From Theory to Practice: CSRD and EU Taxonomy in the Corporate Environment

The European economy is groaning under the weight of increasing EU regulation, which is giving more and more weight to sustainability and ESG aspects. For example, while sustainability reporting within the EU is being elevated to the (group) management report level, companies must at the same time compete in global markets with significantly fewer regulated market participants. With the background and objective of disclosure and transparency obligations within supply chains and the EU’s endeavour to achieve carbon neutrality by 2030, the EU has planned an expansion of its sustainable finance framework, which consists of the EU Taxonomy Regulation, the Sustainable Financial Disclosure Regulation (SFDR) and, to date, the Non-Financial Reporting Directive (NFRD). The NFRD was replaced on 5 January 2023 by the substantially more extensive Corporate Sustainability Reporting Directive (CSRD), which is currently on the verge of legislative implementation in Germany after more than the 18 months planned for it. Like the CSRD itself, the German draft bill, which provides for an almost 1:1 implementation, also stipulates the obligation of companies to different extents and with various transition periods. In any case, this goes hand in hand with an expansion of reporting obligations overall, which in future must be measured against the numerous data points set out in the European Sustainability Reporting Standards (ESRS) and their specific application requirements. In addition, the CSRD ties in with Article 8 of the EU Taxonomy Regulation by requiring companies to report various key performance indicators that are harmonized with the EU Taxonomy. The publication of the EU Taxonomy metrics is part of the reporting obligation of companies covered by the CSRD and companies covered by the SFDR will need the EU Taxonomy metrics from their CSRD report.

This dynamic regulatory interplay often poses practical problems for companies that are forced to apply it, such as recreating their data collection and analysis processes, or ensuring the electronic reporting format. In addition, the envisaged double materiality raises fundamental questions about the reassessment of companies and the associated redefinition of corporate strategies to mitigate—and adapt to—ESG risks.

Ms Jennifer Maaß, LLB, LLM, is a PhD Candidate at the SWPS University of Social Sciences and Humanities in Warsaw, a Senior Consultant at Deloitte and a former research associate and lecturer for International Economic Law and European Economic Law at the Brunswick European Law School (BELS), Ostfalia University of Applied Sciences. In 2022, she also had been a Visiting PhD Researcher at the Lauterpacht Centre for International Law (LCIL), University of Cambridge and the research officer at the Centre for International Sustainable Development Law (CISDL), where she recently was appointed as an Associate Fellow. She previously worked at several law firms and a language service where she coordinated for the German Federal Office for Migration and Refugees, among others. Her current research focus is on the UN Sustainable Development Goals (SDGs) and the regulatory environment in the transnational law of natural resources, justice and human rights. She is a member of the International Law Association (ILA) and the European Society for International Law (ESIL), among others.