Defining Issues | April 2021



European ESG reporting directive proposed

A new EU proposal would significantly expand the scope of ESG reporting and impact US companies.

Maura Hodge

Maura Hodge

Partner, KPMG IMPACT Audit Leader, KPMG US

+1 803-606-8370

Julie Santoro

Julie Santoro

Partner, Dept. of Professional Practice, KPMG US

+1 212-954-1086

A US company listed in the EU would be in the scope of the proposal, as would a 'large' European subsidiary of a US parent. US companies with operations in the EU should take care to understand the effect of the proposed disclosures and related assurance requirements.


  • EU-listed companies, and other companies in the EU that are 'large’.

Relevant dates

  • 2023: first period for which companies would need to report.
  • The next step is for the European Commission to engage in discussions with the European Parliament and Council.

Key impacts

The following are key points about the proposed CSRD:

Extended coverage

  • The current rules (Non-Financial Reporting Directive) scope in 'large' public interest entities. The amendments would extend coverage to all 'large' (new definition) companies and all companies (other than micro-companies) with securities listed on EU-regulated markets; a three-year deferral would apply to small and medium-sized listed companies. These changes would extend the scope from under 12,000 to nearly 50,000 companies.  
  • The proposal applies to all companies operating in Europe that meet the criteria – e.g. a 'large' EU subsidiary of a US parent. Such a subsidiary would be exempt from ESG reporting only if its foreign (e.g. US) parent reports equivalent information (by nature and with assurance) at the consolidated level; this assessment of equivalency would be made by the European Commission at a country (not an entity) level.

Extended ESG reporting scope

  • For companies reporting on ESG matters for the first time, the disclosures would be extensive, covering the environmental, social and governance categories of ESG. For companies already in the scope of the current rules, new disclosures would include information that is material for stakeholders other than investors, as well as disclosures about social, human and intellectual capital.

New assurance requirements

  • The CSRD would introduce mandatory limited assurance over the ESG reporting (including the processes followed in preparing it). Limited assurance is usually a negative form of expression stating that no matter has been identified by the practitioner to conclude that the subject matter is materially misstated.
  • The scope may be extended to full assurance after three years.  

Related content

Subscribe to our newsletter

Receive timely updates on accounting and financial reporting topics from KPMG.

Receive timely updates on accounting and financial reporting topics from KPMG.


Use our Accounting Research Online for financial reporting resources.

Use our Accounting Research Online for financial reporting resources.