10 Things U.S. Companies Need to Know about CSRD Regulations

Corporate Sustainability Reporting Directive (CSRD) regulations are set to bring significant changes to how companies in the European Union report on their sustainability efforts. While these regulations are specific to EU member states, they are likely to influence global standards and expectations for corporate transparency and sustainability. Here are ten key points that U.S. companies should be aware of regarding CSRD regulations:

1. Expanded Scope: CSRD expands the scope of sustainability reporting requirements, mandating more detailed disclosures beyond the current Non-Financial Reporting Directive (NFRD). This includes reporting on environmental, social, and governance (ESG) factors, as well as due diligence on human rights and anti-corruption measures.

2. Mandatory Reporting: Unlike the previous NFRD, which applied only to large public-interest entities, CSRD extends reporting obligations to a broader range of companies, including large and medium-sized enterprises.

3. Standardized Reporting Format: CSRD aims to standardize reporting formats and increase comparability across companies, facilitating easier assessment of sustainability performance by investors, regulators, and other stakeholders.

4. Materiality Assessment: Companies must conduct a materiality assessment to determine which sustainability issues are most relevant to their business and stakeholders. This ensures that reported information is meaningful and impactful.

5. Due Diligence Obligations: CSRD introduces due diligence requirements for certain sustainability risks, such as environmental impacts and human rights abuses within supply chains. Companies must disclose their policies, due diligence processes, and results.

6. Reporting Timeline: The new regulations propose a phased approach to implementation, with large companies expected to comply first, followed by medium-sized companies. The exact timelines and thresholds for compliance are yet to be finalized.

7. Audit and Assurance: CSRD emphasizes the importance of audit and assurance for sustainability reports, ensuring the reliability and credibility of disclosed information. Independent verification may be required for certain disclosures.

8. Impact on Supply Chains: Companies will need to assess and report on sustainability impacts throughout their supply chains, addressing issues such as greenhouse gas emissions, resource use, and labor conditions.

9. Technology and Data Requirements: CSRD encourages the use of digital solutions for reporting, including structured data formats like XBRL, to enhance accessibility and usability of sustainability information.

10. Global Implications: While CSRD is a European regulation, its influence is expected to extend globally. U.S. companies with operations or investors in the EU may face indirect pressure to align with CSRD requirements to maintain competitiveness and reputation.

CSRD represents a significant step towards enhancing corporate transparency and accountability on sustainability issues within the EU. U.S. companies operating in or trading with EU member states should stay informed about these evolving regulations, as they may impact reporting practices, investor relations, and business operations in the near future. By proactively addressing CSRD requirements, companies can not only comply with regulatory obligations but also demonstrate their commitment to sustainable practices and stakeholder trust on a global scale.

Need a deeper dive? Contact us to learn more about our CSRD Readiness Assessment, designed to help companies quickly assess their ability to comply with CSRD regulations and identify major opportunities to close gaps.