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• Based on our data, at least 30 AIM listed firms will be in-scope of CSRD, meeting the criteria for large firms. Impact is not limited to the AIM100 nor EU incorporated firms.
  
• Although listed SMEs are in-scope, the AIM market is exempt.
  
• However, we anticipate that many more firms will be impacted via their supply chain, as clients and distributers in-scope will need to report on their behalf. 
  
• Firms with indirect exposure may decide to disclose voluntarily, on a simpler, size appropriate framework to reduce the overall effort.

In November 2022 the reporting standards under the upcoming EU Corporate Sustainability Reporting Directive (CSDR) were approved. Compliance comes into force from 2024 and will replace the EU’s Non-Financial Reporting Directive (NFRD).

As non-EU and smaller firms come into scope 49,000 companies will be impacted, a 4-fold increase from the 12,000 firms impacted by NFRD today.

Along with the new reporting standards, the regulation also brings an audit requirement, double materiality (i.e. inward and outward assessment) and the need to digitally tag disclosures to facilitate machine reading.

CSDR, together with the EU Taxonomy and Sustainable Finance Disclosure Regulation (SFDR), aim to create a consistent flow of data through the financial value chain.

Is my company affected?

Mandatory compliance thresholds and timeline for compliance depends on EU presence and size:

• Firms who already report under NFRD need to start reporting in line with CSRD on 2024 data in 2025.

• EU incorporated firms not currently in scope of NFRD are considered a large firm and will need to start reporting on 2025 data in 2026, if they meet 2 of the following 3 criteria:
  • €40 million in net turnover;
  • €20 million in assets;
  • 250 or more employees.

• Firms incorporated outside of the EU with at least one subsidiary in the EU are considered in-scope as a large firm if EU turnover exceeds €150 million. Firms also need to start reporting on 2025 data in 2026.

Although listed SMEs are in scope, AIM listed firms who do not meet the large company thresholds are exempt.

A warning however to out-of-scope firms. The reporting standards may well still impact you via your clients and supply chain who will need to report on your behalf.  For this reason, alongside the alignment to SFRD and therefore investor data requirements, the EU is encouraging out-of-scope companies to consider adoption on a voluntary basis.

Some glimmers of hope for firms drowning in ESG reporting standards and frameworks: CSRD reporting requirements are aligned to the International Sustainability Standards Board (ISSB) initiative and will be simplified for SMEs. The EU are also working on sector specific requirements, although it was announced in March, there will be a delay from the expected release later in 2023.