GUIDES FOR POLICY MAKERS SERIESCSRD.
Implications for companies
outside the EU
What is the issue?
When the Corporate Sustainability Reporting Directive(EU 2022/2464) enters into force in January 2024,
sustainability reporting will move from a ‘nice to do’
to mandatory as an estimated 50,000 companies inEurope will be obliged to report on the impact of theiractivities on the environment and society. All large
companies and all European stock exchange-listedcompanies as well as SMEs, are within the scope.
But as European businesses ready themselves formandatory reporting, non-EU businesses cannot afford
to relax as a significant addition of the CSRD is toextend the scope of the reporting obligations to include
international companies. From 2024 the CSRD will
also apply to non-EU companies with securities listed
on an EU regulated market and from 2028 non-EU
companies that directly generate a net turnover of over€150 million in the EU and have a subsidiary office(branch with no legal personality) with a net turnoverof at least €40 million in the EU, or a large or listed EUsubsidiary. However, this last category of companies
will only have to report their impacts not the financial
implications of those.

What does this mean for policy makers?
The implications of the adoption of the CSRD are thatthousands of companies outside the EU will also haveto report at least their sustainability impacts to the EU(see above). Policy makers around the world need to
do more than watch what is happening with interest –they will need to ensure national policies reflect certain
options for their businesses:
1. If a multinational company has a subsidiary basedin the European Union that is within the scope of theCSRD, the subsidiary must include its sustainability
data in an individual management report preparedin accordance with the European Sustainability
Reporting Standards (ESRS), the standards thatdefine the rules of the CSRD. Before 2030 theconsolidation will not be possible in the consolidated
report of the parent companies with HQ outside theEU, unless it is published in accordance with theESRS. Alternatively, the subsidiary can include its
information in the report of its largest sister company
based in the EU that uses the ESRS.
2. Large non-EU companies that operate directlyin the EU through a branch or that makesignificant business in the EU independently of
their subsidiary will need to report separately on
their impacts. The branch or the subsidiary arethen responsible for publishing the sustainability
information of the parent company and if they doso, the sustainability report must be published in alanguage that that Member State accepts. These
companies have two options for reporting:a. Using the standards for non-EU companies
which is being developed by the European
Financial Reporting Advisory Group (EFRAG), orb. Alternatively, non-EU companies that havebranches in the EU could use their own
domestic reporting guidelines (for them,exclusively on impact materiality) providing
these non-EU standards are deemed equivalent
to ESRS by the European Commission. The

same applies to parent companies outside
the EU that want to consolidate the reportingof their EU subsidiaries. The EuropeanCommission will assess equivalence on acountry-by-country basis following a request by
a country to do so.
In summary, policy makers around the world areadvised to ensure their domestic standards as muchas possible support businesses needing to reportin accordance with the ESRS and consider seeking
equivalence status.

How can GRI help?
Around the world, many companies already report on
their sustainability impacts using globally accepted
standards such as those developed by GRI, which
provides the world’s most widely used sustainability
reporting standards. 73% of the world’s 250 largest
companies by revenue use GRI guidelines orstandards and 67% of the top 100 companies byrevenue in 52 countries and jurisdictions use GRI
guidelines or standards. GRI offers the only reporting
standards used by most surveyed companies in all
regions (75% in the Americas, 68% in Asia-Pacificand Europe, 62% in ME & Africa). 99% of Singaporeregistered companies use GRI standards.

disclosure requirements and datapoints in each set ofstandards relate to each other, emphasizing the highdegree of commonality already achieved and laying
down solid foundations to build a reciprocal digitaltaxonomy.

So, GRI standards are widely used but what does thatmean for ESRS compliance?

Policy makers can thus rest easier knowing that if
they wish to ensure their policies have equivalence toESRS, GRI Standards reflect existing ESRS now andwill do so for future European reporting requirements.
And there is a clear case for policy makers outside theEU to support the equivalence status of policies basedon GRI Standards. First, the already high adoption
rate of GRI Standards by many companies outside theEU expected to report using ESRS. And second, theinteroperability tools developed by the EU standard
setting body.

Organisations already using GRI standards in theirreporting will maximise their chances of compliancewith ESRS based on the high level of commonality andtechnical cooperation on non-EU Standards.
GRI and the European Financial Reporting Advisory
Group (EFRAG) the body which developed theESRS, have already started collaboration to makesustainability reporting easy to comply with. Thehigh level of interoperability between ESRS andGRI standards in relation to impact reporting wasconfirmed in a recent MoU. As a first tangible outcomeof this MoU, a GRI-ESRS Interoperability Index has
been made publicly available which sets out how theThis interoperability effectively means that non-EU
businesses already reporting using GRI standards
are almost certainly adhering to ESRS, which
will dramatically ease the burden of the reporting
process and prevent the need for double reporting bycompanies resulting in a user-friendly reporting system
without undue complexity.

For more information on reporting
requirements for non-EU companies, pleasecontact policy@globalreporting.org.

GRI would like to thank the Government of Sweden for their financial support to this publication.

globalreporting.org