Latest: Impact of EU ESG reporting on US companies
Hot Topic | December 2023
The Corporate Sustainability Reporting Directive is now in force, but its application to US companies continues to raise questions.
Updated to reflect the latest developments by the European Commission and European Financial Reporting Advisory Group (EFRAG), this Hot Topic explains which companies within a group are subject to the CSRD and includes a series of examples that illustrate the CSRD scoping and reporting considerations for common US group structures.
Applicability
Accounting Directive, as amended by the Corporate Sustainability Reporting Directive
- Most companies with listed securities in the EU, non-EU parents (including US companies) with substantial activity and a presence in the EU, and non-EU subsidiaries of companies that meet the scoping requirements
CSRD development
So far:
- Apr 21, 2021 – Initial EU Directive proposals issued
- Nov 10, 2022 – EU Parliament adopted the CSRD
- Nov 28, 2022 – Council of the EU adopted the CSRD
- Jan 5, 2023 – The CSRD entered into force
- Oct 2023 – The European Commission approved increases to the general scoping size criteria
Forthcoming:
- Jan 1, 2024 – The earliest effective date for the CSRD
- July 2024 – Deadline for Member States to transpose the CSRD into local law (i.e. 18 months from the date the CSRD became law)
- 2024 and beyond – Anticipated release by EFRAG of European Sustainability Reporting Standards clarifications and guidance on double materiality, value chain, and possibly other topics
- June 30, 2026 – New deadline for the European Commission to adopt sector and non-EU parent standards
Effective dates
Company type | Effective date | Year of initial application |
|---|---|---|
Large PIEs (> 500 employees) and large companies listed on an EU-regulated market (> 500 employees) | Jan 1, 2024 | 2025 (i.e. companies would have to issue their 2024 sustainability report in 2025) |
Other large companies (including large companies listed on an EU-regulated market) | Jan 1, 2025 | 2026 |
Small and medium-sized companies (including non-EU based SMEs), except micro-companies, listed on an EU-regulated market | Jan 1, 2026 | 2027 |
Includes an option to opt out of CSRD reporting until 2029 (i.e. effective date of 2028) | ||
Small and non-complex credit institutions and captive insurance entities | Jan 1, 2026 | 2027 |
Ultimate non-EU parent companies with substantial activity and presence in the EU | Jan 1, 2028 | 2029 |
Key impacts
Despite being an EU directive, US and other non-EU based companies will be impacted by the CSRD if they meet certain scoping criteria, which are discussed in our Hot Topic. The nature of these impacts will vary depending on the specific circumstances of the company.
US and other non-EU based companies that do business in the EU need to consider whether they will be subject to the CSRD. The complexity in applying the CSRD to those that meet the scoping criteria will vary based on a variety of factors, including their group structure and existing consolidated reporting processes.
Our Hot Topic can help US and other non-EU based companies understand the CSRD scoping requirements and consequential reporting obligations. It includes a series of examples that walk through the applicability of the CSRD to common group structures for US and other non-EU based companies.
The CSRD requires certain companies to prepare sustainability reporting in accordance with the European Sustainability Reporting Standards (ESRSs). The EU adopted the first set of ESRSs in July 2023 and they will become effective for companies starting from January 2024. For more information about the ESRSs, see our ESRS Resource Center.
Report contents
- Fast facts, impacts and actions
- Background
- Scoping requirements
- Effective dates
- Reporting and assurance requirements
- Reporting exemptions
- Non-EU company impact
- Next steps: for the European Commission; for EFRAG; for companies
- Examples
- Resources
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