How does the CSRD relate to existing and future sustainability legislation?

The CSRD is one of the initiatives that fits within the European “Green Deal” and other national and international legislation and regulations in the field of International Responsible Business Conduct (IRBC) and sustainability.

Dutch guidelines

Dutch Corporate Governance Code, and other laws and regulations that regulate the substance to the management report

The CSRD/ESRS is an addition to the current rules for the management report. Information that is already part of the management report based on existing laws and regulations will continue to be included. It is intended for the ESRS to allow cross-references to avoid duplication. The exact interpretation of this is still unclear.

European legislation, directives and agreements

European sustainability legislation, objectives and directives mainly originate from the EU Green Deal. The EU Green Deal was introduced in 2019 as a response to the Paris Climate Agreement of 2015.

Below you can find an overview of several European regulations and directives that, like the CSRD, form part of the EU Green Deal and relate directly or indirectly to the CSRD.

Corporate Sustainability Due Diligence Directive (CSDDD)

The CSDDD establishes a corporate due diligence obligation for large companies to identify and address adverse human rights impacts (such as child labour) and environmental impacts (such as pollution) in their own operations, those of their subsidiaries and in their “chain(s) of activities”. The CSDDD, like the CSRD, was part of Omnibus I and has been amended in certain respects. See the revised version of the CSDDD.

The CSDDD refers to existing legislation for certain obligations. For example, regarding public communication on due diligence, the directive relies on reporting under the CSRD, thereby avoiding duplication for companies within the scope of both frameworks.

EU Taxonomy

The EU Taxonomy is a classification system that defines which economic activities can be considered environmentally sustainable. Undertakings within the scope of the CSRD must also report on how and to what extent their activities are aligned with the EU Taxonomy. Although both the EU Taxonomy and the CSRD address the same environmental topics, they take different approaches, resulting in different reporting requirements. The EU Taxonomy was also part of Omnibus I and has been amended. See the revised version of the EU Taxonomy.

Sustainable Finance Disclosure Regulation (SFDR)

Financial market participants subject to the SFDR require sustainability data from the undertakings in which they invest. These undertakings are required to report under the CSRD, and the sustainability report provides the information needed under the SFDR.

Forced Labour Regulation

This regulation prohibits the placing of products made with forced labour on the European internal market. It assigns enforcement responsibility to national authorities based on a risk-based approach. The CSRD requires undertakings to report on labour relations, including forced labour, under ESRS S2.

Regulation on Deforestation-free products

This regulation prohibits the placing or making available of products that contribute to deforestation and forest degradation within the European internal market. It requires insight into the value chain of products. Like the CSRD, this regulation is part of the European Green Deal. Reporting on ecosystems and biodiversity may form part of the sustainability report, see ESRS E4.

International guidelines and agreements

Paris Climate Agreement

The climate agreement is an international treaty signed by nearly 200 countries to limit global warming. The European Union has committed to this agreement, and the CSRD is a concrete way for the EU to implement it.

OECD Guidelines for Multinational Enterprises (OECD MNE Guideline)

These are international standards for responsible business conduct. The guidelines provide tools for undertakings to address issues such as value chain responsibility, human rights, child labour, environment and corruption. The CSRD and the ESRS explicitly refer to these guidelines in several places, for example requiring that the assessment of negative impacts is guided by the due diligence process as set out in the OECD guidelines.

United Nations Sustainable Development Goals (SDGs)

The Sustainable Development Goals for 2030 are seventeen goals aimed at making the world a better place. The CSRD can be seen as a practical implementation of the SDGs, using transparency to contribute to sustainable development from a European perspective.

United Nations Guiding Principles on Business and Human Rights (UNGPs)

These are international standards for responsible business conduct. The CSRD and the ESRS explicitly refer to these principles in several places.

International sustainability reporting standards

Standards of the International Sustainability Standards Board (ISSB)

The ISSB is a sister organisation of the IASB (developer of IFRS: International Financial Reporting Standards). The ISSB has developed international sustainability standards, the IFRS Sustainability Standards (IFRS-S). The European Commission and EFRAG have sought alignment with these standards where possible, in order to reduce reporting burdens for undertakings applying both CSRD/ESRS and IFRS-S. See the ‘ESRS-ISSB Standards Interoperability Guidance’ published by EFRAG and the IFRS Foundation for more information.

Global Reporting Initiative (GRI)

The GRI is an international standard setter that develops and maintains sustainability reporting standards. The GRI standards are widely used globally and focus on reporting the material impacts of an organisation on the economy, environment and society (impact materiality). Unlike the ISSB standards, which focus primarily on financial materiality for investors, GRI applies a broader stakeholder approach. In developing the ESRS, alignment with existing GRI standards has been sought. EFRAG and GRI have also entered into cooperation agreements to increase interoperability and reduce unnecessary reporting burdens.

Corporate initiatives

Science Based Targets

Science Based Targets are CO₂ reduction targets that have been assessed as in line with keeping global warming to 1.5 degrees. The ESRS (Climate standard (E1)) also uses 1.5 degrees as a reference point. For example, the undertaking must report whether the CO₂-reduction plans are in line with the 1.5-degree scenario. The institution that can assess undertaking’s plans on this 1.5-degree objective is the Science Based Target initiative (SBTi) - a collaboration between four non-governmental organizations (NGOs), UN Global Compact, the Carbon Disclosure Project (CDP), World Wildlife Fund (WWF) and the World Resource Institute (WRI). Undertakings are not obliged by the CSRD to set targets that are in line with Science Based Targets.