Corporate Sustainability Reporting

There has been a notable increase in recent years in legislative developments with respect to corporate sustainability reporting, aimed at requiring companies to report not only on financial information, but also on Environmental, Social and Governance (ESG) aspects of their business operations. In 2021, the European Commission published the proposal for the European Corporate Sustainability Reporting Directive (CSRD). Outside the European Union (EU), in 2021, the IFRS Foundation announced the establishment of the International Sustainability Standards Board (ISSB). Furthermore, in 2022, in the United States, the US Securities and Exchange Commission (SEC) proposed rules to enhance and standardize climate-related disclosures for investors. Based on the CSRD, the European Commission adopted the first set of European Sustainability Reporting Standards in July 2023. Also in 2023, the ISSB issued two standards on sustainability-related and climate-related disclosures. As a result, the requirements on corporate sustainability reporting both in the EU and globally are emerging rapidly. This chapter describes the scope and core elements of the CSRD and the ESRS. Before discussing these requirements in depth, we will describe the background of the CSRD. We will also briefly compare these European initiatives to the initiatives of the ISSB and SEC, and to currently existing non-binding frameworks and standards on sustainability reporting. We will conclude with some remarks on the strategic and organizational impact of the CSRD for companies and on the question whether the CSRD is contributing to the evolution of global corporate sustainability reporting standards.