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Requirements and approach to ESG reporting
The CSRD makes ESG reporting mandatory
The increase in disclosure is not only intrinsic or investor driven. To increase transparency and as a tool to support the sustainability agenda, policymakers in various regions have issued or are preparing regulations on ESG reporting. A prominent example of ESG regulation is the European Corporate Sustainability Reporting Directive (CSRD), the successor to the Non-Financial Reporting Directive (NFRD). This regulation will make sustainability reporting mandatory for around 50,000 European companies4, covering more than 75% of the total turnover of European companies and large non-EU companies with a significant presence in the EU.
Through the Directive, the European Commission requires companies to disclose information on „risks and opportunities arising from social and environmental issues and on the impact of their activities on people and the environment“. The directive promotes the shift towards carbon neutrality and resource efficiency in line with the EU Green Deal by requiring progress reports on these issues.