The European Commission has recently initiated infringement procedures against 17 EU member states, signaling serious enforcement of the new CSRD.
According to ESG Today, this directive marks a significant expansion from the former Non-Financial Reporting Directive (NFRD), extending the scope to over 50,000 companies from the previous 12,000.
The CSRD, which took effect at the start of 2024, mandates detailed disclosures from large companies on their environmental impact, human rights, social standards, and sustainability-related risks. The first reports under this directive are due in 2025.
Despite a clear deadline of July 6, 2024, for transposing the CSRD into national legislation, these 17 member states, including Belgium, Germany, Spain, and the Netherlands, have failed to comply, prompting the Commission to issue formal notices. This action underscores the EU’s commitment to achieving a unified standard in sustainability reporting across its members, enhancing the transparency needed for investors to make informed sustainability assessments.
The infringement process, a structured EU legal mechanism, begins with a formal notice and can escalate to the Court of Justice, where financial penalties might be imposed. This step reflects the Commission’s broader strategy to enforce EU law rigorously, as demonstrated by a similar infringement procedure launched against 26 member states for not meeting the renewable energy permitting targets set for 2030.
In the Commission’s words: “In the absence of transposition of these new rules, it will not be possible to achieve the necessary level of harmonisation of sustainability reporting in the EU, and investors will not be in a position to take into account the sustainability performance of companies when making investment decisions.”
This development not only emphasizes the growing importance of corporate sustainability practices in investment decisions but also the EU’s proactive stance in ensuring that these practices are transparent and uniform across all member states.
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