As the EU endeavours to shape the roadmap for energy transition and climate neutrality by 2050, ESG (Environmental, Social, and Governance) indicators are increasingly gaining momentum in defining the criteria for sustainable finance. The compliance of companies operating in EU countries with sustainable development principles requires the disclosure of sustainability information. Such sustainability information is determined, inter alia, by ESG indicators based on the relevant international standards and is disclosed through non-financial reports.
Directive (EU) 2022/2464 (Corporate Sustainability Reporting Directive – “CSRD”) on corporate sustainability reporting is a key step that reinforces the overall regulatory framework of ESG reporting. The Directive (hereinafter referred to as the “CSRD Directive”) was adopted and published in the Official Journal of the European Union on 16 December 2022. It has entered into force from January 2023 (20 days after its publication) and Member States have subsequently 18 months to implement the new rules in their national legislation, i.e. until June 2024.
Under the CSRD Directive, corporate sustainability reports aim to enhance the flow and the status of sustainability information from companies and, thus, prevent the practice of “greenwashing” (i.e. the act of providing the public or investors with misleading or outright false information about the environmental impact of a company’s products and operations).
By Dr. Jenny Livadarou, Innovation Engineer and energy transition consultant
and Maria Barla, Attorney at Law, LLM in Financial Regulation