The Corporate Sustainability Reporting Directive, which entered into force in January 2023, sets out EU harmonied rules for annual reporting of sustainability matters by large companies, large public interest entities (PIEs) and listed SMEs (excluding micro-entities). The required disclosures must be provided in the management report (in Ireland, the directors’ report). The reporting requirements are underpinned by mandatory European Sustainability Reporting Standards (ESRSs). The European Commission is at the last step before adopting the Delegated Act on the first set of ESRS and the consultation period on that process closed on 7 July 2023. Sustainabilty reporting will be subject to an assurance requirement and must be digitally tagged. Member States have until July 2024 to transpose the CSRD into domestic law and the disclosure requirements will be applied incrementally from 2024 to 2028.
The Department of Enterprise, Trade and Employment held a webinar on 4 July 2023 in which it provided an update on the CSRD and its transposition into Irish law, including policy options arising from the Department’s public consultation held earlier in the year.
Some of the key points from that webinar are:
- Credit Unions and friendly societies will be exempt from CSRD requirements. In addition, not-for-profit companies are not in scope of the Accounting Directive and, hence, not in scope of CSRD. However, such companies may elect to comply with sustainability reporting on a voluntary basis.
- The Department has indicated that it will further review the scope of CSRD in the next phase of the transposition project.
- It is proposed that the Member State option to allow, in certain limited circumstances, the exclusion of commercially sensitive information from sustainability reporting by companies and groups will be availed of.
- It is proposed that companies within CSRD remit would be permitted to allow an approved person other than the statutory auditor of the financial statements to undertake the assurance of the sustainability reporting.
- The Department proposes that, should the EU fail to adopt an EU wide assurance standard for sustainability reporting, Ireland would have the power to adopt a national assurance standard for sustainability reporting.
- It is proposed that the assurance report on sustainability reporting may be included as a separate section of the audit opinion on the financial statements (rather than being a separate report).
- The Department proposes that a time limited exemption be given, until 31 December 2025, from the requirement to have relevant experience for persons who perform assurance of sustainability reporting.
- There will be a requirement that the directors’ report containing sustainability reporting or a third country parent company sustainability report be published with the Companies Registration Office (CRO). However, companies in scope of the CSRD, filing the directors’ report with the CRO, will not be required to separately publish the directors’ report containing sustainability reporting to their website nor to make it available on request.
- In 2024, the Department proposes to conduct a specific consultation on the Member State options regarding independent assurance service providers.
It is anticipated that IAASA will have responsibility for examining sustainability reporting for those entities within its existing Transparency Directive remit for financial reporting and which fall within the scope of CSRD, as well as responsibility for inspecting the assurance on those reports in the case of PIEs.
The Department’s slides are available here.