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Gradually introducing CSRD reporting requirements

Large undertakings in the EU are to collect climate protection data for financial year 2023 and publish it the following year. To accomplish this, GDV advocates prioritising and implementing reporting requirements in multiple stages.

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The EU Commission's proposal for the Corporate Sustainability Reporting Directive (CSRD) is ambitious: Large undertakings are to apply the uniform sustainability reporting requirements defined by the Directive for the first time as early as financial year 2023. Just one year after these basic reporting standards (core European Sustainability Reporting Standards; core ESRS) come into force, undertakings are then to apply more advanced reporting standards, so-called “advanced ESRS”.

Do it right or do it twice

Indeed: There is not enough time for field testing before the introduction of the core ESRS. There is a risk that the basic reporting standard will be revised while the more advanced reporting standard will already have been implemented by businesses. In order to improve the quality of sustainability reports and data, the basic reporting standard should be applied for financial years 2023 to 2025, for instance, GDV argues in a position paper.

The enhanced reporting standard could be tested during this phase and become mandatory starting in financial year 2026. Such an approach has two advantages: It is ambitious and at the same time ensures a high level of quality.

Align CSRD with investors' information needs

It is also important to ensure that reporting requirements are consistent, in particular that the basic reporting standards are geared to investors' information needs. The Sustainable Finance Disclosure Regulation (SFDR) requires investors to disclose adverse impacts of their investments on defined sustainability objectives. It is not yet finalised which of these Principal Adverse Impacts (PAIs) investors will be required to report. The CSRD's basic reporting standards should, at a minimum, cover the PAIs required by investors. Otherwise, investors will not be able to adequately fulfill their information obligations.

Current thresholds not a suitable criterion for insurers

Finally, the GDV advocates not making the application of the CSRD dependent on the same thresholds for all industries. The thresholds on total assets and net revenue are well suited to define the scope of the CSRD for large companies in the real economy. However, due to the business activities of the financial industry, even very small insurers with only 50 employees exceed these thresholds. As a result, these are considered large companies and, like large international companies, would be subject to full reporting requirements from financial year 2023. To avoid this, appropriate proportional regulations are needed for small or medium-sized insurers. Such regulations are already provided for in the CSRD for small and medium-sized undertakings in the real economy.