), third-country audit entity(ies) or audit firm(s). For financial years starting before 1January 2028, by way of derogation from paragraph 1 of this Article, small and medium-sized undertakings which are public-interest entities as defined in point (a) of point (1) of Article2 may decide not to include in their management report the information referred to in paragraph 1 of this Article. In the absence of policy action to build consensus on the information that undertakings should report, there will be significant increases in terms of cost and burden for reporting undertakings and for users of such information. The Commission shall be empowered to adopt delegated acts in accordance with Article48a supplementing this Directive for the purpose of establishing the general equivalence criteria to be used in assessing whether the audits of the financial statements and, where applicable, the assurance of sustainability reporting referred to in paragraph 1 of this Article are carried out in accordance with international auditing standards as defined in Article26 and with assurance standards for sustainability reporting referred to in Article26a, respectively, and with the requirements laid down in Articles 22, 24 and25. In order for the statutory auditor to also be approved to carry out the assurance of sustainability reporting, the examination of professional competence referred to in Article6 shall guarantee the necessary level of theoretical knowledge of subjects relevant to the assurance of sustainability reporting and the ability to apply such knowledge in practice. (7)Regulation (EU) 2019/2089 of the European Parliament and of the Council of 27November 2019 amending Regulation (EU) 2016/1011 as regards EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks (OJL317, 9.12.2019, p.17). The Commission shall adopt by 30June 2024 a delegated act in accordance with Article49 supplementing this Directive to provide for sustainability reporting standards for third-country undertakings that specify the information that is to be included in the sustainability reports referred to in Article40a. As regards statutory auditors, the public register shall contain at least the following information: if applicable, the name, address, website address and registration number of the audit firm(s) by which the statutory auditor is employed, or with whom he or she is associated as a partner or otherwise; whether the statutory auditor is also approved for carrying out the assurance of sustainability reporting; all other registration(s) as statutory auditor with the competent authorities of other Member States and as auditor with third countries, including the name(s) of the registration authority(ies), and, if applicable, the registration number(s), and an indication of whether the registration concerns the statutory audit, the assurance of sustainability reporting, or both.; in paragraph 2, the following subparagraph is added: The register shall indicate whether third-country auditors as referred to in the first subparagraph are registered for carrying out the statutory audit, the assurance of sustainability reporting, or both.; in paragraph 1, point (e) is replaced by the following: name and registration number of all statutory auditors employed by, or associated as partners or otherwise with, the audit firm, and an indication of whether they are also approved for carrying out the assurance of sustainability reporting;; in paragraph 1, point (i) is replaced by the following: all other registration(s) as audit firm with the competent authorities of other Member States and as audit entity with third countries, including the name(s) of the registration authority(ies), and, if applicable, the registration number(s), and an indication of whether the registration concerns the statutory audit, the assurance of sustainability reporting, or both.; The register shall indicate whether third-country audit entities as referred to in the first subparagraph are registered for carrying out the statutory audit, the assurance of sustainability reporting, or both.; 1. Directive 2006/43/EC contains rules on the appointment and dismissal of statutory auditors and audit firms carrying out statutory audits. Undertakings should therefore be required to prepare their management report in the electronic reporting format specified in Article3 of Commission Delegated Regulation (EU) 2019/815(33), and to mark up their sustainability reporting, including the disclosures required by Article8 of Regulation (EU) 2020/852, in accordance with the electronic reporting format specified in Delegated Regulation (EU) 2019/815 once that is determined. There is significant evidence that many undertakings do not disclose material information on all major sustainability-related topics, including climate-related information such as all GHG emissions, and factors that affect biodiversity. The sustainability reporting standards should promote a more integrated view of all the information published by undertakings in the management report to provide users of that information with a better understanding of the development, performance, position and impact of the undertaking. Where the same statutory auditor carries out the statutory audit of annual financial statements and the assurance of sustainability reporting, it should be possible to present the information about the assurance of sustainability reporting in the audit report. Any translation that has not been certified shall include a statement to that effect. It should not entail any duplication of work between the auditor or the independent assurance services provider that expresses the assurance opinion and the accredited independent third party. Without prejudice to Article46, audit reports concerning annual accounts or consolidated accounts or, where applicable, the assurance reports concerning annual or consolidated sustainability reporting referred to in paragraph 1 of this Article issued by third-country auditors or audit entities that are not registered in the Member State shall have no legal effect in that Member State. It is therefore necessary to require those subsidiary undertakings to include in their management report the name and registered office of the parent undertaking that is reporting sustainability information at group level, the weblinks to the consolidated management report of their parent undertaking and a reference in their management report to the fact that they are exempted from sustainability reporting. The report shall be transmitted to the European Parliament and the Council by 31December 2028 and shall be accompanied, if appropriate, by legislative proposals. Those Articles therefore require undertakings to report both on the impacts of the activities of the undertaking on people and the environment, and on how sustainability matters affect the undertaking. Sustainability reporting standards for small and medium-sized undertakings shall take into account the criteria set out in Article29b(2) to (5). Regulation (EU) No575/2013 of the European Parliament and of the Council(11) requires large institutions which have issued securities that are admitted to trading on a regulated market to disclose information on ESG risks from 28June 2022. (21)Directive 2013/36/EU of the European Parliament and of the Council of 26June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and2006/49/EC (OJL176, 27.6.2013, p.338). This document is an excerpt from the EUR-Lex website, Directive (EU) 2022/2464 of the European Parliament and of the Council of 14December 2022 amending Regulation (EU) No537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting (Text with EEA relevance), OJ L 322, 16.12.2022, p. 1580 Credit institutions and insurance undertakings other than those that are required to comply with Directive 2013/34/EU, including cooperatives and mutual undertakings, should therefore be subject to sustainability reporting requirements, provided that they meet certain size criteria. 5. The proposal for a Corporate Sustainability Reporting Directive (proposal by the European Parliament dated April 21, 2021 the CSRD), which revises and extends the scope of the sustainability reporting requirements introduced by the NFRD. (31)Directive 2011/7/EU of the European Parliament and of the Council of 16February 2011 on combating late payment in commercial transactions (OJL48, 23.2.2011, p.1). The key sustainability partner shall be actively involved in the carrying-out of the assurance of sustainability reporting.; 2a. The Corporate Sustainability Reporting Directive ("CSRD") was published in the Official Journal of the European Union on 16 December 2022,1 having been Article19a(1) and Article29a(1) of Directive 2013/34/EU require reporting not only on information to the extent necessary for an understanding of the undertakings development, performance and position, but also on information necessary for an understanding of the impact of the undertakings activities on environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters. The fitness check on corporate reporting shows that those two perspectives are often not well understood or applied. 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