Sustainability reporting regulation within the European union

Abstract

This chapter explores the evolution and framework of sustainability reporting regulations in the European Union (EU), highlighting the transformative journey from voluntary non-financial disclosures to the robust regulatory mechanisms embodied in the Corporate Sustainability Reporting Directive (CSRD). It begins by examining the historical context and limitations of the Non-Financial Reporting Directive (NFRD), including its narrow scope and lack of standardisation, which necessitated the CSRD's introduction. The chapter outlines important principles underpinning EU sustainability reporting, such as double materiality, and emphasises the integration of climate-related frameworks like the Task Force on Climate-related Financial Disclosures (TCFD). It also discusses the growing prominence of climate-related matters in corporate reporting, including mandatory disclosures of Scope 1, 2 and 3 emissions and the alignment with the European Green Deal's net-zero targets. Additionally, the role of digitalisation in sustainability reporting is highlighted through the adoption of the European Single Electronic Format (ESEF) and the European Single Access Point (ESAP). By exploring these developments, it is shown how the CSRD plays a vital role in sustainability reporting.