Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting
Date: 2021-04-21
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: activity report, administrative formalities, audit, auditing, closing of accounts, corporate social responsibility, disclosure of information, environmental impact, financial market, publication of accounts

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 21.4.2021  COM(2021) 189 final 2021/0104 (COD)  Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting (Text with EEA relevance) {SEC(2021) 164 final} - {SWD(2021) 150 final} - {SWD(2021) 151 final}  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

The  Non-Financial  Reporting  Directive  (Directive  2014/95/EU,  the  NFRD),  amending  the 
Accounting Directive, was adopted in 2014.1 Companies within the scope of the NFRD had to 
report  in  accordance  with  its  provisions  for  the  first  time  in  2018  (covering  financial  year 
2017).  

The NFRD applies to  large public-interest  entities with  an average number of employees in 
excess of 500, and to public-interest entities that are parent companies of a large group with 
an  average  number  of  employees  in  excess  of  500  on  a  consolidated  basis.2  The  NFRD 
exempts subsidiaries from its reporting obligations if their parent company does the reporting 
for the whole group, including the subsidiaries. Approximately 11 700 companies are subject 
to the reporting requirements of the NFRD3.  

The  NFRD  introduced  a  requirement  for  companies  to  report  both  on  how  sustainability 
issues affect their performance, position and development (the ‘outside-in’ perspective), and 
on  their  impact  on  people  and  the  environment  (the  ‘inside-out’  perspective).  This  is  often 
known as ‘double materiality’.  

In  accordance  with  the  NFRD,  in  2017  the  Commission  published  non-binding  reporting 
guidelines for companies.4  In 2019, it published additional guidelines, on reporting  climate-
related  information.5  These  guidelines  have  not  sufficiently  improved  the  quality  of 
information companies disclose pursuant to the NFRD. 

The  European  Commission  committed  itself  to  proposing  a  revision  of  the  Non-Financial 
Reporting  Directive  in  the  European  Green  Deal  and  its  2020  Work  Programme.6  The 
European  Green  Deal  aims  to  transform  the  EU  into  a  modern,  resource-efficient  and 
competitive economy with  no net  emissions of greenhouse  gases by 2050.7  It  will decouple 
economic growth from resource use, and ensure that all EU regions and citizens participate in 
a  socially  just  transition  to  a  sustainable  economic  system.  It  also  aims  to  protect,  conserve 
and enhance the EU's natural capital, and to protect the health and well-being of citizens from 
environment-related  risks  and  impacts.  The  revision  of  the  NFRD  will  contribute  to  the 
objective  of  building  an  economy  that  works  for  people.  It  will  strengthen  the  EU’s  social 

1 

2 

3 

4 
5 
6 

7 

Directive  2014/95/EU  of  the  European  Parliament  and  of  the  Council  of  22  October  2014  amending 
Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large 
undertakings and groups. 
Public-interest  entities  are  defined  in  the  Accounting  Directive  as  companies  with  securities  listed  in 
EU regulated  markets, banks (whether listed or not), insurance companies (whether listed or not) and 
any other companies designated by Member States. 
This figure takes account of how Member States have transposed the Directive. Not taking account of 
national transposition, about 2 000 companies are within the scope of the NFRD. 
Commission Communication C(2017) 4234 final. 
Commission Communication C(2019) 4490 final. 
Communication  from  the  Commission  on  the  European  Green  Deal,  COM(2019)640  final.  Adjusted 
Commission Work Programme 2020 COM(2020) 440 final. 
On 4 March 2020, the Commission adopted the Proposal for a Regulation of the European Parliament 
and  of  the  Council  establishing  the  framework  for  achieving  climate  neutrality  and  amending 
Regulation  (EU)  2018/1999  (European  Climate  Law)  (2020/0036  (COD)),  proposing  to  make  the 
objective of climate neutrality by 2050 legally binding on the EU. 

EN 

1 

  EN 

                                                 
market  economy,  helping  to  ensure  that  it  is  future-ready  and  that  it  delivers  stability,  jobs, 
growth and investment. These goals are especially important considering the socio-economic 
damage caused by the COVID-19 pandemic and the need for a sustainable, inclusive and fair 
recovery. 

In line with the Commission’s Sustainable Finance Action Plan, the EU has taken a number of 
measures to ensure that the financial sector plays a significant part in achieving the objectives 
of the European Green Deal8. Better data from companies about the sustainability risks they 
are  exposed  to,  and  their  own  impact  on  people  and  the  environment,  is  essential  for  the 
successful  implementation  of  the  European  Green  Deal  and  the  Sustainable  Finance  Action 
Plan.  By  making  companies  more  accountable  for  and  transparent  about  their  impact  on 
people and the environment, this proposal can also help strengthen relations between business 
and society. It will also create opportunities for companies, investors, civil society and other 
stakeholders  to  radically  improve  the  way  sustainability  information  is  reported  and  used 
thanks to  digital  technologies.  In December 2019, in  its conclusions on the Capital  Markets 
Union, the Council stressed the importance of reliable, comparable and relevant information 
on sustainability risks, opportunities and impacts, and called on the Commission to consider 
the development of a European non-financial reporting standard9. 

In  its  May  2018  resolution  on  sustainable  finance,  the  European  Parliament  called  for  the 
further  development  of  reporting  requirements  in  the  framework  of  the  Non-Financial 
Reporting  Directive  (NFRD).10  In  its  December  2020  resolution  on  sustainable  corporate 
governance, it welcomed the Commission’s commitment to reviewing the NFRD, called for 
an extension of the scope of the NFRD to additional categories of companies, and welcomed 
the  Commission’s  commitment  to  developing  EU  non-financial  reporting  standards11.  The 
European Parliament also considered that non-financial information published by companies 
pursuant to the NFRD should be subject to a mandatory audit.  

The  primary  users  of  sustainability  information  disclosed  in  companies’  annual  reports  are 
investors  and  non-governmental  organisations,  social  partners  and  other  stakeholders. 
Investors, including asset managers, want to better understand the risks of, and opportunities 
afforded  by,  sustainability  issues  for  their  investments,  as  well  as  the  impacts  of  those 
investments on people and the environment. Non-governmental organisations, social partners 
and other stakeholders want to hold undertakings to greater account for their impacts of their 
activities on people and the environment. 

The  current  legal  framework  does  not  ensure  that  the  information  needs  of  these  users  are 
met. This is because some companies from which users want sustainability information do not 
report such information, while many that do report sustainability information do not report all 
the  information  that  is  relevant  for  users.  When  information  is  reported,  it  is  often  neither 
sufficiently  reliable,  nor  sufficiently  comparable,  between  companies.  The  information  is 
often  difficult  for  users  to  find  and  is  rarely  available  in  a  machine-readable  digital  format. 
Information on intangibles, including internally generated intangibles, is under-reported, even 
though  these  intangibles  represent  the  majority  of  private  sector  investment  in  advanced 

8 

9 
10 
11 

Communication  from the Commission  –  Action Plan: Financing Sustainable Growth, COM(2018)097 
final. 
Council Conclusions on the Deepening of the Capital Markets Union (5 December 2019). 
European Parliament resolution of 29 May 2018 on sustainable finance (2018/2007(INI)). 
European  Parliament  resolution  of  17  December  2020  on  sustainable  corporate  governance 
(2020/2137(INI). 

EN 

2 

  EN 

                                                 
economies  (e.g.  human  capital,  brand,  and  intellectual  property  and  intangibles  related  to 
research and development).  

The  information  needs  of  users  have  increased  significantly  in  recent  years  and  will  almost 
certainly continue to do so. There are several reasons for this. One is the growing awareness 
of investors that sustainability issues can put the financial performance of companies at risk. 
Another  is  the  growing  market  for  investment  products  that  explicitly  seek  to  conform  to 
certain  sustainability  standards  or  achieve  certain  sustainability  objectives.  Yet  another  is 
regulation,  including  the  Sustainable  Finance  Disclosure  Regulation  and  the  Taxonomy 
Regulation. As a result of both these regulations, asset managers and financial advisers need 
more sustainability information from investee companies12. Finally, the COVID-19 pandemic 
is  likely  to  further  accelerate  the  growth  in  demand  for  sustainability  information  from 
companies,  for  example  regarding  the  vulnerability  of  workers  and  the  resilience  of  supply 
chains.  

There  is  therefore  a  widening  gap  between  the  sustainability  information  companies  report 
and  the  needs  of  the  intended  users  of  that  information.  On  the  one  hand,  this  means  that 
investors  are  unable  to  take  sufficient  account  of  sustainability-related  risks  in  their 
investment  decisions.  This  in  turn  has  the  potential  to  create  systemic  risks  that  threaten 
financial stability. On the other hand, the  gap means that investors cannot  channel  financial 
resources  to  companies  with  sustainable  business  models  and  activities.  This  in  turn 
undermines  the  achievement  of  the  objectives  of  the  European  Green  Deal.  It  also  hampers 
stakeholders’ ability to hold undertakings accountable for the impact they have on people and 
the  environment,  creating  an  accountability  deficit  liable  to  undermine  the  efficient 
functioning of the social market economy. 

The  current  situation  is  also  problematic  for  companies  that  have  to  report.  The  lack  of 
precision  in  the  current  requirements,  and  the  large  number  of  private  standards  and 
frameworks  in  existence,  make  it  difficult  for  companies  to  know  exactly  what  information 
they  should  report.  They  often  experience  difficulties  in  getting  the  information  they 
themselves  need  from  suppliers,  clients  and  investee  companies.  Many  companies  receive 
requests for sustainability  information from  stakeholders in  addition  to  the information  they 
report to comply with current legal requirements. All of this generates unnecessary business 
costs.  

The  objective  of  this  proposal  is  therefore  to  improve  sustainability  reporting  at  the  least 
possible  cost,  in  order  to  better  harness  the  potential  of  the  European  single  market  to 
contribute to  the transition towards a fully sustainable and inclusive economic and financial 
system  in  accordance  with  the  European  Green  Deal  and  the  UN  Sustainable  Development 
Goals.  

The  proposal  aims  to  ensure  that  there  is  adequate  publicly  available  information  about  the 
risks  that  sustainability  issues  present  for  companies,  and  the  impacts  of  companies 
themselves on people and the environment. This means that companies from which users need 
sustainability  information  should  report  such  information,  and  that  companies  should  report 
all information users consider relevant. Reported information should be comparable, reliable 
and easy for users to find and make use of with digital technologies. This entails changing the 

12 

Regulation  (EU)  2019/2088  (Sustainable  Finance  Disclosure  Regulation),  and  Regulation  (EU) 
2020/852 (Taxonomy Regulation). 

EN 

3 

  EN 

                                                 
status  of  sustainability  information  to  make  it  more  comparable  to  that  of  financial 
information. 

The  proposal  will  help  reduce  systemic  risks  to  the  economy.  It  will  also  improve  the 
allocation  of  financial  capital  to  companies  and  activities  that  address  social,  health  and 
environmental problems. Finally, it will make companies more accountable for their impacts 
on people and the environment, thereby building trust between them and society. 

The proposal aims to reduce unnecessary costs of sustainability reporting for companies, and 
to  enable  them  to  meet  the  growing  demand  for  sustainability  information  in  an  efficient 
manner.  It  will  bring  clarity  and  certainty  on  what  sustainability  information  to  report,  and 
make it easier for preparers to get the information they need for reporting purposes from their 
own  business  partners  (suppliers,  clients  and  investee  companies).  It  should  also  reduce  the 
number  of  demands  companies  receive  for  sustainability  information  in  addition  to  the 
information they publish in their annual reports.  

There  are  a  number  of  important  international  initiatives  in  place.  Their  aim  is  to  help  to 
achieve the worldwide  convergence  and harmonisation  of sustainability  reporting standards. 
The EU fully supports this ambition. EU companies and investors that operate globally will 
benefit  from  such  convergence  and  harmonisation.  The  Commission  supports  initiatives  by 
the  G20,  the  G7,  the  Financial  Stability  Board  and  others  to  generate  international 
commitment  to  develop  a  baseline  of  global  sustainability  reporting  standards  that  would 
build on the work of the Task Force on Climate-related Financial Disclosures. The proposals 
of the International Financial Reporting Standards Foundation to create a new Sustainability 
Standards Board are especially relevant in this context, as is the work already carried out by 
established  initiatives  including  the  Global  Reporting  Initiative  (GRI),  the  Sustainability 
Accounting Standards Board (SASB), the International Integrated Reporting Council (IIRC), 
the Climate Disclosure Standards Board (CDSB) and CDP  (formerly the Carbon Disclosure 
Project). This proposal aims to build on and contribute to international sustainability reporting 
initiatives. EU sustainability reporting standards should be developed in constructive two-way 
cooperation with leading international initiatives, and they should align with those initiatives 
as far as possible while taking into account European specificities. 

This proposal consists of one Directive that would amend four existing pieces of legislation. 
In the first place, it would amend the Accounting Directive, revising some exiting provisions 
and adding certain new provisions about sustainability reporting. In addition, it would amend 
the Audit Directive and the Audit Regulation, to cover the audit of sustainability information. 
Finally, it would amend the Transparency Directive to extend the scope of the sustainability 
reporting requirements to companies with securities listed on regulated markets, and to clarify 
the supervisory regime for sustainability reporting by these companies.  

• 

Consistency with existing policy provisions in the policy area 

The  NFRD,  together  with  the  Sustainable  Finance  Disclosure  Regulation  (SFDR)  and  the 
Taxonomy Regulation, are the central components of the sustainability reporting requirements 
underpinning the EU’s sustainable finance strategy. The purpose of this legal framework is to 
create  a  consistent  and  coherent  flow  of  sustainability  information  throughout  the  financial 
value chain. 

This  proposal  builds  on  and  revises  the  sustainability  reporting  requirements  set  out  in  the 
NFRD,  in  order  to  make  sustainability  reporting  requirements  more  consistent  with  the 

EN 

4 

  EN 

broader  sustainable  finance  legal  framework,  including  the  SFDR  and  the  Taxonomy 
Regulation, and to tie in with the objectives of the European Green Deal.  

The SFDR governs how financial market participants (including asset managers and financial 
advisers) should disclose sustainability information to end-investors and asset owners. To be 
able to fulfil the requirements of the SFDR – and therefore ultimately to be able to meet the 
needs  of  end  investors  including  individuals  and  households  –  financial  market  participants 
need adequate information from investee companies. This proposal therefore aims to ensure 
that investee companies report the information financial market participants need in order to 
fulfil their own SFDR reporting requirements. 

The  Taxonomy  Regulation  sets  up  a  classification  system  for  environmentally  sustainable 
economic  activities,  with  the  aim  of  scaling  up  sustainable  investments  and  combatting  the 
greenwashing  of  ‘sustainable’  financial  products.  It  requires  companies  within  the  scope  of 
the  NFRD  to  disclose  certain  indicators  about  the  extent  to  which  their  activities  are 
environmentally sustainable according to the taxonomy. These disclosure obligations will be 
specified by a separate Commission delegated act. These indicators are complementary to the 
information that companies have to disclose according to the NFRD itself, and companies will 
have to report them alongside other sustainability information mandated by the NFRD.  

This proposal aims to ensure that the reporting requirements for companies are consistent with 
the taxonomy. This will be achieved above all through the proposed sustainability reporting 
standards.  These  will  take  into  account  the  indicators  companies  have  to  disclose  about  the 
extent  to  which  their  activities  are  environmentally  sustainable  according  to  the  taxonomy, 
and the screening criteria and do-no-significant-harm thresholds of the taxonomy. 

Compared to  the NFRD  sustainability  reporting requirements, the principal  novelties of this 
proposal are:  

– 

– 

– 

– 

• 

to extend the scope of the reporting requirements to additional companies, including 
all large companies and listed companies (except listed micro-companies);  

to require assurance of sustainability information;  

to  specify in  more detail  the information that companies should report, and require 
them to report in line with mandatory EU sustainability reporting standards;  

to ensure that all information is published as part of companies’ management reports, 
and disclosed in a digital, machine-readable format.  

Consistency with other Union policies 

This  proposal  contributes  to  the  completion  of  the  Capital  Markets  Union,  by  enabling 
investors  and  other  stakeholders  to  access  comparable  sustainability  information  from 
investee companies across  the EU. As part of the action plan on the Capital  Markets  Union 
(COM(2020) 590 final), the Commission will put forward a legislative proposal to set up an 
EU-wide digital access platform to companies’ public financial and sustainability information 
(European  Single  Access  Point  (ESAP)).  This  proposal  complements  that  initiative,  by 
contributing  to  achieving  the  objectives  of  the  Digital  Finance  Strategy  for  the  EU 
(COM(2020)  591  final),  by  requiring  that  reported  sustainability  information  be  digitally 
tagged.  

This proposal takes into consideration the Commission’s 2021 Work Programme, in particular 
the  forthcoming  initiative  on  sustainable  corporate  governance,  and  the  Commission’s 

EN 

5 

  EN 

commitment in the European Green Deal to stepping up action against false green claims and 
to  supporting  businesses  and  other  stakeholders  in  developing  standardised  natural  capital 
accounting practices in the EU and internationally. 

This proposal ties in with the Commission’s proposal for strengthening the application of the 
principle of equal pay for equal work or work of equal value by men and women, through pay 
transparency  and  enforcement  mechanisms13.  It  also  ties  in  with  the  proposed  directive  on 
improving gender balance on the boards of large EU listed companies by sharing information 
on companies’ diversity policies14. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The proposal’s legal basis rests on Articles 50 and 114 of the Treaty on the Functioning of the 
European Union (TFEU). Article 50 of the TFEU is the legal basis for adopting EU measures 
aimed at attaining the right of establishment in the single market in company law. It is also the 
legal basis for Directives 2013/34/EU, 2006/43/EC, 91/674/EEC, 86/635/EEC, and t is part of 
the  legal  basis  for  Directive  2004/109/EC.  Article  50  of  the  TFEU  mandates  the  European 
Parliament  and  the  Council  to  act  by  means  of  directives.  In  addition,  Article  114  of  the 
TFEU is a general legal act with the objective of establishing or ensuring the functioning of 
the  single  market  –  in  this  case,  the  free  movement  of  capital.  Article  114  of  the  TFEU  is 
included as the legal basis for this directive amending Directive 2004/109/EC. 

• 

Subsidiarity (for non-exclusive competence)  

The  Accounting  Directive,  as  amended  by  the  NFRD,  already  regulates  the  disclosure  of 
sustainability  information  in  the  EU.  Transparency  rules  are  necessary  to  ensure  investor 
protection and financial stability across the EU. Common rules on sustainability reporting and 
its assurance ensure a level playing field for companies established in the different Member 
States.  Significant  differences  in  requirements  for  sustainability  reporting  and  assurance 
between  Member  States  create  additional  costs  and  complexity  for  companies  operating 
across borders. This is detrimental to the single market. Member States acting alone are not 
able  to  ensure  the  consistency  and  comparability  of  sustainability  reporting  requirements 
across the EU.  

In  addition,  only  EU  intervention  can  ensure  that  rules  on  sustainability  reporting  are 
consistent with other EU laws, including the Sustainable Finance Disclosure Regulation and 
the  Taxonomy  Regulation,  and  with  delegated  and  implementing  acts  adopted  pursuant  to 
those regulations. 

Sustainability  reporting  is  the  subject  of  increasing  interest  and  regulatory  intervention  in 
jurisdictions around the world. The EU must therefore develop a coherent and comprehensive 
approach  to  sustainability  reporting,  in  order  to  be  able  to  engage  constructively  with  its 
international partners. Compared to individual action by Member States, EU intervention can 
ensure  a  significant  European  contribution  to  global  policy  developments,  in  order  to  better 
defend the interests of European companies and other stakeholders. 

13 
14 

COM (2021)93 
COM(2012) 614 

EN 

6 

  EN 

                                                 
• 

Proportionality 

A  central  element  of  this  proposal  is  to  require  certain  categories  of  companies  to  report 
according  to  mandatory  sustainability  reporting  standards.  As  is  the  case  for  financial 
reporting, common standards are necessary to ensure that reported information is comparable 
and  relevant.  Common  reporting  standards  will  also  greatly  facilitate  the  digitalisation, 
assurance and enforcement of sustainability reporting.  

This  proposal  envisages  introducing  a  requirement  to  assure  reported  sustainability 
information,  so  that  it  is  reliable.  It  also  envisages  requiring  companies  to  digitally  tag 
reported  sustainability  information.  Digital  tagging  is  essential  in  order  to  seize  the 
opportunities digital technologies present to radically improve how sustainability information 
is  used.  The  EU  has  already  introduced  a  requirement  for  the  digital  tagging  of  financial 
information15. 

This proposal takes a proportionate approach to determining which companies will be subject 
to  mandatory  reporting  requirements.  It  does  not  impose  new  requirements  on  small  and 
medium-sized enterprises (SMEs), except SMEs listed on EU regulated markets. The proposal 
exempts listed micro-companies from mandatory reporting obligations16.  

The  Commission  will  adopt  standards  for  large  companies  and  separate,  proportionate 
standards  for  SMEs.  The  SME  standards  will  be  tailored  to  the  capacities  and  resources  of 
such  companies.  While  SMEs  listed  on  regulated  markets  would  be  required  to  use  these 
proportionate  standards,  non-listed  SMEs  –  which  are  the  vast  majority  of  SMEs  –  may 
choose to use them on a voluntary basis.  

• 

Choice of instrument 

This proposal comprises a Directive that amends provisions of the Accounting Directive, the 
Transparency  Directive,  the  Audit  Directive  and  the  Audit  Regulation,  thereby  ensuring 
coherence between the relevant provisions of these four instruments. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

In April 2021 the Commission published a fitness check of the EU framework for financial 
and non-financial corporate reporting, together with a mandatory review of certain aspects of 

15 
16 

The European Single Electronic Format (ESEF), established by Delegated Regulation (EU) 2018/815.  
Article  3  of  the  Accounting  Directive  (2013/34/EU)  defines  categories  of  undertakings  according  to 
their  size:  Paragraph  1:  […]  define  micro-undertakings  as  undertakings  which  on  their  balance  sheet 
dates do not exceed the limits of at least two of the three following criteria: (a) balance sheet total: EUR 
350 000; (b) net turnover: EUR 700 000; (c) average number of employees during the financial year: 
10.  Paragraph  2:  Small  undertakings  shall  be  undertakings  which  on  their  balance  sheet  dates  do  not 
exceed the limits of at least two of the three following criteria: (a) balance sheet total: EUR 4 000 000; 
(b) net turnover: EUR 8 000 000; (c) average number of employees during the financial year: 50. […] 
Paragraph  3:  Medium-sized  undertakings  shall  be  undertakings  which  are  not  micro-undertakings  or 
small undertakings and which on their balance sheet dates do not exceed the limits of at least two of the 
three following criteria: (a) balance sheet total: EUR 20 000 000; (b) net turnover: EUR 40 000 000; (c) 
average number of employees during the financial year: 250. […]. 

EN 

7 

  EN 

                                                 
the  NFRD17.  The  principal  conclusion  of  the  fitness  check  and  the  review  was  that  the 
sustainability  information  companies  currently  report  does  not  meet  the  needs  of  the 
information’s intended users, and that the Commission should therefore propose a revision of 
the NFRD. This is  consistent with the findings of the impact  assessment accompanying this 
proposal (see below). 

• 

Stakeholder consultations 

The following consultation activities have helped to shape the content of this proposal. 

– 

– 

– 

– 

– 

– 

Open  online  public  consultation  from  March  to  July  2018,  to  prepare  the  fitness 
check of the EU framework for corporate reporting. 

Targeted  online  consultation  from  February  to  March  2019,  to  help  develop 
guidelines on climate-related reporting. 

Targeted online consultation of companies within the scope of the NFRD, carried out 
for the Commission by external consultants (CEPS) from December 2019 to March 
2020.  

Online feedback for the Commission’s inception impact assessment for the revision 
of the NFRD from January to February 2020.  

Open online public consultation on the revision of the NFRD from February to June 
2020.  

Targeted online survey of SMEs (SME Panel) on sustainability reporting from March 
to May 2020.  

The  Commission  also  organised  multi-stakeholder  workshops  on  the  materiality  concept 
(November 2019) and the assurance of sustainability information (December 2020), as well as 
separate  consultation  meetings  with  different  stakeholder  groups  in  May  2020  (companies, 
civil society organisations and trade unions). 

The  consultations  revealed  some  differences  between  users  and  preparers  of  sustainability 
information.  Users  tend  to  prefer  detailed  and  comprehensive  reporting  requirements. 
Preparers expressed concern about the costs of such requirements, often stated a preference to 
retain a large degree of discretion about what to report and how to report it. 

The open public consultation on the NFRD revision nevertheless showed that there was very 
strong support for mandatory sustainability reporting standards (over 80% of all respondents, 
including 81% of respondents who are or who represent companies that prepare sustainability 
reports).  Many  stakeholders  stressed  that  if  the  EU  develops  sustainability  reporting 
standards, it should build on and be consistent with international standard-setting initiatives. 
Stakeholders  also  emphasised  the  need  to  clarify  the  obligation  to  report  according  to  the 
double materiality perspective.  

Consultations also showed that there was strong support for measures to ensure the alignment 
of NFRD sustainability reporting requirements with relevant EU legislation, in particular the 
Sustainable Finance Disclosure Regulation and the Taxonomy Regulation. 

17 

[Publication office please insert reference to Report from the Commission to the European Parliament, 
the  Council  and  the  European  Economic  and  Social  Committee  on  the  review  clauses  in  Directives 
2013/34/EU, 2014/95/EU, and 2013/50/EU, and accompanying SWD- Fitness Check]. 

EN 

8 

  EN 

                                                 
Stakeholders  have  a  wide  range  of  views  about  which  categories  of  companies  should  be 
subject  to  mandatory  reporting  requirements.  Most  civil  society  organisations  and  trade 
unions  support  an  extension  of  the  NFRD’s  scope  to  a  wide  range  of  companies,  including 
large non-listed companies and SMEs. Many financial institutions and asset managers support 
the  introduction  of  proportionate  reporting  requirements  for  SMEs,  especially  listed  SMEs. 
Mainstream business associations argued mainly against extending the scope of the reporting 
requirements.  Organisations  representing  SMEs,  and  most  SMEs  themselves,  oppose  the 
introduction  of  mandatory  requirements  for  SMEs  but  remain  open  to  the  idea  of 
proportionate,  voluntary  standards  for  them.  Various  stakeholders  group  proposed  that 
reporting requirements also apply to non-EU companies. 

• 

Collection and use of expertise 

In preparing this  proposal,  the Commission  took into consideration the recommendations of 
the task force established by the European Financial Reporting Advisory Group (EFRAG) to 
explore  the  possibility  of  developing  European  sustainability  reporting  standards18.  It  also 
considered the recommendations of the President of EFRAG on possible governance changes 
to  EFRAG  if  it  is  asked  to  develop  such  standards19.  The  governance  of  EFRAG  would  be 
modified  accordingly  before  EFRAG  submits  any  draft  standards  to  the  Commission.  In 
particular, a new sustainability reporting pillar should be created alongside EFRAG’s existing 
financial reporting pillar. The new pillar should have a robust governance structure and due 
process  reflecting  its  role  of  developing  standards.  It  should  integrate  a  broader  range  of 
stakeholders  than  those  traditionally  involved  in  financial  reporting,  including  a  balanced 
representation of experts from national authorities, civil society and the private sector. 

The Commission contracted consultants to collect data on sustainability reporting, including 
costs,  through  a  survey  of  companies  within  the  scope  of  the  NFRD20.  It  also  contracted 
consultants  to  analyse  market  and  current  practices  in  the  provision  of  sustainability  data, 
ratings and research for the financial sector21. 

Impact assessment 

• 
The  Commission  services  have  drafted  an  impact  assessment  for  this  proposal22.  The 
Regulatory Scrutiny Board has given a positive opinion, with reservations, on the draft impact 
assessment23.  

The impact assessment focused on policy choices in three areas: (1) standardisation – whether 
to  develop  EU  sustainability  reporting  standards  and  require  companies  to  use  them;  (2) 
assurance (audit) – whether reported sustainability information should be assured and if so, at 
what level; and (3) scope – which categories of companies should be subject to the reporting 
requirements. 

The preferred policy option identified in the impact assessment would:  

18 
19 

20 
21 

22 
23 

https://www.efrag.org/Lab2  
https://www.efrag.org/Assets/Download?assetUrl=%2fsites%2fwebpublishing%2fSiteAssets%2fJean-
Paul%2520Gauz%c3%a8s%2520-%2520Ad%2520Personam%2520Mandate%2520-
%2520Final%2520Report%2520-%252005-03-2021.pdf  
Study on the Non-Financial Reporting Directive https://data.europa.eu/doi/10.2874/229601. 
Study  on  sustainability  ratings,  data  and  research:  https://op.europa.eu/en/publication-detail/-
/publication/d7d85036-509c-11eb-b59f-01aa75ed71a1/language-en/format-PDF/source-183474104  
Publication office: please insert link to IA SWD(2021)150 
Publication office: please insert link to RSB opinion on IA SWD(2021)150 

EN 

9 

  EN 

                                                 
(1) 

(2) 

(3) 

require all companies within the scope to report in accordance with EU standards;  

require  all  companies  within  the  scope  to  seek  limited  assurance  for  reported 
sustainability  information,  while  including  an  option  to  move  towards  a reasonable 
assurance requirement at a later stage ; and  

extend  the  scope  to  all  large  companies,  and  all  companies  listed  on  EU  regulated 
markets  except  listed  micro-companies.  The  scope  would  include  companies  not 
established  in  the  EU  that  are  listed  on  EU  regulated  markets,  and  the  EU 
subsidiaries of non-EU companies.  

The  preferred  option  is  the  best  trade-off  between  two  possible  courses  of  action.  One  is 
detailed and prescriptive reporting requirements, a strong assurance requirement, and a broad 
scope – highly effective in meeting users’ needs but more expensive for preparers. The other 
is  less  detailed  reporting  requirements,  a  less  strong  assurance  requirement,  and  a  narrower 
scope – less effective in meeting users’ needs but also less expensive for preparers, at least in 
the  short  term.  The  aim  is  to  achieve  the  best  value  outcome  in  terms  of  objectives  and 
associated costs.  

The preferred option also allows Member States to authorise independent assurance services 
providers  other  than  statutory  auditors  or  audit  firms  to  carry  out  the  assurance  of 
sustainability  reporting.  This  is  intended  to  offer  companies  a  broader  choice  of  assurance 
service providers for the assurance of sustainably reporting. 

Users  will  benefit  from  better  access  to  comparable,  relevant  and  reliable  sustainability 
information from more companies. This will in turn reduce the risks of investment risks in the 
financial system, increase financial flows to companies that have a positive impact on people 
and  the  environment,  and  make  companies  more  accountable.  It  will  provide  savers  and 
investors  who  want  to  invest  sustainably  with  the  possibility  to  do  so.  The  proposed  option 
would ensure that approximately 49 000 companies report sustainability information (75% of 
the  turnover  of  all  limited  liability  companies),  compared  to  the  current  11  600  companies 
(47% of the turnover of all limited liability companies) that are within the scope of the NFRD. 
All large companies, and all companies listed on EU regulated markets (except listed micro-
companies),  would  be  required  to  apply  EU  sustainability  reporting  standards  and  seek 
assurance for reported information. By comparison, currently only an estimated 20% of large 
companies fully apply any sustainability reporting standards today and only 30% seek some 
form  of  assurance.  The  proposed  option  will  have  indirect  positive  effects  on  respect  for 
fundamental rights, as well as on people and the environment, since more stringent reporting 
requirements can influence corporate behaviour for the better.  

The total estimated costs of the preferred option for preparers are EUR 1.200 million in one-
off  costs  and  EUR  3.600  million  in  annual  recurring  costs.  In  addition,  preparers  will  incur 
costs as a result of the reporting requirements of Article 8 of the Taxonomy Regulation.24 If 
the EU takes no action, costs for preparers are in any case expected to increase substantially 
due  to  an  increase  in  uncoordinated  information  demands  from  users,  the  absence  of 
consensus about what information companies should report in order to meet users’ needs, and 
persistent difficulties in obtaining the sustainability information that preparers need for their 
own reporting purposes from suppliers, clients and investee companies. The unavailability of 

24 

The estimated magnitude of these costs is included in the impact assessment of the delegated act on a 
climate change  mitigation and adaptation taxonomy (C(2021)2800; IA SWD(2021)152): EUR 1.200–
3.700 million one-off costs and EUR 600–1.500 million recurring costs per year. 

EN 

10 

  EN 

                                                 
sufficiently detailed data makes it impossible to calculate the costs that preparers would incur 
in the absence of new rules. However, it is estimated that the use of standards could lead to 
annual savings of EUR 24 200-41 700 per company (around EUR 280-490 million per year 
for  the  current  NFRD  population  and  EUR  1.200-2.000  million  per  year  for  the  preferred 
option),  if  standards  completely  eliminated  the  need  for  additional  information  requests  to 
preparers25. 

EU  companies  risk  incurring  higher  reporting  costs  than  non-EU  companies  if  other 
jurisdictions  do not  take an approach similar to  the approach outlined in  this  proposal. This 
could lead to unequal treatment of EU and non-EU companies and therefore be detrimental to 
the level playing field in the EU Single Market. To mitigate this risk, EU subsidiaries of non-
EU companies, as well as any non-EU company with transferable securities listed on an EU 
regulated market, are covered by the reporting requirements set out in the proposal. 

• 

Regulatory fitness and simplification 

To  help  ensure  investor  protection,  all  companies  listed  on  regulated  markets  should  in 
principle be subject to the same disclosure rules. SMEs listed on EU regulated markets would 
therefore  have  to  fulfil  the  proposed  new  sustainability  reporting  requirements26.  However, 
the  requirements  for  SMEs  listed  on  EU  regulated  markets  would  apply  only  3  years  after 
they apply to other companies, to allow for the relative economic difficulties faced by smaller 
companies as  a result of the COVID-19 pandemic. This phasing-in period would also allow 
listed  SMEs  to  apply  the  new  requirements  when  reporting  and  assurance  practices  for 
sustainability  information  have  reached  a  higher  degree  of  maturity.  The  disclosure 
requirements of this proposal would not apply to SMEs with transferable securities listed on 
SME  growth  markets  or  multilateral  trading  facilities  (MTFs).  In  addition,  for  reasons  of 
proportionality, they would not apply to micro-enterprises listed on EU regulated markets.  

This  proposal  does  not  require  other  SMEs  to  report  sustainability  information.  However, 
non-listed SMEs may decide to use on a voluntary basis the sustainability reporting standards 
that the Commission will adopt as delegated acts for reporting by listed SMEs. These aim to 
enable  any SME to report information  cost-efficiently in response to  the  numerous requests 
for  information  they  receive  from  other  companies  with  whom  they  do  business,  such  as 
banks, insurance companies and large corporate clients, and to help define the limits for the 
information that companies can reasonably expect SMEs in their value chain to provide. Such 
standards  should  also  help  SMEs  to  attract  additional  investment  and  funding,  and  to 
participate fully in, and contribute to, the transition to a sustainable economy outlined in the 
European Green Deal. The SME standards will set a reference for companies that are within 
the  scope  of  the  Corporate  Sustainability  Reporting  Directive  regarding  the  level  of 
sustainability information that they could reasonably request from SME suppliers and clients 
in their value chains.. 

This  proposal  is  digital-ready,  since  it  requires  companies  to  digitally  tag  reported 
sustainability information in accordance with a digital taxonomy. 

25 

26 

These  calculations  are  based  on  the  replies  to  the  survey  carried  out  by  the  Sustainability  Institute 
(ERM) as part of their study on sustainability ratings and research (https://op.europa.eu/en/publication-
detail/-/publication/d7d85036-509c-11eb-b59f-01aa75ed71a1/language-en/format-PDF/source-
183474104). 
Except listed micro-companies. 

EN 

11 

  EN 

                                                 
• 

Fundamental rights 

The proposal respects the fundamental rights enshrined, and adheres to the principles stated, 
in the Charter of Fundamental Rights of the European Union. It will have an indirect positive 
impact on fundamental rights, given that more stringent reporting requirements can influence 
corporate  behaviour  for  the  better.  It  should  serve  to  make  companies  more  aware  of 
fundamental  rights  and  positively  influence  how  they  identify  and  manage  actual  and 
potential  adverse  impacts  on  fundamental  rights.  It  should  also  increase  capital  flows  to 
companies that respect fundamental rights, and in general make companies more accountable 
for their impact on fundamental rights. 

4. 

BUDGETARY IMPLICATIONS 

The proposal does not have any budgetary implications. Existing budgetary resources will be 
used for expenditure to fund the development of EU sustainability reporting standards. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

To  monitor  progress  towards  achieving  the  proposal’s  specific  objectives,  the  Commission 
will explore the possibility of organising periodic surveys of users and preparers, depending 
on the availability of financial resources.  

The proposal includes a requirement that the Commission report to the European Parliament 
and to the Council on the implementation of assurance requirements no later than 3 years after 
the entry into application of this Directive. The report will be accompanied, if appropriate, by 
legislative proposals for stricter assurance requirements (‘reasonable assurance’). 

This proposal does not require an implementation plan.  

• 

Explanatory documents (for directives) 

No explanatory documents are considered necessary.  

• 

Detailed explanation of the specific provisions of the proposal 

Article 1 amends Directive 2013/34/EU (“the Accounting Directive”).  

Paragraph  (1) of Article  1  extends the scope  of  the Articles of the Accounting Directive on 
sustainability  reporting  obligations  to  credit  institutions  and  insurance  companies  that 
according to the Accounting Directive are not limited liability companies or are not deemed to 
have  limited  liability,  including  cooperative  banks  and  mutual  and  cooperative  insurance 
companies, provided they meet the relevant size criteria. 

Paragraph  (2)  of  Article  1  defines  certain  terms  that  are  necessary  for  the  proposal.  It 
introduces  and  defines  the  terms  “sustainability  matters”  and  “sustainability  reporting”, 
whereas  the  existing  provisions  of  the  Accounting  Directive  refer  to  “non-financial 
information”.  It  also  defines  the  terms  “independent  assurance  services  provider”  and 
“intangibles”. 

Paragraph (3) of Article 1 replaces Article 19a of the Accounting Directive, which specifies 
the sustainability reporting requirements for certain companies. The proposal amends Article 
19a as follows: 

EN 

12 

  EN 

– 

– 

– 

– 

– 

– 

– 

It  modifies  the  personal  scope  of  the  reporting  requirements,  extending  their 
application  to  all  large  companies  and  all  companies  with  securities  listed  on  EU 
regulated markets, except micro-companies. In order to alleviate the reporting burden 
for listed SMEs, they are to start reporting in accordance with this Directive 3 years 
after its entry into application. 

It clarifies the principle of double materiality, removing any ambiguity about the fact 
that companies should report information necessary to understand how sustainability 
matters affect them, and information necessary to understand the impact they have on 
people and the environment. 

It  specifies  in  greater  detail  the  information  that  companies  should  disclose. 
Compared to  the existing provisions, it introduces new requirements  for companies 
to  provide  information  about  their  strategy,  targets,  the  role  of  the  board  and 
management, the principal adverse impacts connected to the company and its value 
chain, intangibles, and how they have identified the information they report. 

It  specifies  that  companies  should  report  qualitative  and  quantitative  information, 
forward-looking  and  retrospective  information,  and  information  that  covers  short, 
medium and long-term time horizons as appropriate. 

It  requires  all  companies  within  its  scope  to  report  in  accordance  with  European 
sustainability reporting standards, and allows listed SMEs within its scope to report 
in accordance with sustainability reporting standards specific for SMEs. 

It  removes  the  possibility  for  Member  States  to  allow  companies  to  report  the 
required information in a separate report that is not part of the management report. 

It requires exempted subsidiary companies to publish the consolidated management 
report of the parent company reporting at group level, and to include a reference in 
its  legal-entity  (individual)  management  report  to  the  fact  that  the  company  in 
question is exempted from the requirements of the Directive. 

Paragraph (4) of Article 1 introduces three new provisions, Articles 19b, 19c and 19d, into the 
Accounting  Directive,  on  sustainability  reporting  standards.  Article  19b  empowers  the 
Commission  to  adopt  EU  sustainability  reporting  standards  by  means  of  delegated  acts  and 
specifies the requirements for their adoption. Firstly, it specifies minimum quality criteria that 
information  reported  in  accordance  with  the  standards  would  have  to  meet.  Secondly,  it 
identifies  the  topics  standards  should  cover.  Thirdly,  it  identifies  certain  instruments  and 
initiatives that the Commission should take particular account of when deciding the content of 
the  delegated  acts,  including  certain  EU  legislation,  and  the  work  of global  standard-setting 
initiatives for sustainability reporting.  It also requires the Commission to adopt a first set of 
standards  by  31  October  2022.  This  set  of  standards  should  specify  information  that 
companies  should  report  about  all  sustainability  matters  and  all  reporting  areas  listed  in 
Article  19a(2).  These  delegated  acts  should  at  least  specify  the  information  that  companies 
should  report  to  serve  the  needs  of  financial  market  participants  subject  to  the  disclosure 
requirements of Regulation (EU) 2019/2088. A second set of standards should be adopted at 
the  latest  by  31  October  2023.  This  set  of  standards  should  specify  complementary 
information  that  companies  should  report  about  sustainability  matters  and  reporting  areas 
listed  in  Article  19a(2)  where  necessary,  and  information  specific  to  the  sector  in  which  a 
company  operates.  Finally,  Article  19b  requires  the  Commission  to  review  the  standards  at 
least  every  3  years  to  take  account  of  relevant  developments,  including  developments  in 
international standards. Article 19c requires the Commission to adopt sustainability reporting 
standards  for  small  and  medium  sized  companies  by  31  October  2023.  Article  19d  requires 

EN 

13 

  EN 

companies  to  prepare  their  financial  statements  and  their  management  report  in  a  single 
electronic reporting format in accordance with Article 3 of Commission Delegated Regulation 
(EU)  2019/815  and  to  mark-up  sustainability  information  as  and  when  specified  in  that 
Regulation27. 

Paragraph  (5)  of  Article  1  amends  Article  20  to  require  listed  companies  subject  to  this 
provision to include a reference to gender in the description of the diversity policy applied in 
relation to the company’s administrative, management and supervisory bodies. It also amends 
Article 20 to allow listed undertakings subject to Article 20 to comply with the requirements it 
sets  out  in  points  (c),  (f)  and  (g)  by  including  the  necessary  information  as  part  of  their 
sustainability reporting28.  

Paragraph (6) of Article 1 amends Article 23 of the Accounting Directive, clarifying that the 
exemption regime for consolidated financial statements and consolidated management reports 
operates independently  from the exemption  regime for  consolidated sustainability reporting. 
This  means  that  a  company  can  be  exempted  from  consolidated  financial  reporting 
requirements, but not from consolidated sustainability reporting requirements. This is the case 
if  the  company’s  ultimate  parent  company  prepares  consolidated  financial  statements  and 
consolidated management reports in accordance with EU law, or equivalent requirements if it 
is  a  non-EU  country,  but  does  not  prepare  consolidated  sustainability  reports  in  accordance 
with EU law, or equivalent requirements if it is a non-EU country. 

Paragraph  (7)  of  Article  1  replaces  Article  29a  of  the  Accounting  Directive  so  that  all  the 
sustainability reporting requirements of Article 19a apply as appropriate to parent companies 
that report on a consolidated basis for the whole group.  

Paragraph (8) of Article 1 amends Article 30 of the Accounting Directive in order to align it 
with the new sustainability reporting requirements. Firstly, it is amended to require Member 
States  to  ensure that within 12 months after the  balance sheet  date,  companies publish their 
duly  approved  annual  financial  statements  and  management  report  in  the  electronic  format 
prescribed  in  the  new  Article  19d.  Secondly,  it  is  amended  to  require  that  if  an  opinion  on 
sustainability reporting is given by an independent assurance services provider other than the 
statutory auditor, this opinion be published together with the annual financial statements and 
management  report.  Finally,  it  is  amended  to  require  Member  States  to  ensure  that 
management  reports  containing  sustainability  reporting  are  made  available  to  the  relevant 
officially  appointed  mechanism  referred  to  in  Directive  2004/109/EC  of  the  European 
Parliament  and  of  the  Council  (the  Transparency  Directive),  without  delay,  following  their 
publication. It specifies that if companies that prepare sustainability reporting are not listed on 
EU  regulated  markets,  the  relevant  officially  appointed  mechanism  should  be  one  of  the 
officially appointed mechanisms of the Member State where the company in question has its 
registered office. This is necessary for the inclusion of the sustainability information disclosed 
by companies in the European Single Access Point which will be established as announced in 
action 1 of the action plan on the Capital Markets Union. 

27 

28 

A mark-up language is a computer language that uses a specific coding technique (the “tags”) to define 
elements within a document, allowing the presentation of information in a way that both machines and 
humans can read. 
Point  (c)  refers  to  internal  control  and  risk  management  systems  in  relation  to  the  financial  reporting 
process.  Point  (f)  refers  to  the  composition  and  operation  of  the  administrative,  management  and 
supervisory  bodies.  Point  (g)  refers  to  the  diversity  policy  applied  in  relation  to  the  undertaking's 
administrative, management and supervisory bodies. 

EN 

14 

  EN 

                                                 
Paragraph  (9)  of  Article  1  amends  Article  33  of  the  Accounting  Directive,  aligning  the 
collective responsibility  of the members of the administrative, management  and supervisory 
bodies  of  a  company  with  the  revised  sustainability  reporting  requirements.  In  particular,  it 
requires  administrative,  management  and  supervisory  bodies  to  ensure  that  the  company  in 
question  has  reported  in  accordance  with  EU  sustainability  reporting  standards,  and  in  the 
digital format required, and deletes the reference to the currently allowed separate report for 
sustainability reporting. 

Paragraph (10) of Article 1 amends Article 34 of the Accounting Directive with regard to the 
assurance of sustainability reporting. In particular, it requires the statutory auditor to perform 
a  limited  assurance  engagement  on  a  company’s  sustainability  reporting,  including  on  the 
compliance of the sustainability reporting with the reporting standards, on the process carried 
out  by  the  company  to  identify  the  information  reported  pursuant  to  the  standards,  on  the 
mark-up of sustainability reporting, and on the indicators reported pursuant to Article 8 of the 
Taxonomy  Regulation.  In  addition,  it  allows  Member  States  to  allow  any  independent 
assurance  services  provider  accredited  in  accordance  with  Regulation  (EC)  No  765/2008  of 
the European Parliament and of the Council to provide an opinion on sustainability reporting 
on the basis of a limited assurance engagement. It also requires Member States to ensure that 
consistent requirements are set out for all persons and firms, including statutory auditors and 
audit  firms,  who  are  allowed  to  provide  the  opinion  on  the  assurance  of  sustainability 
reporting. 

Paragraph (11) of Article 1 amends Article 49 of the Accounting Directive, laying down the 
conditions  for  empowering  the  Commission  to  adopt  the  delegated  acts  on  sustainability 
reporting  standards  referred  to  in  the  new  Article  19b.  It  requires  the  Commission  to  take 
account  of  the  technical  advice  of  the  European  Financial  Reporting  Advisory  Group 
(EFRAG) when preparing those acts, provided it is developed with proper due process, public 
oversight  and  transparency,  and  with  the  expertise  of  relevant  stakeholders,  and  that  it  is 
accompanied by cost-benefit analyses, which will facilitate the adoption of standards by the 
Commission.  This  paragraph  also  requires  the  European  Securities  and  Markets  Authority 
(ESMA) to provide an opinion on the technical advice provided by EFRAG before it adopts 
standards. This opinion shall be provided within two months from the date of receipt of the 
request  from  the  Commission.  This  is  a  reasonable  period  as  ESMA  will  be  involved  in 
EFRAG’s  work,  and  will  therefore  be  familiarised  with  the  content  of  EFRAG’s  technical 
advice before it is submitted to the Commission. The Commission is also required to consult 
the  Member  State  Expert  Group  on  Sustainable  Finance,  the  European  Banking  Authority 
(EBA), the European Insurance and Occupational Pensions Authority (EIOPA), the European 
Environment Agency (EEA), the European Union Agency for Fundamental Rights (FRA), the 
European  Central  Bank,  the  Committee  of  European  Auditing  Oversight  Bodies  and  the 
Platform on Sustainable Finance before adopting standards. Where any of those bodies decide 
to submit an opinion, they shall do so within two months from the date of being consulted by 
the Commission. 

Paragraph  (12)  of  Article  1  amends  Article  51  of  the  Accounting  Directive,  specifying  the 
minimum types of sanctions and administrative measures that Member States should provide 
for  in  the  case  of  infringements  of  the  national  provisions  transposing  the  sustainability 
reporting requirements of the Accounting Directive. 

Article 2 amends Directive 2004/109/EC (the Transparency Directive).  

Paragraph  (1)  of  Article  2  introduces  and  defines  the  term  “sustainability  reporting”, 
necessary for the proposal. 

EN 

15 

  EN 

Paragraph  (2)  of  Article  2  amends  Article  4  of  the  Transparency  Directive,  in  order  to  take 
into consideration the sustainability reporting part of the regulated information to be drawn up 
and published under its  provisions. Firstly, it is  amended in  order to  require that the  annual 
financial report includes statements made by the people responsible for financial reporting in 
the  issuer  that  to  the  best  of  their  knowledge,  the  management  report  is  prepared  in 
accordance  with  sustainability  reporting  standards  as  required  by  Directive  2013/34/EU, 
where  appropriate.  The  requirement  to  include  sustainability  reporting  in  the  management 
report, as a result of the amendments introduced by this Directive, obviates the need to modify 
Article  4(2)(b)  of  Directive  2004/109/EC.  Secondly,  the  references  to  provisions  of  the 
Accounting Directive and Directive 2006/43/EC (the Audit Directive) are updated as regards 
the  requirement  to  audit  financial  statements  in  accordance  with  Article  34(1)  of  the 
Accounting  Directive,  and  to  state  whether  the  auditor  or  audit  firm  has  identified  material 
misstatements in the management report, and as regards the requirement to disclose the audit 
report,  including  the  opinion  on  the  assurance  of  sustainability  reporting.  Finally,  the 
references  to  provisions  of  the  Accounting  Directive  as  regards  the  preparation  of  the 
management  report  are  updated  and  amended  to  require  sustainability  reporting.  These 
amendments  enable  the  extension  of  the  sustainability  reporting  requirements  to  companies 
listed on EU regulated markets, except micro-companies, including non-EU issuers. They also 
clarify  the  legal  mandate  national  competent  authorities  have  to  supervise  sustainability 
reporting. 

Paragraph  (3)  of  Article  2  amends  Article  23(4)  of  the  Transparency  Directive  in  order  to 
empower the Commission to adopt measures to establish a mechanism for the determination 
of the equivalence of sustainability reporting standards used by non-EU issuers and to take the 
necessary decisions on such equivalence. Any decisions on the equivalence of sustainability 
reporting standards used by non-EU issuers will be independent  from  equivalence decisions 
concerning financial reporting standards. 

Paragraph (4) of  Article 2 introduces Article  28(d) in  the Transparency  Directive to require 
the  European  Securities  and  Markets  Authority  (ESMA)  to  issue  guidelines  for  national 
competent authorities in order to promote supervisory convergence of sustainability reporting. 
The  ESMA  Regulation  (Regulation  (EU)  No  1095/2010)  identifies  the  Transparency 
Directive as one of the Union legislative acts that define ESMA’s scope of action. 

Article 3 amends Directive 2006/43/EC (the Audit Directive).  

Paragraph (1) of Article 3 amends Article 1 of the Audit Directive, its subject matter, in order 
to include the assurance of annual and consolidated sustainability reporting, where carried out 
by the statutory auditor or audit firm carrying out the statutory audit of financial statements. 

Paragraph (2) of Article 3 amends and inserts certain definitions, necessary for the proposal, 
in Article 2 of the Audit Directive. It amends the definitions of ‘statutory auditor’ and ‘audit 
firm’  in  order  to  take  into  account  their  potential  work  in  assuring  sustainability  reporting, 
where  applicable.  It  also  introduces  and  defines  the  term  ‘assurance  of  sustainability 
reporting’ and ‘sustainability reporting’. 

Paragraphs  (3)–(7)  of  Article  3  amend  Articles  6-11  of  the  Audit  Directive,  containing  the 
rules on the approval,  continuing professional education and mutual recognition of statutory 
auditors and audit firms, in order to ensure that statutory auditors have the necessary level of 
theoretical knowledge of subjects relevant to the assurance of sustainability reporting and the 
ability to apply such knowledge in practice. 

EN 

16 

  EN 

Paragraph (7) of article 3 amends Article 14, which contains the rules on the procedures that 
competent  authorities  should  set  out  for  the  approval  of  statutory  auditors  from  a  different 
Member State. It is amended to ensure that where the Member State decides that the applicant 
seeking  approval  should  be  subject  to  an  aptitude  test,  this  test  also  covers  the  statutory 
auditor's adequate knowledge of the laws and regulations of the host Member State relevant to 
the assurance of sustainability reporting. 

Paragraph (8) of article 3 introduces Article 14a which comprises a grandfathering clause to 
ensure  that  approved  statutory  auditors  can  continue  carrying  out  statutory  audits  and  can 
carry  out  audits  of  sustainability  reporting  once  the  amended  legal  requirements  apply. 
Member States should ensure that already approved statutory auditors acquire the necessary 
knowledge  in  sustainability  reporting  and  the  assurance  of  sustainability  reporting  via  the 
continuing education requirement of Article 13 of the Audit Directive. 

Paragraph  (9)  of  Article  3  amends  Article  24b  to  adapt  the  rules  on  the  organisation  of  the 
work  of  the  auditor  to  include  references  to  their  work  on  the  assurance  of  sustainability 
reporting.  In  particular,  it  is  amended  in  order  to  require  that  the  key  audit  partner(s)  is/are 
actively involved in carrying out the assurance of sustainability reporting; that when carrying 
out  the  assurance  of  sustainability  reporting,  the  statutory  auditor  devotes  sufficient  time  to 
the  engagement  and  assigning  sufficient  resources  to  enable  them  to  carry  out  their  duties 
appropriately;  that  the  client  account  record  specifies  the  fees  for  the  assurance  of 
sustainability  reporting;  and  that  the  audit  file  includes  information  on  the  assurance  of 
sustainability reporting, where carried out by the statutory auditor. 

Paragraph (10) of Article 3 amends Article 25 to require Member States to put adequate rules 
in place to prevent the fees for the assurance of sustainability reporting from being influenced 
or determined by the provision of additional services to the audited entity, or being based on 
any form of contingency. 

Paragraph  (11)  of  Article  3  inserts  Article  25b  to  extend  Audit  Directive  rules  on  the 
professional  ethics,  independence,  objectivity,  confidentiality  and  professional  secrecy 
required  of  auditors  of  financial  statements  to  their  work  on  the  assurance  of  sustainability 
reporting. 

Paragraph (12) of Article 3 inserts Article 26a, requiring Member States to require auditors to 
carry  out  assurance  engagements  of  sustainability  reporting  in  accordance  with  assurance 
standards adopted by the Commission and to apply national assurance standards, procedures 
or requirements unless the Commission has adopted an assurance standard covering the same 
subject-matter.  It  empowers  the  Commission  to  adopt  assurance  standards  by  means  of 
delegated acts in order to set out the procedures that the auditor shall perform in order to draw 
its  conclusions  on  the  assurance  of  sustainability  reporting,  including  engagement  planning, 
risk  consideration  and  response  to  risks,  and  the  type  of  conclusions  to  be  included  in  the 
audit  report.  It  also  requires  auditors  to  base  their  opinion  on  sustainability  reporting  on  a 
reasonable  assurance  engagement  should  the  Commission  use  the  option  to  adopt  standards 
for reasonable assurance. 

Paragraph  (13)  of  Article  3  inserts  Article  27a  in  order  to  extend  the  rules  on  the  statutory 
audit of a group of companies to the assurance of consolidated sustainability reporting, where 
carried out by the statutory auditor. 

Paragraph (14) of Article 3 amends Article 28 in  order to  require the  statutory auditor(s) or 
the  audit  firm(s)  carrying  out  the  assurance  of  sustainability  reporting  to  present  its/their 

EN 

17 

  EN 

results in the audit report, and to prepare the report in accordance with the requirements for 
assurance  standards  adopted  by  the  EU  or  Member  State  concerned.  In  particular,  the  audit 
report  should  specify  the  annual  or  consolidated  sustainability  reporting  and  the  date  and 
period  they  cover.  It  should  identify  the  sustainability  reporting  framework  applied  in  their 
preparation.  It  should  include  a  description  of  the  scope  of  the  assurance  of  sustainability 
reporting  and  identify  the  assurance  standards  in  accordance  with  which  the  assurance  of 
sustainability  reporting  was  conducted.  Finally,  it  should  include  the  statutory  auditor’s 
opinion on sustainability reporting. 

Paragraph (15) of Article 3 amends Article 29 of the Audit Directive concerning the system 
for the quality assurance review of  statutory auditors and audit firms in order to  ensure that 
quality  assurance  reviews  take  place  for  the  audits  of  sustainability  reporting  and  that  the 
people who carry out quality assurance reviews have appropriate professional education and 
relevant experience in the assurance of sustainability reporting. 

Paragraph (16) of Article 3 inserts Article 30g in order to clarify that the investigations  and 
sanctions regime for statutory auditors and audit firms carrying out statutory audits also apply 
to audits of sustainability reporting. 

Paragraph (17) of Article 3 inserts Article 36a in order to clarify that the provisions on public 
oversight and regulatory arrangements between Member States as regards statutory audits also 
apply to the assurance of sustainability reporting. 

Paragraph  (18)  of  Article  3  inserts  Article  38a  in  order  to  clarify  that  the  provisions  on  the 
appointment and dismissal of statutory auditors and audit firms as regards statutory audits also 
apply to the assurance of sustainability reporting. 

Paragraph  (19)  of  Article  3  amends  Article  39  in  order  to  clarify  the  tasks  of  the  audit 
committee  for  the  assurance  of  sustainability  reporting.  In  particular,  the  audit  committee 
should inform the administrative or supervisory body of the audited entity of the outcome of 
the assurance of sustainability reporting and explain how the audit committee contributed to 
the integrity of sustainability reporting and what the role of the audit committee was in that 
process. It should monitor the sustainability reporting process, including the digital reporting 
process,  and  the  process  carried  out  by  the  company  to  identify  the  information  reported 
according  to  the  relevant  sustainability  reporting  standards  and  submit  recommendations  or 
proposals to ensure its integrity. It should monitor the effectiveness of the company's internal 
quality  control  and  risk  management  systems  and,  where  applicable,  its  internal  audit, 
regarding  the  sustainability  reporting  of  the  audited  entity,  including  its  digital  reporting  as 
its 
will  be  required  under 
independence.  Finally,  it  should  monitor  the  assurance  of  the  annual  and  consolidated 
sustainability reporting, and review and monitor the independence of the statutory auditors or 
the audit firms. 

the  amended  Accounting  Directive,  without  breaching 

Paragraph  (20)  of  Article  3  amends  Article  45  in  order  to  align  the  requirements  for  the 
registration  and  oversight  of  non-EU  auditors  and  audit  entities  with  the  new  scope  of  the 
Directive, covering the assurance of sustainability reporting. 

Paragraph  (21)  of  Article  3  amends  Article  48a  in  order  to  set  out  the  conditions  for  the 
exercise  of  the  delegation  of  powers  to  the  Commission  to  adopt  assurance  standards  for 
sustainability reporting pursuant to Article 26a(2). 

Article 4 amends Regulation (EU) No 537/2014 (the Audit Regulation).  

EN 

18 

  EN 

Paragraph (1) of Article 4 amends Article 5 of the Audit Regulation to prohibit the provision 
of  consulting  services  for  the  preparation  of  sustainability  reporting  in  the  time  periods 
specified in Article 5 of the Audit Regulation, when statutory auditors or audit firms carrying 
out the statutory audit are also carrying out the assurance of sustainability reporting.  
Paragraph (2) of Article 4 amends Article 14 in order to require statutory auditors and audit 
firms  to  annually inform the competent  authority in  question of which revenues, among the 
revenues  from  non-audit  services,  were  generated  from  the  assurance  of  sustainability 
reporting. 

Article 5 requires Member States to transpose Articles 1 to 3 of the Directive by 1 December 
2022, and to ensure that its provisions apply to companies for the financial year starting on 1 
January 2023 or during calendar year 2023. 

Article 6 sets out the date of entry into application of the amended provisions of Regulation 
(EU) No 537/2014 (the Audit Regulation) on 1 January 2023. 

. 

EN 

19 

  EN 

2021/0104 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and 
Regulation (EU) No 537/2014, as regards corporate sustainability reporting 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 50 and 114 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 

Having regard to the opinion of the European Central Bank, 
Having regard to the opinion of the European Economic and Social Committee29, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

In  its  communication  on  the  European  Green  Deal  adopted  on  11  December  201930, 
the  European  Commission  made  a  commitment  to  review  the  provisions  concerning 
non-financial  reporting  of  Directive  2013/34/EU  of  the  European  Parliament  and  of 
the  Commission.31  The  European  Green  Deal  is  the  European  Union’s  new  growth 
strategy.  It  aims  to  transform  the  Union  into  a  modern,  resource-efficient  and 
competitive economy with no net emissions of greenhouse gases by 2050. It also aims 
to protect, conserve and enhance the Union's natural capital, and protect the health and 
well-being  of  citizens  from  environment-related  risks  and  impacts.  The  European 
Green Deal aims at decoupling economic growth from resource use, and ensuring that 
all  regions  and  citizens  of  the  Union  participate  in  a  socially  just  transition  to  a 
sustainable  economic  system.  It  will  contribute  to  the  objective  of  building  an 
economy  that  works  for  the  people,  strengthening  the  EU’s  social  market  economy, 
helping to ensure that it is future-ready and that it delivers stability, jobs, growth and 
investment.  These  goals  are  especially  important  considering  the  socio-economic 
damage caused by the COVID-19 pandemic and the need for a sustainable, inclusive 
and fair recovery.  In its  proposal  of 4 March 2020 for a European Climate  Law, the 

29 
30 
31 

OJ C […], […], p. […]. 
COM(2019) 640 final. 
Directive  2013/34/EU  of  the  European  Parliament  and  of  the  Council  of  26  June  2013 on  the  annual 
financial  statements,  consolidated  financial  statements  and  related  reports  of  certain  types  of 
undertakings,  amending  Directive  2006/43/EC  of  the  European  Parliament  and  of  the  Council  and 
repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19). 

EN 

20 

  EN 

                                                 
(2) 

32 

33 
34 

35 

36 

37 

38 

39 

40 

European Commission  proposed to  make the objective of  climate neutrality by 2050 
binding in the Union.32  

In its Action Plan: Financing Sustainable Growth the Commission set out measures to 
achieve the following objectives: reorient capital flows towards sustainable investment 
in order to achieve sustainable and inclusive growth, manage financial risks stemming 
from climate change, resource depletion, environmental degradation and social issues, 
and  foster  transparency  and  long-termism  in  financial  and  economic  activity33.  The 
disclosure  by  undertakings  of  relevant,  comparable  and  reliable  sustainability 
information  is  a  prerequisite  for  meeting  those  objectives.  The  European  Parliament 
and the Council adopted a number of legislative acts as part of the implementation of 
the Action Plan on Financing Sustainable Growth. Regulation (EU) 2019/2088 of the 
European Parliament  and of the Council34 governs how financial market  participants 
and  financial  advisers  are  to  disclose  sustainability  information  to  end  investors  and 
asset  owners.  Regulation  (EU)  2020/852  of  the  European  Parliament  and  of  the 
Council35  creates  a  classification  system  of  environmentally  sustainable  economic 
activities  with  the  aim  of  scaling  up  sustainable  investments  and  combatting 
greenwashing  of  financial  products  that  unduly  claim  to  be  sustainable.  Regulation 
(EU) 2019/2089  of the  European Parliament  and of the Council36, complemented by 
Commission  Delegated  Regulations  (EU)  2020/181637,  (EU)  2020/181738  and  (EU) 
2020/181839,  introduces  environmental,  social  and  governance  (‘ESG’)  disclosure 
requirements  for  benchmarks  administrators  and  minimum  standards  for  the 
construction  of  EU  Climate  Transition  Benchmarks  and  EU  Paris-aligned 
Benchmarks.  Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the 
Council40 requires large institutions which have issued securities that are admitted to 
trading on a regulated market to disclose information on ESG risks from 28 June 2022. 
The  new  prudential  framework  for  investment  firms  set  by  Regulation  (EU) 

Proposal for a Regulation of the European Parliament and of the Council establishing the framework for 
achieving  climate  neutrality  and  amending  Regulation  (EU)  2018/1999  (European  Climate  Law) 
[2020/0036 (COD)] 
COM(2018) 97 final. 
Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on 
sustainability‐ related disclosures in the financial services sector (OJ L 317, 9.12.2019, p. 1). 
Regulation  (EU)  2020/852  of  the  European  Parliament  and  of  the  Council  of  18  June  2020  on  the 
establishment  of  a  framework  to  facilitate  sustainable  investment,  and  amending  Regulation  (EU) 
2019/2088 (OJ L 198, 22.6.2020, p. 13). 
Regulation  (EU)  2019/2089  of  the  European  Parliament  and  of  the  Council  of  27  November  2019 
amending Regulation (EU) 2016/1011 as regards EU Climate Transition Benchmarks, EU Paris-aligned 
Benchmarks and sustainability-related disclosures for benchmarks (OJ L 317, 9.12.2019, p. 17). 
Commission  Delegated  Regulation  (EU)  2020/1816  of  17  July  2020  supplementing  Regulation  (EU) 
2016/1011 of the European Parliament and of the Council as regards the explanation in the benchmark 
statement  of  how  environmental,  social  and  governance  factors  are  reflected  in  each  benchmark 
provided and published (OJ L 406, 3.12.2020, p. 1). 
Commission  Delegated  Regulation  (EU)  2020/1817  of  17  July  2020  supplementing  Regulation  (EU) 
2016/1011  of  the  European  Parliament  and  of  the  Council  as  regards  the  minimum  content  of  the 
explanation  on  how  environmental,  social  and  governance  factors  are  reflected  in  the  benchmark 
methodology (OJ L 406, 3.12.2020, p. 12). 
Commission  Delegated  Regulation  (EU)  2020/1818  of  17  July  2020  supplementing  Regulation  (EU) 
2016/1011  of  the  European  Parliament  and  of  the  Council  as  regards  minimum  standards  for  EU 
Climate Transition Benchmarks and EU Paris-aligned Benchmarks (OJ L 406, 3.12.2020, p. 17). 
Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential  requirements  for  credit  institutions  and  investment  firms  and  amending  Regulation  (EU) 
No 648/2012 (OJ L 176, 27.6.2013, p. 1). 

EN 

21 

  EN 

                                                 
2019/2033  of  the  European  Parliament  and  of  the  Council41  and  Directive  (EU) 
2019/2034  of  the  European  Parliament  and  of  the  Council42  contains  provisions 
concerning the introduction of an ESG risk dimension in the supervisory review and 
evaluation  process  (SREP)  by  competent  authorities,  and  contains  ESG  risks 
disclosure requirements for investment firms, applicable from 26 December 2022. The 
Commission has also announced a proposal on a European Green Bond Standard in its 
Work Programme for 2021, following up on the Action Plan on Financing Sustainable 
Growth. 

On 5 December 2019, in its conclusions on deepening the Capital Markets Union, the 
Council  stressed  the  importance  of  reliable,  comparable  and  relevant  information  on 
sustainability  risks,  opportunities  and  impacts,  and  called  on  the  Commission  to 
consider the development of a European non-financial reporting standard. 
In  its  resolution  on  sustainable  finance  of  29  May  201843,  the  European  Parliament 
called  for  the  further  development  of  non-financial  reporting  requirements  in  the 
framework  of  Directive  2013/34/EU.  In  its  resolution  on  sustainable  corporate 
governance  of  17  December  202044,  the  European  Parliament  welcomed  the 
Commission’s commitment to review Directive 2013/34/EU and expressed the need to 
set  up  a  comprehensive  Union  framework  on  non-financial  reporting  that  contains 
mandatory  Union  non-financial  reporting  standards.  The  European  Parliament  called 
for the expansion of the scope of the reporting requirements to additional categories of 
undertakings and for the introduction of an audit requirement. 

On 25 September 2015, the UN General Assembly adopted a new global sustainable 
development  framework:  the  2030  Agenda  for  Sustainable  Development  (the  ‘2030 
Agenda’).  The  2030  Agenda  has  at  its  core  the  Sustainable  Development  Goals  and 
covers the three dimensions of sustainability: economic, social and environmental. The 
Commission communication of 22 November 2016 on the next steps for a sustainable 
European  future  linked  the  Sustainable  Development  Goals  to  the  Union  policy 
framework to ensure that all Union actions and policy initiatives, both in and beyond 
the Union, take those goals on board at the outset.45 In its conclusions of 20 June 2017, 
the  Council  confirmed  the  commitment  of  the  Union  and  its  Member  States  to  the 
implementation of the 2030 Agenda in a full, coherent, comprehensive, integrated and 
effective manner, in close cooperation with partners and other stakeholders.46  
Directive  2014/95/EU  of  the  European  Parliament  and  the  Council47  amended 
Directive  2013/34/EU  as  regards  disclosure  of  non-financial  information  by  certain 
large  undertakings  and  groups.  Directive  2014/95/EU  introduced  a  requirement  on 

Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on 
the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) 
No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (OJ L 314, 5.12.2019, p. 1). 
Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the 
prudential  supervision  of  investment  firms  and  amending  Directives  2002/87/EC,  2009/65/EC, 
2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU (OJ L 314, 5.12.2019, p. 64). 
2018/2007(INI). 
A9-0240/2020 (INI). 
COM(2016) 739 final 
Council  conclusions  “A  sustainable  European  future:  The  EU  response  to  the  2030  Agenda  for 
Sustainable Development”, 20 June 2017.  
Directive  2014/95/EU  of  the  European  Parliament  and  of  the  Council  of  22  October  2014  amending 
Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large 
undertakings and groups (OJ L 330, 15.11.2014, p. 1). 

(3) 

(4) 

(5) 

(6) 

41 

42 

43 
44 
45 
46 

47 

EN 

22 

  EN 

                                                 
undertakings  to  report  information  on,  as  a  minimum,  environmental,  social  and 
employee  matters,  respect  for  human  rights,  and  anti-corruption  and  bribery  matters. 
With  regard  to  these  topics,  Directive  2014/95/EU  required  undertakings  to  disclose 
information  under  the  following  reporting  areas:  business  model,  policies  (including 
due  diligence  processes  implemented),  the  outcome  of  the  policies,  risks  and  risk 
management, and key performance indicators relevant to the business. 

(7)  Many  stakeholders  consider  the  term  ‘non-financial’  to  be  inaccurate,  in  particular 
because  it  implies  that  the  information  in  question  has  no  financial  relevance. 
Increasingly,  however,  the  information  in  question  does  have  financial  relevance. 
Many  organisations,  initiatives  and  practitioners  in  this  field  refer  to  ‘sustainability’ 
information.  It  is  therefore  preferable  to  use  the  term  ‘sustainability  information’  in 
place  of  ‘non-financial  information’.  Directive  2013/34/EU  should  therefore  be 
amended to take account of this change in terminology. 

(8) 

(9) 

The  ultimate  beneficiaries  of  better  sustainability  reporting  by  undertakings  are 
individual  citizens  and  savers.  Savers  who  want  to  invest  sustainably  will  have  the 
opportunity  to  do  so,  while  all  citizens  should  benefit  from  a  stable,  sustainable  and 
inclusive  economic  system.  To  realise  these  benefits,  the  sustainability  information 
disclosed  in  undertaking’s  annual  reports  first  has  to  reach  two  primary  groups 
(‘users’). The first group of users consists of investors, including asset managers, who 
want to better understand the risks and opportunities that sustainability issues pose to 
their investments and the impacts of those investments on people and the environment. 
The  second  group  of  users  consists  of  organisations,  including  non-governmental 
organisations and social partners, that wish to better hold undertakings to account for 
their impacts on people and the environment. Other stakeholders may also make use of 
sustainability  information  disclosed  in  annual  reports.  The  business  partners  of 
undertakings,  including  customers,  may  rely  on  this  information  to  understand,  and 
where necessary report on, the sustainability risks and impacts through their own value 
chains.  Policy  makers  and  environmental  agencies  may  use  such  information,  in 
particular  on  an  aggregate  basis,  to  monitor  environmental  and  social  trends,  to 
contribute  to  environmental  accounts,  and  to  inform  public  policy.  Few  individual 
citizens and consumers directly consult undertaking’s reports, but they may use such 
information  indirectly  such  as  when  considering  the  advice  or  opinions  of  financial 
advisers  or  non-governmental  organisations.  Many  investors  and  asset  managers 
purchase  sustainability  information  from  third  party  data  providers,  who  collect 
information from various sources, including public corporate reports. 

There  has  been  a  very  significant  increase  in  demand  for  corporate  sustainability 
information in recent years, especially on the part of the investment community. That 
increase  in  demand  is  driven  by  the  changing  nature  of  risks  to  undertakings  and 
growing  investor  awareness  of  the  financial  implications  of  these  risks.  That  is 
especially  the  case  for  climate-related  financial  risks.  Awareness  of  the  risks  to 
undertakings  and  to  investments  resulting  from  other  environmental  issues  and  from 
social  issues,  including  health  issues,  is  also  growing.  The  increase  in  demand  for 
sustainability  information  is  also  driven  by  the  growth  in  investment  products  that 
explicitly seek to meet certain sustainability standards or achieve certain sustainability 
objectives.  Part  of  that  increase  is  the  logical  consequence  of  previously  adopted 
Union legislation, notably Regulation (EU) 2019/2088 and Regulation (EU) 2020/852. 
Some of the increase would  have happened in  any  case, due to  fast-changing citizen 
awareness, consumer preferences and market practices. The COVID-19 pandemic will 
further  accelerate  the  increase  in  users’  information  needs,  in  particular  as  it  has 

EN 

23 

  EN 

exposed the vulnerabilities of workers and of undertaking’s value chains. Information 
on  environmental  impacts  is  also  relevant  in  the  context  of  mitigating  future 
pandemics  with  human  disturbance  of  ecosystems  increasingly  linked  to  the 
occurrence and spread of diseases. 

(10)  Undertakings themselves stand to benefit from carrying out high quality reporting on 
sustainability  matters.  The  growth  in  the  number  of  investment  products  that  aim  to 
pursue sustainability objectives means that good sustainability reporting can enhance 
an  undertaking’s  access  to  financial  capital.  Sustainability  reporting  can  help 
undertakings  to  identify  and  manage  their  own  risks  and  opportunities  related  to 
sustainability  matters.  It  can  provide  a  basis  for  better  dialogue  and  communication 
between  undertakings  and  their  stakeholders,  and  can  help  undertakings  to  improve 
their reputation.  

(11)  The report on the review clause of the Non-Financial Reporting Directive (Directive 
2014/95/EU),  and  its  accompanying  fitness  check  on  corporate  reporting,  identified 
problems as to the effectiveness of that Directive48. There is significant evidence that 
many  undertakings  do  not  disclose  material  information  on  all  major  sustainability-
related  topics.  The  report  also  identified  as  significant  problems  the  limited 
comparability  and  reliability  of  sustainability  information.  Additionally,  many 
undertakings  from  which  users  need  sustainability  information  are  not  obliged  to 
report such information.  

(12) 

In  the  absence  of  policy  action,  the  gap  between  users’  information  needs  and  the 
sustainability information reported by undertakings is expected to grow. This gap has 
significant  negative  consequences.  Investors  are  unable  to  take  sufficient  account  of 
sustainability-related  risks  and  opportunities  in  their  investment  decisions.  The 
aggregation  of  multiple  investment  decisions  that  do  not  take  adequate  account  of 
sustainability-related  risks  has  the  potential  to  create  systemic  risks  that  threaten 
financial stability. The European Central Bank and international organisations such as 
the Financial Stability Board have drawn attention to those systemic risks, in particular 
in  the  case  of  climate.  Investors  are  also  less  able  to  channel  financial  resources  to 
undertakings  and  economic  activities  that  address  and  do  not  exacerbate  social  and 
environmental problems, which undermines the objectives of the European Green Deal 
and 
the  Action  Plan  on  Financing  Sustainable  Growth.  Non-governmental 
organisations,  social  partners,  communities  affected  by  undertakings’  activities,  and 
other stakeholders are less able to hold undertakings accountable for their impacts on 
people and the environment. This creates an accountability deficit, and may contribute 
to lower levels of citizen trust in businesses, which in turn may have negative impacts 
on  the  efficient  functioning  of  the  social  market  economy.  The  lack  of  generally 
accepted  metrics  and  methods  for  measuring,  valuing,  and  managing  sustainability-
related  risks  is  also  an  obstacle  to  the  efforts  of  undertakings  to  ensure  that  their 
business models and activities are sustainable.  

(13)  The  report  on  the  review  clause  of  Directive  2014/95/EU,  and  its  accompanying 
fitness  check  on  corporate  reporting,  also  recognised  a  significant  increase  in 
information requests for information about sustainability matters to undertakings in an 
attempt to address the existing information gap. In addition, ongoing expectations on 

48 

Publication office: please insert reference to Report from the Commission to the European Parliament, 
the  Council  and  the  European  Economic  and  Social  Committee  on  the  review  clauses  in  Directives 
2013/34/EU, 2014/95/EU, and 2013/50/EU, and accompanying SWD- Fitness Check. 

EN 

24 

  EN 

                                                 
undertakings  to  use  a  variety  of  different  frameworks  and  standards  are  likely  to 
continue  and  may  even  intensify  as  the  value  placed  on  sustainability  information 
continues  to  grow.  In  the  absence  of  policy  action  to  build  consensus  on  the 
information that undertakings should report, there will be significant increases in costs 
and burden for reporting undertakings and for users of such information. 

(14)  The growing gap between users’ information needs and the current reporting practices 
of  undertakings  makes  it  more  likely  that  individual  Member  States  will  introduce 
increasingly divergent national rules or standards. Different reporting requirements in 
different  Member  States  would  create  additional  costs  and  complexity  for 
undertakings operating across borders and therefore undermine the single market, and 
would undermine the right  of establishment and the free movement  of capital  across 
the Union. Those different reporting requirements also make reported information less 
comparable across borders, undermining the capital markets union. 

(15)  Articles  19a  and  29a  of  Directive  2013/34/EU  apply  to  large  undertakings  that  are 
public-interest entities with an average number of employees in excess of 500, and to 
public-interest  entities  that  are  parent  undertakings  of  a  large  group  with  an  average 
number of employees in excess of 500 on a consolidated basis, respectively. In view of 
the  growth  of  users’  needs  for  sustainability  information,  additional  categories  of 
undertakings should be required to report such information. It is therefore appropriate 
to  require  all  large  undertakings  and  all  undertakings  listed  on  regulated  markets, 
except  micro  undertakings,  to  report  detailed  sustainability  information.  In  addition, 
all  undertakings  that  are  parent  undertakings  of  large  groups  should  prepare 
sustainability reporting at group level.  

(16)  The requirement that also large non-listed undertakings should disclose information on 
sustainability  matters  is  mainly  driven  by  concerns  about  the  impacts  and 
accountability  of  such  undertakings,  including  through  their  value  chain.  In  this 
respect,  all  large  undertakings  should  be  subject  to  the  same  requirements  to  report 
sustainability information publicly. In addition, financial market participants also need 
information from those large non-listed undertakings.  

(17)  The  requirement  that  undertakings  not  established  in  the  Union  but  with  securities 
listed on regulated markets should also disclose information on sustainability matters 
responds  to  the  needs  of  financial  market  participants  for  information  from  such 
undertakings in order to understand the risks and impacts of their investments, and to 
comply with the disclosure requirements laid down in Regulation (EU) 2019/2088.  

(18)  Considering  the  growing  relevance  of  sustainability-related  risks  and  taking  into 
account  that small and medium-sized enterprises  (SMEs) listed on regulated markets 
comprise  a  significant  proportion  of  all  listed  undertakings  in  the  Union,  in  order  to 
ensure  investor  protection  it  is  appropriate  to  require  that  also  those  SMEs  disclose 
information on sustainability matters. The introduction of this requirement will help to 
ensure  that  financial  market  participants  can  include  smaller  listed  undertakings  in 
investment  portfolios  on  the  basis  that  they  report  the  sustainability  information  that 
financial  market  participants  need.  It  will  therefore  help  to  protect  and  enhance  the 
access  of  smaller  listed  undertakings  to  financial  capital,  and  avoid  discrimination 
against such undertakings on the part of financial market participants. The introduction 
of this requirement is also necessary to ensure that financial market participants have 
the information they need from investee undertakings to be able to comply with their 
own sustainability disclosure requirements laid down in  Regulation  (EU) 2019/2088. 
SMEs listed on regulated markets should, however, be provided with sufficient time to 

EN 

25 

  EN 

prepare for the application of the requirement to report sustainability information, due 
to  their  smaller  size  and  more  limited  resources,  and  taking  account  of  the  difficult 
economic  circumstances  created  by  the  COVID-19  pandemic.  They  should  also  be 
given  the  possibility  to  report  according  to  standards  that  are  proportionate  to  the 
capacities  and  resources  of  SMEs.  Non-listed  SMEs  can  also  choose  to  use  these 
proportionate standards on a voluntary basis. The SME standards will set a reference 
for  undertakings  that  are  within  the  scope  of  the  Directive  regarding  the  level  of 
sustainability information that they could reasonably request from SME suppliers and 
clients in their value chains. 

(19)  Directive 2004/109/EC of the European Parliament and of the Council49 applies to all 
undertakings  with  securities  listed  on  regulated  markets.  In  order  to  ensure  that  all 
undertakings  with  securities  listed  on  regulated  markets,  including  third  country 
the  same  sustainability  reporting  requirements,  Directive 
issuers,  fall  under 
2004/109/EC  should  contain  the  necessary  cross-references  to  any  requirement  on 
sustainability reporting in the annual financial report.  

(20)  Article 23(4),  first  subparagraph,  point (i),  and  Article 23(4),  fourth  subparagraph  of 
Directive  2004/109/EC  empower  the  Commission  to  adopt  measures  to  set  up  a 
mechanism  for  the  determination  of  equivalence  of  information  required  under  the 
Directive,  and  for  the  establishment  of  general  equivalence  criteria  regarding 
accounting  standards,  respectively.  Article 23(4),  third  subparagraph,  of  Directive 
2004/109/EC  also  empowers  the  Commission  to  take  the  necessary  decisions  on  the 
equivalence of accounting standards that are used by third-country issuers. In order to 
reflect  the inclusion of the sustainability requirements in  Directive 2004/109/EC,  the 
Commission should be empowered to establish a mechanism for the determination of 
equivalence  of  sustainability  reporting  standards  applied  by  third-country  issuers  of 
securities. For the same reason, the Commission should also be empowered to take the 
necessary  decisions  on  the  equivalence  of  sustainability  reporting  standards  that  are 
used  by  third-country  issuers.  Those  amendments  will  ensure  consistent  equivalence 
regimes for sustainability reporting obligations and for financial reporting obligations 
regarding the annual financial report. 

(21)  Articles  19a(3)  and  29a(3)  of  Directive  2013/34/EU  currently  exempt  all  subsidiary 
undertakings  from  the  obligation  to  report  non-financial  information  where  such 
undertakings  and  their  subsidiary  undertakings  are  included  in  the  consolidated 
management  report  of  their  parent  undertaking,  provided  this  includes  the  required 
non-financial  information.  It  is  necessary,  however  to  ensure  that  sustainability 
information is easily accessible for users, and to bring transparency about which is the 
parent  undertaking  of  the  exempted  subsidiary  undertaking  which  is  reporting  at 
consolidated level. It is therefore necessary to require those subsidiary undertakings to 
publish the consolidated management report of their parent undertaking and to include 
a  reference  in  their  management  report  to  the  fact  that  they  are  exempted  from 
reporting  sustainability  information.  That  exemption  should  also  apply  where  the 
parent  undertaking  reporting  at  consolidated  level  is  a  third  country  undertaking 
reporting  sustainability  information  in  accordance  with  the  requirements  of  this 
Directive or in a manner equivalent to EU sustainability reporting standards. 

49 

Directive  2004/109/EC  of  the  European  Parliament  and  of  the  Council  of  15  December  2004  on  the 
harmonisation of transparency requirements in relation to information about issuers whose securities are 
admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, 
p. 38). 

EN 

26 

  EN 

                                                 
(22)  Article 23 of Directive 2013/34/EU exempts parent undertakings from the obligation 
to  prepare  consolidated  financial  statements  and  a  consolidated  management  report 
where those undertakings are subsidiaries of another parent undertaking that complies 
with  that  obligation.  It  should  be  specified,  however,  that  the  exemption  regime  for 
consolidated  financial  statements  and  consolidated  management  reports  operates 
independently from the exemption regime for consolidated sustainability reporting. An 
undertaking  can  therefore  be  exempted  from  consolidated  financial  reporting 
obligations  but  not  exempted  from  consolidated  sustainability  reporting  obligations 
where its ultimate parent prepares consolidated financial statements and consolidated 
management reports in accordance with Union law, or in accordance with equivalent 
requirements if the undertaking is established in a third country, but does not prepare 
consolidated sustainability reporting in accordance with EU law, or in accordance with 
equivalent requirements if the undertaking is established in a third country. 

(23)  Credit institutions and insurance undertakings play a key role in the transition towards 
a  fully  sustainable  and  inclusive  economic  and  financial  system  in  line  with  the 
European  Green  Deal.  They  can  have  significant  positive  and  negative  impacts  via 
their lending, investment and underwriting activities. Credit institutions and insurance 
undertakings other than those that are required to comply with Directive 2013/34/EU, 
including  cooperatives  and  mutual  undertakings,  should  therefore  be  subject  to 
sustainability  reporting  requirements  provided  that  they  meet  certain  size  criteria. 
Users  of  that  information  would  thus  be  enabled  to  assess  both  the  impacts  of  these 
undertakings on society and the environment and the risks arising from sustainability 
matters  that  these  undertakings  could  face.  To  ensure  coherence  with  the  reporting 
requirements  of  Council  Directive  86/635/EEC50  on  the  annual  accounts  and 
consolidated accounts of banks and other financial institutions, sustainability reporting 
Member States may choose not to apply sustainability reporting requirements to credit 
institutions listed in Article 2(5) of Directive 2013/36/EU of the European Parliament 
and of the Council51. 

(24)  The list of sustainability matters on which undertakings are required to report should 
be as  coherent  as possible with  the definition of ‘sustainability factors’ laid  down in 
Regulation  (EU)  2019/2088.  That  list  should  also  correspond  to  the  needs  and 
expectations  of  users  and  undertakings  themselves,  who  often  use  the  terms 
‘environmental’,  ‘social’  and  ‘governance’  as  a  means  to  categorise  the  three  main 
sustainability matters. The list of sustainability factors laid down in Regulation (EU) 
2019/2088  does  not  explicitly  include  governance  matters.  The  definition  of 
sustainability  matters  in  Directive  2013/34/EU  should  therefore  be  based  on  the 
definition of ‘sustainability factors’ laid down in Regulation (EU) 2019/2088, but with 
the addition of governance matters. 

(25)  Articles  19a  and  29a  of  Directive  2013/34/EU  require  reporting  not  only  on 
information  ‘to  the  extent  necessary  for  an  understanding  of  the  undertaking's 
development,  performance,  position’,  but  also  on  information  necessary  for  an 
understanding  of  the  impact  of  the  undertaking’s  activities  on  environmental,  social 

50 

51 

Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts 
of banks and other financial institutions (OJ L 372, 31.12.1986, p. 1). 
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the 
activity of credit institutions and the prudential supervision of credit institutions and investment firms, 
amending  Directive  2002/87/EC  and  repealing  Directives  2006/48/EC  and  2006/49/EC  (OJ  L  176, 
27.6.2013, p. 338). 

EN 

27 

  EN 

                                                 
and  employee  matters,  respect  for  human  rights,  anti-corruption  and  bribery  matters. 
Those  articles  therefore  require  undertakings  to  report  both  on  how  various 
sustainability matters affect the undertaking, and on the impacts of the activities of the 
undertaking  on  people  and  the  environment.  That  is  referred  to  as  the  double-
materiality  perspective,  in  which  the  risks  to  the  undertaking  and  the  impacts  of  the 
undertaking each represent one materiality perspective. The fitness check on corporate 
reporting shows that those two perspectives are often not well understood or applied. It 
is  therefore  necessary  to  clarify  that  undertakings  should  consider  each  materiality 
perspective in its own right, and should disclose information that is material from both 
perspectives as well as information that is material from only one perspective.  

(26)  Articles  19a(1)  and  29a(1)  of  Directive  2013/34/EU  require  undertakings  to  disclose 
information  about  five  reporting  areas:  business  model,  policies  (including  due 
diligence  processes  implemented),  the  outcome  of  those  policies,  risks  and  risk 
management, and key performance indicators relevant to the business. Article 19a(1) 
of Directive 2013/34/EU does not contain explicit references to other reporting areas 
that  users  of  information  consider  relevant,  some  of  which  align  with  disclosures 
included  in  international  frameworks,  including  the  recommendations  of  the  Task 
Force  on  Climate-related  Financial  Disclosures.  Disclosure  requirements  should  be 
specified  in  sufficient  detail  to  ensure  that  undertakings  report  information  on  their 
resilience  to  risks  related  to  sustainability  matters.  In  addition  to  the  reporting  areas 
identified in Articles 19a(1) and 29a(1) of Directive 2013/34/EU, undertakings should 
therefore  be  required  to  disclose  information  about  their  business  strategy  and  the 
resilience of the business model and strategy to risks related to sustainability matters, 
any  plans  they  may  have  to  ensure  that  their  business  model  and  strategy  are 
compatible with the transition to a sustainable and climate-neutral economy; whether 
and  how  their  business  model  and  strategy  take  account  of  the  interests  of 
stakeholders; any opportunities for the undertaking arising from sustainability matters; 
the implementation of the aspects of the business strategy which affect, or are affected 
by  sustainability  matters;  any  sustainability  targets  set  by  the  undertaking  and  the 
progress  made  towards  achieving  them;  the  role  of  the  board  and  management  with 
regard  to  sustainability  matters;  the  principal  actual  and  potential  adverse  impacts 
connected with the undertaking’s activities; and how the undertaking has identified the 
information  that  they  report  on.  Once  the  disclosure  of  elements  such  as  targets  and 
the progress towards achieving them is required, the separate requirement to disclose 
the outcomes of policies is no longer necessary. 

(27)  To  ensure  consistency  with  international  instruments  such  as  the  UN  Guiding 
Principles on Business and Human Rights and the OECD Due Diligence Guidance for 
Responsible  Business  Conduct,  the  due  diligence  disclosure  requirements  should  be 
specified  in  greater  detail  than  is  the  case  in  Article  19a(1),  point (b),  and 
Article 29a(1),  point (b)  of  Directive  2013/34/EU.  Due  diligence  is  the  process  that 
undertakings carry out to identify, prevent, mitigate and remediate the principal actual 
and potential adverse impacts  connected with  their activities and identifies how they 
address  those  adverse  impacts.  Impacts  connected  with  an  undertaking’s  activities 
include impacts directly caused by the undertaking, impacts to which the undertaking 
contributes, and impacts which are otherwise linked to the undertaking’s value chain. 
The due diligence process concerns the whole value chain of the undertaking including 
its own operations, its products and services, its business relationships and its supply 
chains. In alignment with the UN Guiding Principles on Business and Human Rights, 
an actual or potential adverse impact is to be considered principal where it measures 
among the greatest impacts connected with the undertaking’s activities based on: the 

EN 

28 

  EN 

gravity of the impact on people or the environment; the number of individuals that are 
or  could  be  affected,  or  the  scale  of  damage  to  the  environment;  and  the  ease  with 
which the harm could be remediated, restoring the environment or affected people to 
their prior state. 

(28)  Directive  2013/34/EU  does  not  require  the  disclosure  of  information  on  intangibles 
other  than  intangible  assets  recognised  in  the  balance  sheet.  It  is  widely  recognised 
that information on intangible assets and other intangible factors, including internally-
generated  intangibles,  is  underreported,  impeding  the  proper  assessment  of  an 
undertaking’s development, performance and position and monitoring of investments. 
To  enable  investors  to  better  understand  the  increasing  gap  between  the  accounting 
book  value  of  many  undertakings  and  their  market  valuation,  which  is  observed  in 
many sectors of the economy, adequate reporting on intangibles should be required. It 
is  therefore  necessary  to  require  undertakings  to  disclose  information  on  intangibles 
other  than  intangible  assets  recognised  in  the  balance  sheet,  including  intellectual 
capital,  human  capital,  including  skills  development,  and  social  and  relationship 
capital,  including  reputation  capital.  Information  on  intangibles  should  also  include 
information related to research and development. 

(29)  Articles  19a(1)  and  29a(1)  of  Directive  2013/34/EU  do  not  specify  whether  the 
information  to  be  reported  is  to  be  forward  looking  or  information  about  past 
performance. There is currently a lack of forward-looking disclosures, which users of 
sustainability  information  especially  value.  Articles  19a  and  29a  of  Directive 
2013/34/EU should therefore specify that the sustainability information reported shall 
include  forward-looking  and  retrospective,  and  both  qualitative  and  quantitative 
information.  Reported  sustainability  information  should  also  take  into  account  short, 
medium and long-term time horizons and contain information about the undertaking’s 
whole value chain, including its own operations, its products and services, its business 
relationships, and its supply chain, as appropriate. Information about the undertaking’s 
whole value chain would include information related to its value chain within the EU 
and  information  that  covers  third  countries  if  the  undertaking’s  value  chain  extends 
outside the EU.  

(30)  Articles 19a(1) and 29a(1) of Directive 2013/34/EU require undertakings to include in 
their  non-financial  reporting  references  to,  and  additional  explanations  of,  amounts 
reported  in  the  annual  financial  statements.  Those  Articles  do,  however,  not  require 
undertakings to make references to other information in the management report or to 
add  additional  explanations  to  that  information.  There  is  currently  thus  a  lack  of 
consistency between non-financial information reported and the rest of the information 
disclosed in the management report. It is necessary to lay down clear requirements in 
this regard. 

(31)  Articles 19a(1) and 29a(1) of Directive 2013/34/EU require undertakings to provide a 
clear and reasoned explanation for not pursuing policies in relation to one or more of 
the  matters  listed,  where  the  undertaking  does  not  do  so.  The  different  treatment  of 
disclosures  on  the  policies  that  undertakings  may  have,  compared  to  the  other 
reporting  areas  included  in  those  articles,  has  created  confusion  among  reporting 
undertakings  and  has  not  helped  to  improve  the  quality  of  the  reported  information. 
Therefore,  there  is  no  need  to  maintain  this  different  treatment  of  policies  in  the 
Directive.  The  standards  will  determine  what  information  needs  to  be  disclosed  in 
relation to each of the reporting areas mentioned in Articles 19a and 29a. 

EN 

29 

  EN 

the  Commission  published 

(32)  Undertakings under the scope of Articles 19a(1) and 29a(1) of Directive 2013/34/EU 
may  rely on national,  Union-based or international  reporting  frameworks, and where 
they  do  so,  they  have  to  specify  which  frameworks  they  relied  upon.  However, 
Directive  2013/34/EU  does  not  require  undertakings  to  use  a  common  reporting 
framework or standard, and it does not prevent undertakings from choosing not to use 
any  reporting  framework  or  standards  at  all.  As  required  by  Article  2  of  Directive 
2014/95/EU, 
in  2017  non-binding  guidelines  for 
undertakings under the scope of that Directive52. In 2019, the Commission published 
additional  guidelines,  specifically  on  reporting  climate-related  information53.  The 
climate reporting guidelines explicitly incorporated the recommendations of the Task 
Force  on  Climate-related  Financial  Disclosures.  Available  evidence  indicates  that 
those non-binding guidelines did not have a significant impact on the quality of non-
financial  reporting  by  undertakings  under  the  scope  of  Articles  19a  and  29a  of 
Directive 2013/34/EU. The voluntary nature of the guidelines means that undertakings 
are free to apply them or not. The guidelines can therefore not ensure on their own the 
comparability of information disclosed by different  undertakings  or the disclosure of 
all information that users consider relevant. That is why there is a need for mandatory 
common  reporting  standards  to  ensure  that  information  is  comparable  and  that  all 
relevant  information  is  disclosed.  Building  on  the  double-materiality  principle, 
standards  should  cover  all  information  that  is  material  to  users.  Common  reporting 
standards  are  also  necessary  to  enable  the  audit  and  digitalisation  of  sustainability 
reporting  and  to  facilitate  its  supervision  and  enforcement.  The  development  of 
mandatory  common  sustainability  reporting  standards  is  necessary  to  progress  to  a 
situation  in  which  sustainability  information  has  a  status  comparable  to  that  of 
financial information.  

(33)  No  existing  standard  or  framework  satisfies  the  Union’s  needs  for  detailed 
sustainability reporting by itself. Information required by Directive 2013/34/EU needs 
to cover information relevant from each of the materiality perspectives, needs to cover 
all  sustainability  matters  and  needs  to  be  aligned,  where  appropriate,  with  other 
obligations  under  Union  law  to  disclose  sustainability  information,  including 
obligations laid down in Regulation (EU) 2020/852 and Regulation (EU) 2019/2088. 
In addition, mandatory sustainability reporting standards for Union undertakings must 
be  commensurate  with  the  level  of  ambition  of  the  European  Green  Deal  and  the 
Union’s climate-neutrality objective for 2050. It is therefore necessary to empower the 
Commission  to  adopt  Union  sustainability  reporting  standards,  enabling  their  rapid 
adoption  and  ensuring  that  the  content  of  sustainability  reporting  standards  are 
consistent with the Union’s needs. 

(34)  The  European  Financial  Reporting  Advisory  Group  (EFRAG)  is  a  non-profit 
association established under Belgian law that serves the public interest by providing 
advice  to  the  Commission  on  the  endorsement  of  international  financial  reporting 
standards.  EFRAG  has  established  a  reputation  as  a  European  centre  of  expertise  on 
corporate  reporting,  and  is  well  placed  to  foster  coordination  between  European 
sustainability  reporting  standards  and  international  initiatives  that  seek  to  develop 
standards that are consistent across the world. In March 2021, a multi-stakeholder task 

52 

53 

Communication  from  the  Commission  Guidelines  on  non-financial  reporting  (methodology  for 
reporting non-financial information) (C/2017/4234). 
Communication from the Commission Guidelines on non-financial reporting: Supplement on reporting 
climate-related information (C/2019/4490). 

EN 

30 

  EN 

                                                 
force set up by EFRAG published recommendations for the possible development of 
sustainability  reporting  standards  for  the  European  Union.  Those  recommendations 
contain proposals to develop a coherent and comprehensive set of reporting standards, 
covering  all  sustainability  matters  from  a  double-materiality  perspective.  Those 
recommendations also contain a detailed roadmap for developing such standards, and 
proposals  for  mutually  reinforcing  cooperation  between  global  standard-setting 
initiatives and standard-setting initiatives of the European Union. In March 2021, the 
EFRAG  President  published  recommendations  for  possible  governance  changes  to 
EFRAG  if  it  were  to  be  asked  to  develop  technical  advice  about  sustainability 
reporting  standards.  These  recommendations  include  offsetting  up  within  EFRAG  a 
new  sustainability  reporting  pillar  while  not  significantly  modifying  the  existing 
financial  reporting  pillar.  When  adopting  sustainability  reporting  standards,  the 
Commission  should  take  account  of  technical  advice  that  EFRAG  will  develop.  In 
order to ensure high-quality standards that contribute to the European public good and 
meet  the  needs  of  undertakings  and  of  users  of  the  information  reported,  EFRAG’s 
technical  advice  should  be  developed  with  proper  due  process,  public  oversight  and 
transparency,  accompanied  by  cost  benefit  analyses,  and  be  developed  with  the 
expertise  of  relevant  stakeholders.  To  ensure  that  Union  sustainability  reporting 
standards  take  account  of  the  views  of  the  Member  States  of  the  Union,  before 
adopting  the  standards  the  Commission  should  consult  the  Member  State  Expert 
Group on Sustainable Finance referred to in Article 24 of Regulation (EU) 2020/852 
on  EFRAG’s  technical  advice.  The  European  Securities  and  Markets  Authority 
(ESMA) plays a role in drafting regulatory technical standards pursuant to Regulation 
(EU)  2019/2088  and  there  needs  to  be  coherence  between  those  regulatory  technical 
standards  and  sustainability  reporting  standards.  According  to  Regulation  (EU)  No 
1095/2010 of the European Parliament and of the Council54, ESMA also plays a role 
in  promoting  supervisory  converge  in  the  enforcement  of  corporate  reporting  by 
issuers whose securities are listed on EU regulated markets and who will be required 
to use these sustainability reporting standards. Therefore, ESMA should be required to 
provide  an  opinion  on  EFRAG’s  technical  advice.  This  opinion  should  be  provided 
within  two  months  from  the  date  of  receipt  of  the  request  from  the  Commission.  In 
addition,  the  Commission  should  consult  the  European  Banking  Authority,  the 
European Insurance and Occupational Pensions Authority, the European Environment 
Agency,  the  European  Union  Agency  for  Fundamental  Rights,  the  European  Central 
Bank,  the  Committee  of  European  Auditing  Oversight  Bodies  and  the  Platform  on 
Sustainable Finance to  ensure that the sustainability reporting standards are coherent 
with  relevant  Union  policy  and  legislation.  Where  any  of  those  bodies  decide  to 
submit  an  opinion,  they  shall  do  so  within  two  months  from  the  date  of  being 
consulted by the Commission. 

(35)  Sustainability  reporting  standards  should  be  coherent  with  other  Union  legislation. 
Those standards should in particular be aligned with the disclosure requirements laid 
down  in  Regulation  (EU)  2019/2088,  and  they  should  take  account  of  underlying 
indicators and methodologies set out in the various delegated acts adopted pursuant to 
Regulation  (EU)  2020/852,  disclosure  requirements  applicable 
to  benchmark 
administrators pursuant to Regulation (EU) 2016/1011 of the European Parliament and 

54 

Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 
establishing a European Supervisory Authority (European Securities and Markets Authority), amending 
Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (OJ L 331, 15.12.2010, p. 
84). 

EN 

31 

  EN 

                                                 
of the Council55, the minimum standards for the construction of EU climate transition 
benchmarks  and  EU  Paris-aligned  benchmarks;  and  of  any  work  carried  out  by  the 
European  Banking  Authority  in  the  implementation  of  the  Pillar  III  disclosure 
requirements  of  Regulation  (EU)  No  575/2013.  Standards  should  take  account  of 
Union  environmental  legislation,  including  Directive  2003/87/EC  of  the  European 
Parliament and of the Council56 and Regulation (EC) No 1221/2009 of the European 
Parliament  and  of 
take  account  of  Commission 
Recommendation  2013/179/EU58  and  its  annexes,  and  their  updates.  Other  relevant 
Union legislation, including Directive 2010/75/EU of the European Parliament and of 
the  Council59,  and  requirements  laid  down  in  Union  law  for  undertakings  as  regards 
directors’ duties and due diligence, should also be taken into account. 

the  Council57,  and  should 

(36)  Sustainability  reporting  standards  should  take  account  of  the  Commission  guidelines 
on  non-financial  reporting60  and  the  Commission  guidelines  on  reporting  climate-
related information61. They should also take account of other reporting requirements in 
Directive 2013/34/EU not directly related to sustainability, with the aim of providing 
the users of the reported information with a better understanding of the development, 
performance, position and impact of the undertaking, by maximising the links between 
the  sustainability  information  and  other  information  reported  in  accordance  with 
Directive 2013/34/EU. 

(37)  Sustainability  reporting  standards  should  be  proportionate,  and  should  not  impose 
unnecessary  administrative  burden  on  companies  that  are  required  to  use  them.  In 
order  to  minimise  disruption  for  undertakings  that  already  report  sustainability 
information,  sustainability  reporting  standards  should  take  account  of  existing 
standards  and  frameworks  for  sustainability  reporting  and  accounting  where 
appropriate.  Those  include  the  Global  Reporting  Initiative,  the  Sustainability 
Accounting  Standards  Board,  the  International  Integrated  Reporting  Council,  the 
International  Accounting  Standards  Board,  the  Task  Force  on  Climate-related 
Financial Disclosures, the Carbon Disclosure Standards Board, and CDP (formerly the 
Carbon Disclosure Project). Standards of the European Union should take account of 
any  sustainability  reporting  standards  developed  under  the  auspices  of  International 
Financial  Reporting  Standards  Foundation.  To  avoid  unnecessary  regulatory 
fragmentation  that  may  have  negative  consequences  for  undertakings  operating 

55 

56 

57 

58 

59 

60 
61 

Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices 
used as benchmarks in financial instruments and financial contracts or to measure the performance of 
investment  funds  and  amending  Directives  2008/48/EC  and  2014/17/EU  and  Regulation  (EU)  No 
596/2014 (OJ L 171, 29.6.2016, p. 1). 
Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a 
scheme  for greenhouse  gas emission allowance trading  within the  Community and amending Council 
Directive 96/61/EC (OJ L 275, 25.10.2003, p. 32). 
Regulation (EC) No 1221/2009 of the European Parliament and of the Council of 25 November 2009 
on  the  voluntary  participation  by  organisations  in  a  Community  eco-management  and  audit  scheme 
(EMAS),  repealing  Regulation  (EC)  No 761/2001  and  Commission  Decisions  2001/681/EC 
and 2006/193/EC (OJ L 342, 22.12.2009, p. 1). 
Commission  Recommendation  2013/179/EU  of  9 April  2013  on  the  use  of  common  methods  to 
measure and communicate the life cycle environmental performance of products and organisations (OJ 
L 124, 4.5.2013, p. 1). 
Directive  2010/75/EU  of  the  European  Parliament  and  of  the  Council  of  24  November  2010  on 
industrial emissions (integrated pollution prevention and control) (OJ L 334, 17.12.2010, p. 17). 
2017/C 215/01. 
2019/C 209/01. 

EN 

32 

  EN 

                                                 
(38) 

globally,  European  standards  should  contribute  to  the  process  of  convergence  of 
sustainability reporting standards at global level.  

In  its  communication  on  the  European  Green  Deal,  the  European  Commission 
committed  to  support  businesses  and  other  stakeholders  in  developing  standardised 
natural capital accounting practices within the Union and internationally, with the aim 
of  ensuring  appropriate  management  of  environmental  risks  and  mitigation 
opportunities, and reduce related transaction costs. The Transparent Project sponsored 
under  the  LIFE  programme  is  developing  the  first  natural  capital  accounting 
methodology,  which  will  make  existing  methods  easier  to  compare  and  more 
transparent while lowering the threshold for companies to adopt and use the systems in 
support  of  future-proofing  their  business.  The  Natural  Capital  Protocol  is  also  an 
important  reference  in  this  field.  While  natural  capital  accounting  methods  serve 
principally  to  strengthen  internal  management  decisions,  they  should  be  duly 
considered when establishing sustainability reporting standards. Some natural  capital 
accounting  methodologies  seek  to  assign  a  monetary  value  to  the  environmental 
impacts  of  companies’  activities,  which  may  help  users  to  better  understand  those 
impacts.  It  is  therefore  appropriate  that  sustainability  reporting  standards  should  be 
able  to  include  monetised  indicators  of  sustainability  impacts  if  that  is  deemed 
necessary.  

(39)  Sustainability  reporting  standards  should  also  take  account  of  internationally 
recognised  principles  and  frameworks  on  responsible  business  conduct,  corporate 
social  responsibility,  and  sustainable  development,  including  the  UN  Sustainable 
Development  Goals,  the  UN  Guiding  Principles on  Business  and  Human  Rights,  the 
OECD Guidelines  for Multinational  Enterprises, the OECD Due Diligence Guidance 
for  Responsible  Business  Conduct  and  related  sectoral  guidelines,  the  UN  Global 
Compact,  the  Tripartite  Declaration  of  Principles  of  the  International  Labour 
Organisation  concerning  Multinational  Enterprises  and  Social  Policy,  the  ISO  26000 
standard on social responsibility, and the UN Principles for Responsible Investment.  

(40) 

It should be ensured that the information reported by undertakings in accordance with 
the sustainability reporting standards meet the needs of users. The reporting standards 
should therefore specify the information that undertakings are to disclose on all major 
environmental factors, including their impacts and dependencies on climate, air, land, 
water  and  biodiversity.  Regulation  (EU)  2020/852  provides  a  classification  of  the 
environmental objectives of the Union. For reasons of coherence, it is  appropriate to 
use  a  similar  classification  to  identify  the  environmental  factors  that  should  be 
addressed  by  sustainability  reporting  standards.  The  reporting  standards  should 
that 
consider  and  specify  any  geographical  or  other  contextual 
undertakings should disclose to provide an understanding of their principal impacts on 
sustainability  matters  and  the  principal  risks  to  the  undertaking  arising  from 
sustainability matters.  

information 

(41)  With  regard  to  climate-related  information,  users  are  interested  in  knowing  about 
undertakings’  physical  and  transition  risks,  and  about  their  resilience  to  different 
climate  scenarios.  They  are  also  interested  in  the  level  and  scope  of  greenhouse  gas 
emissions and removals attributed to the undertaking, including the extent to which the 
undertaking uses offsets  and the source of those  offsets.  Achieving  a  climate neutral 
economy  requires  the  alignment  of  greenhouse  gas  accounting  and  offset  standards. 
Users  need  reliable  information  regarding  offsets  that  addresses  concerns  regarding 
possible  double-counting  and  overestimations,  given  the  risks  to  the  achievement  of 
climate-related  targets  that  double-counting  and  overestimations  can  create.  The 

EN 

33 

  EN 

reporting  standards  should  therefore  specify  the  information  undertakings  should 
report with regard to those matters.  

(42)  Achieving  a  climate  neutral  and  circular  economy  and  a  toxic-free  environment 
requires  the  full  mobilisation  of  all  economic  sectors.  Reducing  energy  use  and 
increasing  energy  efficiency  is  key  in  this  respect  as  energy  is  used  across  supply 
chains. Energy aspects should therefore be duly considered in sustainability reporting 
standards, in particular in relation to environmental matters. 

(43)  Sustainability  reporting  standards  should  specify  the  information  that  undertakings 
should disclose on social factors, including employee factors and human rights. Such 
information should cover the impacts of undertakings on people, including on human 
health. The information that undertakings disclose about human rights should include 
information  about  forced  labour  in  their  value  chains  where  relevant.  Reporting 
standards that address social factors should specify the information that undertakings 
should  disclose  with  regard  to  the  principles  of  the  European  Pillar  of  Social  Rights 
that  are  relevant  to  businesses,  including  equal  opportunities  for  all  and  working 
conditions. The European Pillar of Social Rights Action Plan adopted in March 2021 
calls  for  stronger  requirements  on  undertakings  to  report  on  social  issues.  The 
reporting  standards  should  also  specify  the  information  that  undertakings  should 
disclose with regard to the human rights, fundamental freedoms, democratic principles 
and standards established in the International Bill of Human Rights and other core UN 
human  rights  conventions,  the  International  Labour  Organization’s  Declaration  on 
Fundamental  Principles  and  Rights  at  Work,  the  fundamental  conventions  of  the 
International  Labour  Organisation,  and  the  Charter  of  Fundamental  Rights  of  the 
European Union.  

including 

lobbying  activities. 

(44)  Users need information about governance factors, including information on the role of 
an undertaking’s  administrative, management  and supervisory bodies, including with 
regard to sustainability matters, the composition of such bodies, and an undertaking’s 
internal  control  and  risk  management  systems,  including  in  relation  to  the  reporting 
process.  Users  also  need  information  about  undertakings’  corporate  culture  and 
approach to business ethics, including anti-corruption and anti-bribery, and about their 
political  engagements, 
the 
management of the undertaking and the quality of relationships with business partners, 
including  payment  practices  relating  to  the  date  or  period  for  payment,  the  rate  of 
interest  for  late  payment  or  the  compensation  for  recovery  costs  referred  to  in 
Directive 2011/7/EU of the European Parliament and of the Council62 on late payment 
in commercial transactions, helps users to understand an undertaking’s risks as well as 
its  impacts  on  sustainability  matters.  Every  year,  thousands  of  businesses,  especially 
SMEs, suffer administrative and financial burdens because they are paid late, or not at 
all.  Ultimately,  late  payments  lead  to  insolvency  and  bankruptcy,  with  destructive 
effects on entire value chains. Increasing information about payment practices should 
empower  other  undertakings  to  identify  prompt  and  reliable  payers,  detect  unfair 
payment  practices,  access  information  about  the  businesses  they  trade  with,  and 
negotiate fairer payment terms.  

Information  about 

(45)  The reporting standards should promote a more integrated view of all the information 
published  by  undertakings  in  the  management  report  to  provide  users  of  that 

62 

Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating 
late payment in commercial transactions (OJ L 48, 23.2.2011, p. 1). 

EN 

34 

  EN 

                                                 
information with a better understanding of the development, performance, position and 
impact  of  the  undertaking.  Those  standards  should  distinguish  as  necessary  between 
information  that  undertakings  should  disclose  when  reporting  at  individual  level  and 
the information that undertakings should disclose when reporting at consolidated level. 
Those standards should also contain guidance for undertakings on the process carried 
out  to  identify  the  sustainability  information  that  should  be  included  in  the 
management report. 

(46)  Undertakings  in  the  same  sector  are  often  exposed  to  similar  sustainability-related 
risks,  and  they  often  have  similar  impacts  on  society  and  the  environment. 
Comparisons  between  undertakings  in  the  same  sector  are  especially  valuable  to 
investors  and  other  users  of  sustainability  information.  Sustainability  reporting 
standards adopted by the Commission  should therefore specify both  information  that 
undertakings  in  all  sectors  should  disclose  and  information  that  undertakings  should 
disclose  depending  on  their  sector  of  activity.  Standards  should  also  take  account  of 
the difficulties that undertakings may encounter in gathering information  from actors 
throughout  their  value  chain,  especially  from  SME  suppliers  and  from  suppliers  in 
emerging markets and economies. 

(47)  To meet the information needs from users in a timely manner, and in particular given 
the urgency to meet the information needs of financial market participants subject to 
the  requirements  laid  down  in  the  delegated  acts  adopted  pursuant  to  Article  4, 
paragraphs  6  and  7  of  Regulation  (EU)  2019/2088,  the  Commission  should  adopt  a 
first  set  of  reporting  standards  by  31  October  2022.  That  set  of  reporting  standards 
should  specify  the  information  that  undertakings  should  disclose  with  regard  to  all 
reporting areas and sustainability matters, and that financial market participants need 
to  comply  with  the  disclosure  obligations  laid  down  in  Regulation  (EU)  2019/2088. 
The Commission should adopt a second set of reporting standards at the latest by 31 
October  2023,  specifying  complementary  information  that  undertakings  should 
disclose  about  sustainability  matters  and  reporting  areas  where  necessary,  and 
information  that  is  specific  to  the  sector  in  which  an  undertaking  operates.  The 
Commission  should  review  the  standards  every  3  years  to  take  account  of  relevant 
developments, including the development of international standards.  

(48)  Directive  2013/34/EU  does  not  require  that  the  financial  statements  or  the 
management report are provided in a digital format, which hinders the findability and 
usability of the reported information. Users of sustainability information increasingly 
expect  such  information  to  be  findable  and  machine-readable  in  digital  formats. 
Digitalisation  creates  opportunities  to  exploit  information  more  efficiently  and  holds 
the potential for significant cost savings for both users and undertakings. Undertakings 
should  therefore  be  required  to  prepare  their  financial  statements  and  their 
management  report  in  XHTML  format  in  accordance  with  Article  3  of  Commission 
Delegated  Regulation  (EU)  2019/815,63  and  to  mark-up  sustainability  information, 
including  the  disclosures  required  by  Article  8  of  Regulation  (EU)  2020/852,  in 
accordance  with  that  Delegated  Regulation.  A  digital  taxonomy  to  the  Union 
sustainability  reporting  standards  will  be  necessary  to  allow  for  the  information 
reported to be tagged in accordance with those standards. These requirements should 
feed  into  the  work  on  digitalisation  announced  by  the  Commission  in  its 

63 

Commission  Delegated  Regulation  (EU)  2018/815  of  17  December  2018  supplementing  Directive 
2004/109/EC  of  the  European  Parliament  and  of  the  Council  with  regard  to  regulatory  technical 
standards on the specification of a single electronic reporting format (OJ L 143, 29.5.2019, p. 1). 

EN 

35 

  EN 

                                                 
Communication  A  European  strategy  for  data64  and  in  the  Digital  Finance  Strategy 
for the EU.65 These requirements also complement the creation of a European single 
access point for public corporate information as envisaged in the capital markets union 
action plan, which also considers the need for structured data. 

(49)  To allow for the inclusion of the reported sustainability information  in  the European 
single  access  point,  Member  States  should  ensure  that  undertakings  publish  the  duly 
approved  annual  financial  statements  and  the  management  report  in  the  prescribed 
electronic  format,  and  ensure  that  management  reports  containing  sustainability 
reporting are made available, without delay following their publication, to the relevant 
officially appointed mechanism referred to in Article 21(2) of Directive 2004/109/EC. 

(50)  Article  19a(4)  of  Directive  2013/34/EU  enables  Member  States 

to  exempt 
undertakings  from  including  in  the  management  report  the  non-financial  statement 
required  under  Article 19a(1).  Member  States  may  do  so  where  the  undertaking 
concerned prepares  a separate report that is  published together with  the management 
report  in  accordance  with  Article  30  of  that  Directive,  or  where  that  report  is  made 
publicly available on the undertaking's website within a reasonable period of time not 
exceeding 6 months, after the balance sheet date, and is referred to in the management 
report.  The  same  possibility  exists  for  the  consolidated  non-financial  statement 
referred to in Article 29(a)(4) of Directive 2013/34/EU. Twenty Member States have 
used  that  option.  The  possibility  to  publish  a  separate  report  hinders,  however,  the 
availability  of  information  that  connects  financial  and  information  on  sustainability 
matters.  It  also  hinders  the  findability  and  accessibility  of  information  for  users, 
in  both  financial  and  sustainability 
especially 
information.  Possible  different  publication  times  for  financial  and  sustainability 
information exacerbate this problem. Publication in a separate report can also give the 
impression,  internally  and  externally,  that  sustainability  information  belongs  to  a 
category  of  less  relevant  information,  which  can  impact  negatively  on  the  perceived 
reliability  of  the  information.  Undertakings  should  therefore  report  sustainability 
information in the management report and Member States should no longer be allowed 
to  exempt  undertakings  from  the  obligation  to  include  in  the  management  report 
information on sustainability matters. Such obligation also helps to clarify the role of 
national  competent  authorities  in  supervising  sustainability  reporting,  as  part  of  the 
management  report,  in  accordance  with  Directive  2004/109/EC.  In  addition, 
undertakings  required  to  report  sustainability  information  should  in  no  case  be 
exempted from  the obligation to  publish the management report as it is  important  to 
ensure that sustainability information is publically available. 

investors,  who  are 

interested 

(51)  Article  20  of  Directive  2013/34/EU  requires  undertakings  with  securities  listed  on 
regulated  markets  to  include  a  corporate  governance  statement  in  their  management 
report,  which  has  to  contain  among  other  information  a  description  of  the  diversity 
policy  applied  by  the  undertaking  in  relation  to  its  administrative,  management  and 
supervisory  bodies.  Article  20  of  Directive  2013/34/EU  leaves  flexibility  to 
undertakings to decide what aspects of diversity they report on. It does not explicitly 
oblige  undertakings  to  include  information  on  any  particular  aspect  of  diversity.  In 
order  progress  towards  a  more  gender-balanced  participation  in  economic  decision-
making, it is necessary to ensure that undertakings with securities listed on regulated 
markets  always  report  on  their  gender  diversity  policies  and  the  implementation 

64 
65 

https://ec.europa.eu/digital-single-market/en/european-strategy-data  
https://ec.europa.eu/info/publications/200924-digital-finance-proposals_en  

EN 

36 

  EN 

                                                 
thereof.  However,  to  avoid  unnecessary  administrative  burden,  those  undertakings 
should have the possibility to report some of the information required by Article 20 of 
Directive 2013/34/EU alongside other sustainability-related information.  

(52)  Article  33  of  Directive  2013/34/EU  requires  Member  States  to  ensure  that  the 
members of the administrative, management and supervisory bodies of an undertaking 
have  collective  responsibility  for  ensuring  that  the  (consolidated)  annual  financial 
statements,  the  (consolidated)  management  report  and  the  (consolidated)  corporate 
governance statement are drawn up and published in accordance with the requirements 
of that Directive. That collective responsibility should be extended to the digitalisation 
requirements laid down in Delegated Regulation (EU) 2019/815, to the requirement to 
comply with Union sustainability reporting standards and to the requirement to mark 
up sustainability reporting. 

(53)  The  assurance  profession  distinguishes  between  limited  and  reasonable  assurance 
engagements. The conclusion of a limited assurance engagement is usually provided in 
a  negative  form  of  expression  by  stating  that  no  matter  has  been  identified  by  the 
practitioner  to  conclude  that  the  subject  matter  is  materially  misstated.  The  auditor 
performs fewer tests than in a reasonable assurance engagement. The amount of work 
for a limited assurance engagement is therefore less than for reasonable assurance. The 
work  effort  in  a  reasonable  assurance  engagement  entails  extensive  procedures 
including  consideration  of  internal  controls  of  the  reporting  undertaking  and 
substantive  testing,  and  is  therefore  significantly  higher  than  in  a  limited  assurance 
engagement.  The  conclusion  of  this  type  of  engagement  is  usually  provided  in  a 
positive form  of expression and states an opinion on the measurement of the subject 
matter  against  previously  defined  criteria.  Article  19a(5)  and  Article  29a(5)  of 
Directive  2013/34/EU  require  Member  States  to  ensure  that  the  statutory  auditor  or 
audit firm checks whether the non-financial statement or the separate report has been 
provided.  It  does  not  require  that  an  independent  provider  of  assurance  services 
verifies the information, although it allows Member States to require such verification 
where  they  wish  to.  The  absence  of  an  assurance  requirement  on  sustainability 
reporting,  in  contrast  to  the  requirement  for  the  statutory  auditor  to  perform  a 
reasonable  assurance  engagement  on  financial  statements,  would  threaten  the 
credibility of the sustainability information disclosed, thus failing to meet the needs of 
the intended users of that information. Although the objective is to have a similar level 
of  assurance  for  financial  and  sustainability  reporting,  the  absence  of  a  commonly 
agreed  standard  for  the  assurance  of  sustainability  reporting  creates  the  risk  of 
different understandings and expectations of what a reasonable assurance engagement 
would consist of for different categories of sustainability information, especially with 
regard  to  forward  looking  and  qualitative  disclosures.  Therefore,  a  progressive 
approach to enhance the level of the assurance required for sustainability information 
should be considered, starting with an obligation on the statutory auditor or audit firm 
to express an opinion about the compliance of the sustainability reporting with Union 
requirements based on a limited assurance engagement. This opinion should cover the 
compliance  of  the  sustainability  reporting  with  Union  sustainability  reporting 
standards,  the  process  carried  out  by  the  undertaking  to  identify  the  information 
reported  pursuant  to  the  sustainability  reporting  standards  and  compliance  with  the 
requirement  to  mark-up  sustainability  reporting.  The  auditor  should  also  assess 
whether  the  undertaking’s  reporting  complies  with  the  reporting  requirements  of 
Article  8  of  Regulation  (EU)  2020/852.  To  guarantee  a  common  understanding  and 
expectations  of  what  a  reasonable  assurance  engagement  would  consist  of,  the 
statutory  auditor  or  audit  firm  should  be  required  to  express  an  opinion  based  on  a 

EN 

37 

  EN 

reasonable assurance engagement about the compliance of the sustainability reporting 
with  Union  requirements,  should  the  Commission  adopt  assurance  standards  for 
reasonable  assurance  of  sustainability  reporting.  This  would  also  allow  for  the 
progressive development of the assurance market for sustainability information, and of 
undertakings’  reporting  practices.  Finally,  this  progressive  approach  would  phase  in 
the  increase  in  costs  for  reporting  undertakings,  given  that  reasonable  assurance  is 
more costly than limited assurance. 

(54)  Statutory  auditors  or  audit  firms  already  verify  the  financial  statements  and  the 
management report. The assurance of sustainability reporting by the statutory auditors 
or  audit  firms  would  help  to  ensure  the  connectivity  between,  and  consistency  of, 
financial and sustainability information, which is particularly important for by users of 
sustainability  information.  However,  there  is  a  risk  of  further  concentration  of  the 
audit  market,  which  could  risk  the  independence  of  auditors  and  increase  audit  or 
assurance  fees.  It  is  therefore  desirable  to  offer  undertakings  a  broader  choice  of 
independent  assurance  service  providers  for  the  assurance  of  sustainably  reporting. 
Member States should therefore be allowed to accredit independent assurance services 
providers  in  accordance  with  Regulation  (EC)  No 765/2008  of  the  European 
Parliament  and  of  the  Council66  to  provide  an  opinion  on  sustainability  reporting, 
which  should  be  published  together  with  the  management  report.  Member  States 
should  set  out  requirements  that  ensure  consistent  outcomes  in  the  assurance  of 
sustainability reporting carried out by different assurance service providers. Therefore, 
all independent assurance services providers should be subject to requirements that are 
consistent  with  those  set  out  in  Directive  2006/43/EC  as  regards  the  assurance  of 
sustainability  reporting.  This  will  also  guarantee  a  level  playing  field  among  all 
persons and firms allowed by Member States to provide the opinion on the assurance 
of  sustainability  reporting,  including  statutory  auditors.  If  an  undertaking  seeks  the 
opinion  of  an  accredited  independent  assurance  services  provider  other  than  the 
statutory  auditor  on  its  sustainability  reporting,  it  should  not  in  addition  need  to 
request this opinion from the statutory auditor. 

(55)  Directive 2006/43/EC of the European Parliament and of the Council67 sets out rules 
concerning  the  statutory  audit  of  annual  and  consolidated  financial  statements.  It  is 
necessary to ensure that consistent rules apply to the audit of financial statements and 
the  assurance  of  sustainability  reporting  by  the  statutory  auditor,.  Directive 
2006/43/EC should apply where the opinion on sustainability reporting is given by the 
statutory auditor or audit firm carrying out the statutory audit of financial statements.  

(56)  The rules on the approval and recognition of statutory auditors and audit firms should 
ensure  that  statutory  auditors  have  the  necessary  level  of  theoretical  knowledge  of 
subjects  relevant  to  the  assurance  of  sustainability  reporting  and  the  ability  to  apply 
such  knowledge  in  practice.  However,  statutory  auditors  that  have  already  been 
approved or recognised by a Member State should continue to be allowed to carry out 
statutory  audits  and  should  be  allowed  to  carry  out  assurance  engagements  of 
sustainability reporting. Member States should, however, ensure that already approved 

66 

67 

Regulation (EC) No 765/2008 of the European Parliament and of the Council of 9 July 2008 setting out 
the  requirements  for  accreditation  and  market  surveillance  relating  to  the  marketing  of  products  and 
repealing Regulation (EEC) No 339/93 (OJ L 218, 13.8.2008, p. 30). 
Directive  2006/43/EC  of  the  European  Parliament  and  of  the  Council  of  17  May  2006  on  statutory 
audits  of  annual  accounts  and  consolidated  accounts,  amending  Council  Directives  78/660/EEC  and 
83/349/EEC and repealing Council Directive 84/253/EEC (OJ L 157, 9.6.2006, p. 87). 

EN 

38 

  EN 

                                                 
(57) 

statutory auditors acquire the necessary knowledge in sustainability reporting and the 
assurance of sustainability reporting via continued professional education. 

It should be ensured that the requirements imposed on auditors as regards their work 
on  the  statutory  audit  and  the  assurance  of  sustainability  reporting  are  consistent.  It 
should  therefore  be  laid  down  that,  where  the  opinion  on  sustainability  reporting  is 
given by the statutory auditor or audit firm carrying out the statutory audit of financial 
statements, the key audit partners are actively involved in conducting the assurance of 
sustainability  reporting.  When  carrying  out  the  assurance  of  sustainability  reporting, 
statutory auditors should be required to devote sufficient time to the engagement and 
assign  sufficient  resources  to  enable  them  to  carry  out  their  duties  appropriately. 
Finally, the client account record should specify the fees charged for the assurance of 
sustainability  reporting  and  the  audit  file  should  include  information  related  to  the 
assurance of sustainability reporting. 

(58)  Article 25 of Directive 2006/43/EC requires Member States to put appropriate rules in 
place to avoid that the fees on the statutory audit are influenced or determined by the 
provision  of  additional  services  to  the  audited  entity  or  are  based  on  any  form  of 
contingency. Articles 21 to 24 of that Directive also require Member States to ensure 
that  statutory  auditors  carrying  out  statutory  audits  comply  with  the  rules  on 
independence,  objectivity,  confidentiality  and  professional 
professional  ethics, 
secrecy. For reasons of coherence, it is appropriate that those rules are extended to the 
work carried out by statutory auditors on the assurance of sustainability reporting. 

(59) 

In  order  to  provide  for  uniform  assurance  practices  and  high  quality  assurance  of 
sustainability  reporting  across  the  Union,  the  Commission  should  be  empowered  to 
adopt  sustainability  assurance  standards  by  means  of  delegated  acts.  Member  States 
should apply national assurance standards, procedures or requirements as long as the 
Commission has not adopted an assurance standard covering the same subject matter. 
These assurance standards should set out the procedures that the auditor shall perform 
in order to draw its conclusions on the assurance of sustainability reporting. 

(60)  Article 27 of Directive 2006/43/EC sets out rules on the statutory audit of a group of 
undertakings.  Those  rules  should  be  extended  to  the  assurance  of  consolidated 
sustainability reporting, where the statutory auditor performs the statutory audit. 

(61)  Article 28 of Directive 2006/43/EC requires statutory auditors or audit firms to present 
the  results  of  their  statutory  audit  in  an  audit  report.  That  requirement  should  be 
extended  to  the  assurance  of  sustainability  reporting  to  ensure  that  the  results  of  the 
assurance of sustainability reporting are presented in the same audit report. 

(62)  Article  29  of  Directive  2006/43/EC  requires  Member  States  to  set  up  a  system  of 
quality assurance review of statutory auditors and audit firms. To ensure that quality 
assurance reviews also take place for the assurance of sustainability reporting and that 
the  persons  who  carry  out  quality  assurance  reviews  have  appropriate  professional 
education  and  relevant  experience  in  the  assurance  of  sustainability  reporting  and 
sustainability  reporting,  that  requirement  to  set  up  a  system  of  quality  assurance 
review should be extended to the assurance of sustainability reporting. 

(63)  Chapter  VII  of  Directive  2006/43/EC  requires  Member  States  to  have  in  place  an 
investigations and sanctions regime for statutory auditors and audit firms carrying out 
statutory audits. Chapter VIII of that Directive requires Member States to organise an 
effective  system  of  public  oversight,  and  to  ensure  that  regulatory  arrangements  for 
public  oversight  systems  permit  effective  cooperation  at  Union  level  in  respect  of 

EN 

39 

  EN 

Member  States'  oversight  activities.  Those  requirements  should  be  extended  to 
statutory auditors and audit firms that conduct assurance engagements of sustainability 
reporting  in  order  to  ensure  the  consistency  of  the  investigations,  sanctions  and 
oversight  frameworks  set  up  for  the  auditor’s  work  in  the  statutory  audit  and  the 
assurance of sustainability reporting. 

(64)  Article  37  and  38  of  Directive  2006/43/EC  contain  rules  on  the  appointment  and 
dismissal  of  statutory  auditors  and  audit  firms  carrying  out  statutory  audits.  Those 
rules  should  be  extended  to  the  assurance  of  sustainability  reporting  to  ensure  the 
consistency  of  the  rules  imposed  on  auditors  as  regards  their  work  on  the  statutory 
audit and the assurance of sustainability reporting.  

(65)  Article 39 of Directive 2006/43/EC requires Member States to ensure that each public-
interest  entity  has  an  audit  committee,  and  specifies  its  tasks  with  regard  to  the 
statutory audit. That audit committee should be assigned with certain tasks with regard 
to the assurance of sustainability reporting. Those tasks should include the obligation 
to inform the administrative or supervisory body of the audited entity of the outcome 
of  the  assurance  of  sustainability  reporting,  and  to  explain  how  the  audit  committee 
contributed  to  the  integrity  of  sustainability  reporting  and  what  the  role  of  the  audit 
committee was in that process. 

(66)  Article  45  of  Directive  2006/43/EC  contains  requirements  for  registration  and 
oversight  of  third-country  auditors  and  audit  entities.  To  ensure  that  a  consistent 
framework exists for the work of auditors in both the statutory audit and the assurance 
of  sustainability  reporting,  it  is  necessary  to  extend  those  requirements  to  the 
assurance of sustainability reporting. 

(67)  Regulation (EU) No 537/2014 of the European Parliament and of the Council68 applies 
to  statutory  auditors  and  audit  firms  carrying  out  statutory  audits  of  public-interest 
entities.  To  ensure  the  independence  of  the  statutory  auditor,  Article  5  of  that 
Regulation  prohibits  the  provision  of  certain  non-audit  services  over  certain  time 
periods. That independence should also be ensured for the work of statutory auditors 
and audit firms carrying out statutory audits of public-interest entities on the assurance 
of  sustainability  reporting.  Consulting  services  for  the  preparation  of  sustainability 
reporting should therefore be included in the list of prohibited non-audit services. 

(68)  Article 14 of Regulation (EU) No 537/2014 requires statutory auditors and audit firms 
to inform their competent authority annually of the revenues generated from statutory 
audits  and  non-audit  services  of  public-interest  entities.  Auditors  and  audit  firms 
should  be  required  to  specify  which  revenues  among  the  revenues  from  non-audit 
services are generated from the assurance of sustainability reporting. 

(69)  According  to  Article  51  of  Directive  2013/34/EU,  the  enforcement  of  corporate 
reporting by undertakings the securities of which are not listed on regulated markets is 
carried  out  by  Member  States.  The  types  of  sanctions  are,  however,  not  specified, 
which  means  that  sanctioning  regimes  can  vary  widely  between  Member  States,  so 
undermining  the  single  market.  To  improve  sustainability  reporting  in  the  internal 
market  and  to  contribute  to  the  transition  towards  a  fully  sustainable  and  inclusive 
economic and financial system in which the benefits of growth are broadly shared in 

68 

Regulation  (EU)  No  537/2014  of  the  European  Parliament  and  of  the  Council  of  16  April  2014  on 
specific  requirements  regarding  statutory  audit  of  public-interest  entities  and  repealing  Commission 
Decision 2005/909/EC (OJ L 158, 27.5.2014, p. 77). 

EN 

40 

  EN 

                                                 
accordance with the European Green Deal, Member States should provide for certain 
sanctions  and  administrative  measures  in  the  case  of  infringements  of  sustainability 
reporting  requirements.  The  sanctioning  regime  of  Directive  2013/34/EU  should 
therefore  be  strengthened  accordingly,  whereby  Member  States  are  to  provide  for 
appropriate sanctions and administrative measures. 

(70)  Article  24  of  Directive  2004/109/EC  assigns  to  national  supervisors  the  task  of 
enforcing  compliance  with  corporate  reporting  requirements  by  undertakings  with 
securities listed on regulated markets. Article 4 of that Directive specifies the content 
of the annual financial reports, but lacks an explicit reference to Articles 19a and 29a 
of  Directive  2013/34/EU,  which  require  the  preparation  of  a  (consolidated)  non-
financial statement. This implies that national competent authorities of some Member 
States  have  no  legal  mandate  to  supervise  those  non-financial  statements,  especially 
where  those  statements  are  published  in  a  separate  report,  outside  of  the  annual 
financial report, which Member States may currently allow. It is therefore necessary to 
insert  into  Article  4(5)  of  Directive  2004/109/EC  a  reference  to  sustainability 
reporting. It is also necessary to require that the persons responsible within the issuer 
confirm  in  the  annual  financial  report  that,  to  the  best  of  their  knowledge,  the 
management  report  is  prepared  in  accordance  with  the  sustainability  reporting 
standards.  In addition,  given the novel  character  of those reporting requirements,  the 
European  Securities  and  Markets  Authority  should  issue  guidelines  for  national 
competent authorities to promote convergent supervision of sustainability reporting by 
issuers subject to Directive 2004/109/EC. 

(71)  Member States are invited to assess the impact of their transposition act on SMEs in 
order to ensure that they are not disproportionately affected, giving specific attention 
to  micro-enterprises  and  to  the  administrative  burden,  and  to  publish  the  results  of 
such  assessments.  Member  States  should  consider  introducing  measures  to  support 
SMEs in applying the voluntary simplified reporting standards. 

(72)  Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation 

(EU) No 537/2014 should therefore be amended accordingly,  

HAVE ADOPTED THIS DIRECTIVE: 

Article 1 
Amendments to Directive 2013/34/EU 

Directive 2013/34/EU is amended as follows:  

(1) 

in Article 1, the following paragraph 3 is added: 

‘3.  The  coordination  measures  prescribed  by  Articles  19a,  19d,  29a,  30  and  33, 
Article 34(1), second subparagraph, point (aa), paragraphs 2 and 3 of Article 34, and 
Article  51  of  this  Directive  shall  also  apply  to  the  laws,  regulations  and 
administrative  provisions  of 
the  following 
undertakings regardless of their legal form: 

the  Member  States  relating 

to 

insurance  undertakings  within  the  meaning  of  Article  2(1)  of  Council 

(a) 
Directive 91/674/EEC*1; 

credit  institutions  as  defined  in  Article  4(1),  point  (1),  of  Regulation 

(b) 
(EU) No 575/2013 of the European Parliament and of the Council*2. 

EN 

41 

  EN 

Member States may choose not to apply the coordination measures referred to in the 
first  subparagraph  to  the  undertakings  listed  in  Article  2(5),  points  (2)  to  (23),  of 
Directive 2013/36/EU of the European Parliament and of the Council*3. 

____________________________________________________________________ 

Council Directive 91/674/EEC of 19 December 1991 on the annual accounts of insurance undertakings 
( OJ L 374, 31.12.1991, p. 7). 
Regulation  (EU)  No 575/2013  of  the  European  Parliament  and  of  the  Council  of  26 June  2013  on 
prudential  requirements  for  credit  institutions  and  investment  firms  and  amending  Regulation  (EU) 
No 648/2012 (OJ L 176, 27.6.2013, p. 1). 
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the 
activity of credit institutions and the prudential supervision of credit institutions and investment firms, 
amending  Directive  2002/87/EC  and  repealing  Directives  2006/48/EC  and  2006/49/EC  (OJ  L  176, 
27.6.2013, p. 338).’; 

*1 

*2 

*3 

(2) 

in Article 2, the following points (17) to (20) are added: 

‘(17)  ‘sustainability  matters’  means  sustainability  factors  as  defined  in  Article  2, 
point (24)  of  Regulation  (EU)  2019/2088  of  the  European  Parliament  and  of  the 
Council*4, and governance factors; 

(18)  ‘sustainability  reporting’  means  reporting  information  related  to  sustainability 
matters in accordance with Articles 19a, 19d and 29a of this Directive; 

(19) ’intangibles’ means non-physical resources that contribute to the undertaking’s 
value creation; 

(20) ‘independent assurance services provider’ means a conformity assessment body 
accredited  in  accordance  with  Regulation  (EC)  No  765/2008  of  the  European 
Parliament  and  of  the  Council*5  for  the  specific  conformity  assessment  activity 
referred to in Article 34(1), second subparagraph, point (aa) of this Directive. 

__________________________________________________________________ 

*4 

*5 

Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on 
sustainability‐ related disclosures in the financial services sector (OJ L 317, 9.12.2019, p. 1). 
Regulation (EC) No 765/2008 of the European Parliament and of the Council of 9 July 2008 setting out 
the  requirements  for  accreditation  and  market  surveillance  relating  to  the  marketing  of  products  and 
repealing Regulation (EEC) No 339/93 (OJ L 218, 13.8.2008, p. 30).’; 

(3) 

Article 19a is replaced by the following: 

‘Article 19a 

Sustainability Reporting 

Large  undertakings  and,  as  of  1  January  2026,  small  and  medium-sized 
1. 
undertakings  which  are  undertakings  referred  to  in  Article  2,  point  (1),  point  (a), 
shall  include  in  the  management  report  information  necessary  to  understand  the 
undertaking’s  impacts  on  sustainability  matters,  and  information  necessary  to 
understand  how  sustainability  matters  affect  the  undertaking’s  development, 
performance and position. 

2. 

The information referred to in paragraph 1 shall contain in particular: 

a  brief  description  of  the  undertaking's  business  model  and  strategy, 

(a) 
including: 

(i) 
to risks related to sustainability matters; 

the  resilience  of  the  undertaking's  business  model  and  strategy 

EN 

42 

  EN 

(ii) 
matters; 

the  opportunities  for  the  undertaking  related  to  sustainability 

(iii) 
the  plans  of  the  undertaking  to  ensure  that  its  business  model 
and strategy are compatible with the transition to a sustainable economy 
and with the limiting of global warming to 1.5 °C in line with the Paris 
Agreement; 

(iv) 
how the undertaking’s business model and strategy take account 
of  the  interests  of  the  undertaking’s  stakeholders  and  of  the  impacts  of 
the undertaking on sustainability matters; 

(v) 
regard to sustainability matters; 

how  the  undertaking’s  strategy  has  been  implemented  with 

(b) 
a  description  of  the  targets  related  to  sustainability  matters  set  by  the 
undertaking  and  of  the  progress  the  undertaking  has  made  towards  achieving 
those targets; 

a  description  of  the  role  of  the  administrative,  management  and 

(c) 
supervisory bodies with regard to sustainability matters; 

a  description  of  the  undertaking’s  policies  in  relation  to  sustainability 

(d) 
matters;  

(e) 

a description of: 

(i) 
sustainability matters; 

the  due  diligence  process 

implemented  with  regard 

to 

(ii) 
the principal actual or potential adverse impacts connected with 
the undertaking’s value chain, including its own operations, its products 
and services, its business relationships and its supply chain; 

(iii) 
mitigate or remediate actual or potential adverse impacts; 

any  actions  taken,  and  the  result  of  such  actions,  to  prevent, 

(f) 
a  description  of  the  principal  risks  to  the  undertaking  related  to 
sustainability  matters,  including  the  undertaking’s  principal  dependencies  on 
such matters, and how the undertaking manages those risks; 

(g) 

indicators relevant to the disclosures referred to in points (a) to (f). 

Undertakings shall also disclose information on intangibles, including information on 
intellectual, human, and social and relationship capital.  

Undertakings shall report the process carried out to identify the information that they 
have included in the management report in accordance with paragraph 1 and in this 
process they shall take account of short, medium and long-term horizons.  

The  information  referred  to  in  paragraphs  1  and  2  shall  contain  forward-

3. 
looking and retrospective information, and qualitative and quantitative information. 

Where  appropriate,  the  information  referred  to  in  paragraphs  1  and  2  shall  contain 
information  about  the  undertaking’s  value  chain,  including  the  undertaking’s  own 
operations, products and services, its business relationships and its supply chain. 

Where  appropriate,  the  information  referred  to  in  paragraphs  1  and  2  shall  also 
contain  references  to,  and  additional  explanations  of,  other  information  included  in 

EN 

43 

  EN 

the  management  report  in  accordance  with  Article  19  and  amounts  reported  in  the 
annual financial statements.  

Member  States  may  allow  information  relating  to  impending  developments  or 
matters in the course of negotiation to be omitted in exceptional cases where, in the 
duly  justified  opinion  of  the  members  of  the  administrative,  management  and 
supervisory bodies, acting within the competences assigned to them by national law 
and  having  collective  responsibility  for  that  opinion,  the  disclosure  of  such 
information  would  be  seriously  prejudicial  to  the  commercial  position  of  the 
undertaking, provided that such omission does not prevent a fair and balanced under-
standing  of  the  undertaking's  development,  performance,  position  and  impact  of  its 
activity. 

Undertakings  shall  report  the  information  referred  to  in  paragraphs  1  to  3  in 

4. 
accordance with the sustainability reporting standards referred to in Article 19b. 

5. 
By way of derogation from Article 19a, paragraphs 1 to 4, small and medium 
sized  undertakings  referred  to  in  Article  2,  point  (1),  point  (a),  may  report  in 
accordance  with  the  sustainability  reporting  standards  for  small  and  medium  sized 
undertakings referred to in Article 19c. 

Undertakings  that  comply  with  the  requirements  set  out  in  paragraphs  1  to  4 
6. 
shall  be  deemed  to  have  complied  with  the  requirement  set  out  in  the  third 
subparagraph of Article 19(1). 

7. 
An undertaking which is a subsidiary undertaking shall be exempted from the 
obligations  set  out  in  paragraphs  1  to  4  if  that  undertaking  and  its  subsidiary 
undertakings  are  included  in  the  consolidated  management  report  of  a  parent 
undertaking, drawn up in accordance with Articles 29 and 29a. An undertaking that 
is  a  subsidiary  undertaking  from  a  parent  undertaking  that  is  established  in  a  third 
country  shall  also  be  exempted  from  the  obligations  set  out  in  paragraphs  1  to  4 
where  that  undertaking  and  its  subsidiary  undertakings  are  included  in  the 
consolidated  management  report  of  that  parent  undertaking  and  where  the 
consolidated  management  report  is  drawn  up  in  a  manner  that  may  be  considered 
equivalent, in accordance with the relevant implementing measures adopted pursuant 
to Article 23(4), point (i), of Directive 2004/109/EC of the European Parliament and 
of  the  Council*6,  to  the  manner  required  by  the  sustainability  reporting  standards 
referred to in Article 19b of this Directive. 

The  consolidated  management  report  of  the  parent  undertaking  referred  to  in 
subparagraph  1  shall  be  published  in  accordance  with  Article  30,  in  the  manner 
prescribed  by  the  law  of  the  Member  State  by  which  the  undertaking  that  is 
exempted from the obligations set out in paragraphs 1 to 4 is governed.  

The Member State by which the undertaking that  is  exempted from  the obligations 
set  out  in  paragraphs  1  to  4  is  governed,  may  require  that  the  consolidated 
management  report  referred  to  in  the  first  subparagraph  of  this  paragraph  is 
published in an official language of the Member State or in a language customary in 
the  sphere  of  international  finance,  and  that  any  necessary  translation  into  those 
languages is certified. 

The management report of an undertaking that is exempted from the obligations set 
out in paragraphs 1 to 4 shall contain all of the following information:  

(a) 
the  name  and  registered  office  of  the  parent  undertaking  that  reports 
information  at  group  level  in  accordance  with  Articles  29  and  29a,  or  in  a 

EN 

44 

  EN 

that  may  be  considered  equivalent, 

manner 
the 
implementing  measures  adopted  pursuant  to  Article  23(4),  point (i)  of 
Directive 2004/109/EC, to the manner required by the sustainability reporting 
standards referred to in Article 19b; 

in  accordance  with 

the fact that the undertaking is exempted from the obligations set out in 

(b) 
paragraphs 1 to 4 of this Article. 

____________________________________________________________________
__ 

*6 

Directive  2004/109/EC  of  the  European  Parliament  and  of  the  Council  of  15  December  2004  on  the 
harmonisation of transparency requirements in relation to information about issuers whose securities are 
admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, 
p. 38).’; 

(4) 

the following Articles 19b, 19c and 19d are inserted: 

‘Article 19b 

Sustainability reporting standards 

1. 
The  Commission  shall  adopt  delegated  acts  in  accordance  with  Article  49  to 
provide  for  sustainability  reporting  standards.  Those  sustainability  reporting 
standards shall specify the information that undertakings are to report in accordance 
with  Articles  19a  and  29a  and,  where  relevant,  shall  specify  the  structure  in  which 
that information shall be reported. In particular: 

(a) 

by 31 October 2022, the Commission shall adopt delegated acts specifying the 
information  that  undertakings  are  to  report  in  accordance  with  paragraphs  1 
and 2 of Article 19a, and at  least  specifying information  corresponding to  the 
needs  of  financial  market  participants  subject  to  the  disclosure  obligations  of 
Regulation (EU) 2019/2088. 

(b)  by 31 October 2023, the Commission shall adopt delegated acts specifying: 

complementary  information  that  undertakings  shall  report  with  regard 
(i) 
to the sustainability matters and reporting areas listed in Article 19a(2), where 
necessary; 

information  that undertakings shall report that is  specific to  the sector 

(ii) 
in which they operate.  

The Commission shall, at least every three years after its date of application, review 
any  delegated  act  adopted  pursuant  to  this  Article,  taking  into  consideration  the 
technical advice of the European Financial Reporting Advisory Group (EFRAG), and 
where  necessary  shall  amend  such  delegated  act  to  take  into  account  relevant 
developments, including developments with regard to international standards. 

The sustainability  reporting standards  referred to in  paragraph 1 shall  require 
2. 
that  the  information  to  be  reported  is  understandable,  relevant,  representative, 
verifiable, comparable, and is represented in a faithful manner. 

The sustainability reporting standards shall, taking into account the subject matter of 
a particular standard: 

specify  the  information  that  undertakings  are  to  disclose  about 

(a) 
environmental factors, including information about: 

(i) 

climate change mitigation; 

EN 

45 

  EN 

(ii) 

(iii) 

(iv) 

(v) 

(vi) 

climate change adaptation;  

water and marine resources;  

resource use and circular economy; 

pollution;  

biodiversity and ecosystems; 

specify  the  information  that  undertakings  are  to  disclose  about  social 

(b) 
factors, including information about: 

(i) 
equal opportunities for all, including gender equality and equal 
pay  for  equal  work,  training  and  skills  development,  and  employment 
and inclusion of people with disabilities; 

working 

conditions, 

(ii) 
adaptable 
employment,  wages,  social  dialogue,  collective  bargaining  and  the 
involvement of workers, work-life balance, and a healthy, safe and well-
adapted work environment; 

including 

secure 

and 

(iii) 
respect for the human rights, fundamental freedoms, democratic 
principles  and  standards  established  in  the  International  Bill  of  Human 
Rights  and  other  core  UN  human  rights  conventions,  the  International 
Labour Organization’s Declaration on Fundamental Principles and Rights 
at  Work  and  the  ILO  fundamental  conventions  and  the  Charter  of 
Fundamental Rights of the European Union. 

specify  the  information  that  undertakings  are  to  disclose  about 

(c) 
governance factors, including information about:  

the  role  of  the  undertaking’s  administrative,  management  and 
(i) 
supervisory  bodies,  including  with  regard  to  sustainability  matters,  and 
their composition; 

(ii) 
and anti-bribery; 

business ethics and corporate culture, including anti-corruption 

(iii) 
activities; 

political engagements of the undertaking, including its lobbying 

(iv) 
partners, including payment practices; 

the  management  and  quality  of  relationships  with  business 

(v) 
systems, including in relation to the undertaking’s reporting process. 

internal  control  and  risk  management 

the  undertaking’s 

3.  When adopting delegated acts pursuant to paragraph 1, the Commission shall 
take account of: 

(a) 

(b) 

the work of global standard-setting initiatives for sustainability reporting, and 
existing  standards  and  frameworks  for  natural  capital  accounting,  responsible 
business conduct, corporate social responsibility, and sustainable development;  

the  information  that  financial  market  participants  need  to  comply  with  their 
disclosure  obligations  laid  down  in  Regulation  (EU)  2019/2088  and  the 
delegated acts adopted pursuant to that Regulation; 

(c) 

the  criteria  set  out  in  the  delegated  acts  adopted  pursuant  to  Regulation  (EU) 
2020/852*7; 

EN 

46 

  EN 

(d) 

the  disclosure  requirements  applicable  to  benchmarks  administrators  in  the 
benchmark  statement  and  in  the  benchmark  methodology  and  the  minimum 
standards  for  the  construction  of  EU  Climate  Transition  Benchmarks  and  EU 
Paris-aligned  Benchmarks 
in  accordance  with  Commission  Delegated 
Regulations (EU) 2020/1816*8, (EU) 2020/1817*9 and (EU) 2020/1818*10; 

(e) 

the disclosures specified in the implementing acts adopted pursuant to Article 
434a of Regulation (EU) No 575/2013*11; 
(f)  Commission Recommendation 2013/179/EU*12; 
(g)  Directive 2003/87/EC of the European Parliament and of the Council*13; 

(h)  Regulation  (EC)  No  1221/2009  of  the  European  Parliament  and  of  the 

Council*14. 

____________________________________________________________________
__ 

Regulation  (EU)  2020/852  of  the  European  Parliament  and  of  the  Council  of  18  June  2020  on  the 
establishment  of  a  framework  to  facilitate  sustainable  investment,  and  amending  Regulation  (EU) 
2019/2088 (OJ L 198, 22.6.2020, p. 13). 
Commission  Delegated  Regulation  (EU)  2020/1816  of  17  July  2020  supplementing  Regulation  (EU) 
2016/1011 of the European Parliament and of the Council as regards the explanation in the benchmark 
statement  of  how  environmental,  social  and  governance  factors  are  reflected  in  each  benchmark 
provided and published (OJ L 406, 3.12.2020, p. 1). 
Commission  Delegated  Regulation  (EU)  2020/1817  of  17  July  2020  supplementing  Regulation  (EU) 
2016/1011  of  the  European  Parliament  and  of  the  Council  as  regards  the  minimum  content  of  the 
explanation  on  how  environmental,  social  and  governance  factors  are  reflected  in  the  benchmark 
methodology (OJ L 406, 3.12.2020, p. 12). 
Commission  Delegated  Regulation  (EU)  2020/1818  of  17  July  2020  supplementing  Regulation  (EU) 
2016/1011  of  the  European  Parliament  and  of  the  Council  as  regards  minimum  standards  for  EU 
Climate Transition Benchmarks and EU Paris-aligned Benchmarks (OJ L 406, 3.12.2020, p. 17). 
Commission  Implementing  Regulation  laying  down  implementing  technical  standards  with  regard  to 
public  disclosures  by  institutions  of  the  information  referred  to  in  Titles  II  and  III  of  Part  Eight  of 
Regulation (EU) No 575/2013 of the European Parliament and of the Council (C(2021)1595) 
Commission  Recommendation  2013/179/EU  of  9  April  2013  on  the  use  of  common  methods  to 
measure and communicate the life cycle environmental performance of products and organisations (OJ 
L 124, 4.5.2013, p. 1). 
Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a 
scheme  for greenhouse  gas emission allowance trading  within the  Community and amending Council 
Directive 96/61/EC (OJ L 275, 25.10.2003, p. 32). 
Regulation (EC) No 1221/2009 of the European Parliament and of the Council of 25 November 2009 
on  the  voluntary  participation  by  organisations  in  a  Community  eco-management  and  audit  scheme 
(EMAS),  repealing  Regulation  (EC)  No  761/2001  and  Commission  Decisions  2001/681/EC  and 
2006/193/EC (OJ L 342, 22.12.2009, p. 1). 

Article 19c 

Sustainability reporting standards for SMEs  

*7 

*8 

*9 

*10 

*11 

*12 

*13 

*14 

reporting  standards  proportionate 

The Commission shall adopt delegated acts in accordance with Article 49 to provide 
for  sustainability 
the  capacities  and 
characteristics  of  small  and  medium-sized  undertakings.  Those  sustainability 
reporting  standards  shall  specify  which  information  referred  to  in  Articles  19a  and 
29a small and medium-sized undertakings referred to in Article 2, point (1)(a) shall 
report. They shall take into account the criteria set out in Article 19b, paragraphs 2 
and 3. They shall also, where relevant, specify the structure in which that information 
shall be reported. 

to 

The Commission shall adopt those delegated acts at the latest by 31 October 2023. 

EN 

47 

  EN 

Article 19d 

Single electronic reporting format 

1. 
Undertakings subject to Article 19a shall prepare their financial statements and 
their  management  report  in  a  single  electronic  reporting  format  in  accordance  with 
Article 3 of Commission Delegated Regulation (EU) 2019/815*15 and shall mark-up 
their  sustainability  reporting,  including  the  disclosures  laid  down  in  Article  8  of 
Regulation (EU) 2020/852, in accordance with that Delegated Regulation. 

Undertakings  subject  to  Article  29a  shall  prepare  their  consolidated  financial 
2. 
statements and their consolidated management report in a single electronic reporting 
format  in  accordance  with  Article  3  of  Delegated  Regulation  (EU)  2019/815  and 
shall  mark-up  sustainability  reporting,  including  the  disclosures  laid  down  in 
Article 8 of Regulation (EU) 2020/852. 

____________________________________________________________________ 

*15 

Commission  Delegated  Regulation  (EU)  2019/815  of  17  December  2018  supplementing  Directive 
2004/109/EC  of  the  European  Parliament  and  of  the  Council  with  regard  to  regulatory  technical 
standards on the specification of a single electronic reporting format (OJ L 143, 29.5.2019, p. 1).;’ 

(5) 

Article 20(1) is amended as follows: 

(a) 

point (g) is replaced by the following: 

‘(g) a description of the diversity policy applied in relation to the undertaking's 
administrative, management and supervisory bodies with regard to gender and 
other  aspects  such  as,  age,  or  educational  and  professional  backgrounds,  the 
objectives of that diversity policy, how it has been implemented and the results 
in the reporting period. If no such policy is applied, the statement shall contain 
an explanation as to why this is the case.’; 

(b) 

the following subparagraph is added: 

‘Undertakings subject to Article 19a may comply with the obligation laid down 
in  points  (c),  (f)  and  (g)  of  the  first  subparagraph  of  this  Article  where  they 
include  the  information  required  under  those  points  as  part  of  their 
sustainability reporting.’; 

(6) 

Article 23 is amended as follows: 

(a) 

in paragraph 4, point (b) is replaced by the following: 

‘(b)  the  consolidated  financial  statements  referred  to  in  point  (a)  and  the 
consolidated management report of the larger body of undertakings are drawn 
up  by  the  parent  undertaking  of  that  body,  in  accordance  with  the  law  of  the 
Member  State  by  which  that  parent  undertaking  is  governed,  in  accordance 
with this Directive, with the exception of the requirements laid down in Article 
29a,  or  in  accordance  with  international  accounting  standards  adopted  in 
accordance with Regulation (EC) No 1606/2002;’;  

(b) 

in paragraph 8, point (b)(i) is replaced by the following: 

in  accordance  with 

‘(i) 
requirements laid down in Article 29a,’; 

this  Directive,  with 

the  exception  of 

the 

(c) 

in paragraph 8, (b)(iii) is replaced by the following: 

EN 

48 

  EN 

‘(iii) 
in  a  manner  equivalent  to  consolidated  financial  statements  and 
consolidated management reports drawn up in accordance with this Directive, 
with the exception of the requirements laid down in Article 29a, or’; 

(7) 

Article 29a is replaced by the following: 

‘Article 29a 

Consolidated sustainability reporting 

1. 
Parent  undertakings  of  a  large  group  shall  include  in  the  consolidated 
management  report  information  necessary  to  understand  the  group's  impacts  on 
sustainability  matters,  and  information  necessary  to  understand  how  sustainability 
matters affect the group's development, performance and position. 

2. 

The information referred to in paragraph 1 shall contain in particular: 

a  brief  description  of  the  group's  business  model  and  strategy, 

(a) 
including: 

(i) 
related to sustainability matters; 

the resilience of the group's business model and strategy to risks 

(ii) 

the opportunities for the group related to sustainability matters; 

(iii) 
the plans of the group to ensure that the group’s business model 
and strategy compatible with the transition to a sustainable economy and 
with  the  limiting  of  global  warming  to  1.5  °C  in  line  with  the  Paris 
Agreement; 

(iv) 
how  the  group’s  business  model  and  strategy  take  account  of 
the interests of the group’s stakeholders and of the impacts of the group 
on sustainability matters; 

(v) 
sustainability matters; 

how the group’s strategy has been implemented with regard to 

a  description  of  the  targets  related  to  sustainability  matters  set  by  the 

(b) 
group and of the progress of the undertaking towards achieving them; 

a  description  of  the  role  of  the  administrative,  management  and 

(c) 
supervisory bodies with regard to sustainability matters; 

(d) 

(e) 

a description of the group’s policies in relation to sustainability matters; 

a description of: 

(i) 
sustainability matters; 

the  due  diligence  process 

implemented  with  regard 

to 

(ii) 
the principal actual or potential adverse impacts connected with 
the  group’s  value  chain,  including  its  own  operations,  its  products  and 
services, its business relationships and its supply chain; 

(iii) 
mitigate or remediate actual or potential adverse impacts; 

any  actions  taken,  and  the  result  of  such  actions,  to  prevent, 

(f) 
a description of the principal risks to the group related to sustainability 
matters, including the group’s principal dependencies on such factors, and how 
the group manages those risks; 

EN 

49 

  EN 

indicators relevant to the relevant to the disclosures referred to in points 

(g) 
(a) to (f). 

Parent  undertakings  shall  also  report 
information on intellectual, human, and social and relationship capital.  

information  on 

intangibles, 

including 

Parent undertakings shall describe the process carried out to identify the information 
that  they  have  included  in  the  consolidated  management  report  in  accordance  with 
this Article.  

The  information  referred  to  in  paragraphs  1  and  2  shall  contain  forward-
3. 
looking  information  and  information  about  past  performance,  and  qualitative  and 
quantitative information. This information shall take into account short, medium and 
long-term time horizons, where appropriate.  

The information referred to in paragraphs 1 and 2 shall include information about the 
group’s  value  chain,  including  its  own  operations,  its  products  and  services,  its 
business relationships and its supply chain, where appropriate. 

The  information  referred  to  in  paragraphs  1  and  2  shall  also,  where  appropriate, 
include  references  to,  and  additional  explanations  of,  other  information  included  in 
the consolidated management report in accordance with Article 29 of this Directive 
and amounts reported in the consolidated financial statements.  

Member  States  may  allow  information  relating  to  impending  developments  or 
matters in the course of negotiation to be omitted in exceptional cases where, in the 
duly  justified  opinion  of  the  members  of  the  administrative,  management  and 
supervisory bodies, acting within the competences assigned to them by national law 
and  having  collective  responsibility  for  that  opinion,  the  disclosure  of  such 
information would be seriously prejudicial to the commercial position of the group, 
provided  that  such  omission  does  not  prevent  a  fair  and  balanced  understanding  of 
the group's development, performance, position and impact of its activity. 

4. 
Parent undertakings shall report the information referred to in paragraphs 1 to 
3 in accordance with the sustainability reporting standards referred to in Article 19b. 

5. 
By  way  of  derogation  from  Article  29a,  paragraphs  1-4,  parent  undertakings 
that are small and medium sized undertakings referred to in Article 2, point (1), point 
(a),  may  report  in  accordance  with  the  sustainability  reporting  standards  for  small 
and medium sized undertakings referred to in Article 19c. 

6. 
A parent undertaking that complies with the requirements set out in paragraphs 
1 to  4 shall  be deemed to have complied with  the requirements set  out  in the third 
subparagraph of Article19(1), Article 19a and Article 29. 

7. 
A parent undertaking which is also a subsidiary undertaking shall be exempted 
from the obligation set out in paragraphs 1 to 4 if that exempted parent undertaking 
and  its  subsidiaries  are  included  in  the  consolidated  management  report  of  another 
undertaking,  drawn  up  in  accordance  with  Article  29  and  this  Article.  A  parent 
undertaking  that  is  a  subsidiary  undertaking  from  a  parent  undertaking  that  is 
established in a third country shall also be exempted from the obligations set out in 
paragraphs 1 to 4 where that undertaking and its subsidiary undertakings are included 
in  the  consolidated  management  report  of  that  parent  undertaking  and  where  the 
consolidated  management  report  is  drawn  up  in  a  manner  that  may  be  considered 
equivalent, in accordance with the relevant implementing measures adopted pursuant 

EN 

50 

  EN 

to  Article  23(4)(i)  of  Directive  2004/109/EC,  to  the  manner  required  by  the 
sustainability reporting standards referred to in Article 19b of this Directive. 

The  consolidated  management  report  of  the  parent  undertaking  referred  to  in 
subparagraph  1  shall  be  published  in  accordance  with  Article  30,  in  the  manner 
prescribed by the law of the Member State by  which the parent  undertaking that is 
exempted from the obligations set out in paragraphs 1 to 4 is governed. 

The  Member  State  by  which  the  parent  undertaking  that  is  exempted  from  the 
obligations set out in paragraphs 1 to 4 is governed may require that the consolidated 
management  report  referred  to  in  in  the  first  subparagraph  of  this  paragraph  is 
published  in  its  official  language  or  in  a  language  customary  in  the  sphere  of 
international  finance,  and  that  any  necessary  translation  into  those  languages  is 
certified. 

The consolidated management report of a parent undertaking that is exempted from 
the  obligations  set  out  in  paragraphs  1  to  4  shall  contain  all  of  the  following 
information: 

(a) 
the  name  and  registered  office  of  the  parent  undertaking  that  reports 
information at group level in accordance with Articles 29 and this Article, or in 
a  manner  that  may  be  considered  equivalent,  in  accordance  with  the  relevant 
implementing  measures  adopted  pursuant  to  Article  23(4)(i)  of  Directive 
2004/109/EC,  to  the  manner  required  by  the  sustainability  standards  adopted 
pursuant to Article 19b; 

the fact that the undertaking is exempted from the obligations set out in 

(b) 
paragraphs 1 to 4 of this Article.’; 

(8) 

Article 30 is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

‘1.  Member  States  shall  ensure  that  undertakings  publish  within  a  reasonable 
period of time, which shall not exceed 12 months after the balance sheet date, 
the  duly  approved  annual  financial  statements  and  the  management  report  in 
the  format  prescribed  by  Article  19d  of  this  Directive  where  applicable, 
together with the opinions and statement submitted by the statutory auditor or 
audit firm referred to in Article 34 of this Directive, as laid down by the laws 
of  each  Member  State  in  accordance  with  Chapter  3  of  Directive  (EU) 
2017/1132 of the European Parliament and of the Council*16.’ 

‘Where an independent  assurance services provider gives the opinion referred 
to in point (aa) of Article 34(1), this opinion shall be published together with 
the reports referred to in the first subparagraph. 

Member  States  may,  however,  exempt  undertakings  from  the  obligation  to 
publish the management report where a copy of all or part of any such report 
can be easily obtained upon request at a price not exceeding its administrative 
cost.’ 

‘The  exemption  laid  down  in  the  third  subparagraph  shall  not  apply  to 
undertakings subject to Articles 19a and 29a.’; 

______________________________________________ 

*16 

Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to 
certain aspects of company law (OJ L 169, 30.6.2017, p. 46). 

EN 

51 

  EN 

(b) 

the following paragraph 1a is inserted: 

that  management  reports  containing 
‘1a.  Member  States  shall  ensure 
sustainability  reporting  drawn  up  by  undertakings  subject  to  Articles  19a  and 
29a  are  also  made  available  to  the  relevant  officially  appointed  mechanism 
referred to in Article 21(2) of Directive 2004/109/EC without delay following 
their publication. 

Where  the  undertaking  drawing  up  the  management  report  is  not  subject  to 
Directive  2004/109/EC,  the  relevant  officially  appointed  mechanism  shall  be 
one  of  the  officially  appointed  mechanisms  of  the  Member  State  where  the 
undertaking has its registered office.’; 

(9) 

in Article 33, paragraph 1 is replaced by the following: 

‘1. Member States shall ensure that the members of the administrative, management 
and supervisory bodies of an undertaking, acting within the competences assigned to 
them  by  national  law,  have  collective  responsibility  for  ensuring  that  the  following 
documents are drawn up and published in accordance with the requirements of this 
Directive and, where applicable, with the international accounting standards adopted 
in  accordance  with  Regulation  (EC)  No  1606/2002,  with  Delegated  Regulation 
2019/815, with the sustainability reporting standards referred to in Article 19b of this 
Directive, and with the requirements of Article 19d of this Directive: 

(a)  the  annual  financial  statements,  the  management  report  and  the  corporate 
governance statement when provided separately; 

(b) the consolidated financial statements, the consolidated management reports 
and 
the  consolidated  corporate  governance  statement  when  provided 
separately.’; 

(10) 

Article 34 is amended as follows: 

(a) 

in paragraph 1, the second subparagraph is amended as follows: 

(i) 

point (a)(ii) is replaced by the following: 

whether 

‘(ii) 
in 
accordance  with  the  applicable  legal  requirements,  excluding  the 
requirements on sustainability reporting laid down in Article 19a;’; 

the  management  report  has  been  prepared 

(ii) 

the following point (aa) is inserted: 

‘(aa) 
where  applicable,  express  an  opinion  based  on  a  limited 
assurance  engagement  as  regards  the  compliance  of  the  sustainability 
reporting  with  the  requirements  of  this  Directive,  including  the 
compliance  of  the  sustainability  reporting  with  the  reporting  standards 
adopted  pursuant  to  Article  19b,  the  process  carried  out  by  the 
undertaking  to  identify  the  information  reported  pursuant  to  those 
reporting standards, and the compliance with the requirement to mark-up 
sustainability reporting in accordance with Article 19d, and as regards the 
compliance  with  the  reporting  requirements  of  Article  8  of  Regulation 
(EU) 2020/852.’; 

(b)  paragraph 3 is replaced by the following: 

‘3.  Member  States  may  allow  an  independent  assurance  services  provider  to 
express the opinion referred to in paragraph 1, second subparagraph, point (aa), 

EN 

52 

  EN 

provided that it is subject to requirements that are consistent with those set out 
in Directive 2006/43/EC as regards the assurance of sustainability reporting as 
defined in Article 2(1), point (r) of that Directive. 

(11) 

Article 49 is amended as follows: 

(a) 

paragraphs 2 and 3 are replaced by the following: 

‘2. The power to adopt delegated acts referred to in Article 1(2), Article 3(13), 
Article  46(2),  Article  19b  and  Article  19c  shall  be  conferred  on  the 
Commission for an indeterminate period of time. 

3.  The  delegation  of  power  referred  to  in  Article  1(2),  Article  3(13), 
Article 46(2), Article 19b and Article 19c may be revoked at any time by the 
European Parliament or by the Council. A decision to revoke shall put an end 
to the delegation of the power specified in that decision. It shall take effect the 
day  following  the  publication  of  that  decision  in  the  Official  Journal  of  the 
European  Union  or  at  a  later  date  specified  therein.  It  shall  not  affect  the 
validity of any delegated acts already in force.’; 

(b) 

the following paragraph 3a is inserted: 

‘3a.  When  adopting  delegated  acts  pursuant  to  Articles  19b  and  19c,  the 
Commission  shall  take  into  consideration  technical  advice  from  EFRAG, 
provided  such  advice  has  been  developed  with  proper  due  process,  public 
oversight and transparency and with the expertise of relevant stakeholders, and 
is accompanied by cost-benefit analyses that include analyses of the impacts of 
the technical advice on sustainability matters. 

The Commission shall consult the Member State Expert Group on Sustainable 
Finance referred to in Article 24 of Regulation (EU) 2020/852 on the technical 
advice provided by EFRAG prior to the adoption of the delegated acts referred 
to in Articles 19b and 19c.  

The  Commission  shall  request  the  opinion  of  the  European  Securities  and 
Markets  Authority  on  the  technical  advice  provided  by  EFRAG,  in  particular 
with  regard  to  its  consistency  with  Regulation  (EU)  2019/2088  and  its 
delegated  acts.  The  European  Securities  and  Markets  Authority  shall  provide 
its opinion within two months from the date of receipt of the request from the 
Commission. 

The  Commission  shall  also  consult  the  European  Banking  Authority,  the 
European  Insurance  and  Occupational  Pensions  Authority,  the  European 
Environment  Agency,  the  European  Union  Agency  for  Fundamental  Rights, 
the  European  Central  Bank,  the  Committee  of  European  Auditing  Oversight 
Bodies  and  the  Platform  on  Sustainable  Finance  established  pursuant  to 
Article 20  of  Regulation  (EU)  2020/852  on  the  technical  advice  provided  by 
EFRAG prior to the adoption of delegated acts referred to in Articles 19b and 
19c. Where any of those bodies decide to submit an opinion, they shall do so 
within two months from the date of being consulted by the Commission.’;  

(c) 

paragraph 5 is replaced by the following:  

‘5.  A  delegated  act  adopted  pursuant  to  Article  1(2),  Article  3(13), 
Article 46(2),  Article  19b  and  Article  19c  shall  enter  into  force  only  if  no 
objection has been expressed either by the European Parliament or the Council 
within  a  period  of  two  months  of  notification  of  that  act  to  the  European 

EN 

53 

  EN 

Parliament and the Council or if, before the expiry of that period, the European 
Parliament and the Council have both informed the Commission that they will 
not object. That period shall be extended by two months at the initiative of the 
European Parliament or the Council.’ 

(12) 

Article 51 is replaced by the following: 

‘Article 51 

Penalties 

1.  Without  prejudice  to  paragraph  2,  Member  States  shall  provide  for  penalties 
applicable  to  infringements  of  the  national  provisions  adopted  in  accordance  with 
this Directive and shall take all the measures necessary to ensure that those penalties 
are  enforced.  The  penalties  provided  for  shall  be  effective,  proportionate  and 
dissuasive.’ 

2. 
In case of a breach of the national provisions transposing Articles 19a, 19d and 
29a, Member States shall provide for at least the following administrative measures 
and sanctions: 

(a)  a  public  statement  indicating  the  natural  person  or  the  legal  entity 
responsible and the nature of the infringement; 

(b) an order requiring the natural person or the legal entity responsible to cease 
the conduct  constituting  the infringement  and to  desist  from  any repetition of 
that conduct; 

(c) administrative pecuniary sanctions. 

3.  Member  States  shall  ensure  that,  when  determining  the  type  and  level  of 
penalties, administrative sanctions or measures referred to in paragraph 2, all relevant 
circumstances are taken into account, including: 

(a) 

the gravity and the duration of the breach; 

the  degree  of  responsibility  of  the  natural  person  or  legal  entity 

(b) 
responsible; 

(c) 

the financial strength of the natural person or legal entity responsible; 

the importance of profits gained or losses avoided by the natural person 
(d) 
or legal entity responsible, in so far as such profits or losses can be determined;  

the losses sustained by third parties as a result of the breach, in so far as 

(e) 
those losses can be determined; 

the level of cooperation of the natural person or legal entity responsible 

(f) 
with the competent authority; 

previous 

(g) 
responsible.’. 

infringements  by 

the  natural  person  or 

legal  entity 

Article 2 
Amendments to Directive 2004/109/EC 

Directive 2004/109/EC is amended as follows:  

(1) 

in Article 2(1) the following point (r) is added: 

EN 

54 

  EN 

‘(r)  ‘sustainability  reporting’  means  sustainability  reporting  as  defined 
in 
Article 2(18)  of  Directive  2013/34/EU  of  the  European  Parliament  and  of  the 
Council*18.’; 

___________________________________________ 

*18 

Directive  2013/34/EU  of  the  European  Parliament  and  of  the  Council  of  26 June  2013  on  the  annual 
financial  statements,  consolidated  financial  statements  and  related  reports  of  certain  types  of 
undertakings,  amending  Directive  2006/43/EC  of  the  European  Parliament  and  of  the  Council  and 
repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19). 

(2) 

Article 4 is amended as follows: 

(a) 

in paragraph 2, point (c) is replaced by the following: 

‘(c) statements made by the persons responsible within the issuer, whose names 
and functions shall  be clearly indicated, to the  effect  that,  to  the best  of their 
knowledge, the financial statements prepared in accordance with the applicable 
set  of  accounting  standards  give  a  true  and  fair  view  of  the  assets,  liabilities, 
financial position and profit or loss of the issuer and the undertakings included 
in the consolidation taken as a whole and that the management report includes 
a  fair  review  of  the  development  and  performance  of  the  business  and  the 
position of the issuer and the undertakings included in the consolidation taken 
as a whole, together with a description of the principal risks and uncertainties 
that  they  face  and,  where  appropriate,  that  it  is  prepared  in  accordance  with 
sustainability  reporting  standards  referred  to  in  Article  19b  of  Directive 
2013/34/EU.’; 

(b)  paragraphs 4 and 5 are replaced by the following: 

‘4. The financial statements shall be audited in  accordance with Article 34 of 
Directive 2013/34/EU and Article 28 of Directive 2006/43/EC.  

The audit report, signed by the person or persons responsible for carrying out 
the work set out in paragraphs 1 and 2 of Article 34 of Directive 2013/34/EU 
shall be disclosed in full to the public together with the annual financial report. 

5.  The  management  report  shall  be  drawn  up  in  accordance  with  Articles  19, 
19a, 19d(1) and 20 of Directive 2013/34/EU, when drawn-up by undertakings 
referred to in those provisions. 

Where the issuer is required to prepare consolidated accounts, the consolidated 
management  report  shall  be  drawn  up  in  accordance  with  Article  19d(2),  29 
and 29a of Directive 2013/34/EU, when drawn-up by undertakings referred to 
in those provisions.’; 

(3) 

in Article 23(4), the third and fourth subparagraphs are replaced by the following: 

‘The  Commission  shall,  in  accordance  with  the  procedure  referred  to  in 
Article 27(2),  take  the  necessary  decisions  on  the  equivalence  of  accounting 
standards  and  on  the  equivalence  of  sustainability  reporting  standards  as 
referred  to  in  Article  19b  of  Directive  2013/34/EU  which  are  used  by  third-
country issuers under the conditions set out in Article 30(3). If the Commission 
decides that the  accounting standards  or the sustainability reporting standards 
of  a  third  country  are  not  equivalent,  it  may  allow  the  issuers  concerned  to 
continue  using  such  accounting  standards  during  an  appropriate  transitional 
period. 

EN 

55 

  EN 

In the context of the third subparagraph, the Commission shall also adopt, by 
means of delegated acts adopted in accordance with paragraphs 2a, 2b and 2c 
of Article 27, and subject to the conditions laid down in Articles 27a and 27b, 
measures  aimed  at  establishing  general  equivalence  criteria  regarding 
accounting standards and sustainability  reporting standards relevant  to  issuers 
of more than one country.’; 

(4) 

the following Article 28(d) is inserted: 

‘Article 28d 

ESMA guidelines 

After  consulting  the  European  Environment  Agency  and  the  European  Union 
Agency  for  Fundamental  Rights,  ESMA  shall  issue  guidelines  in  accordance  with 
Article 16 of Regulation 1095/2010 on the supervision of sustainability reporting by 
national competent authorities.  

Article 3 
Amendments to Directive 2006/43/EC 

Directive 2006/43/EC is amended as follows:  

(1) 

Article 1 is replaced by the following: 

‘Article 1 

Subject matter 

This  Directive  establishes  rules  concerning  the  statutory  audit  of  annual  and 
consolidated  accounts  and  the  assurance  of  annual  and  consolidated  sustainability 
reporting, where this is performed by the statutory auditor or audit firm carrying out 
the statutory audit of financial statements.’; 

(2) 

Article 2 is amended as follows: 

(a) 

points 2 and 3 are replaced by the following: 

‘2.  ‘statutory  auditor’  means  a  natural  person  who  is  approved  in  accordance 
with this Directive by the competent authorities of a Member State to carry out 
statutory audits and assurance engagements of sustainability reporting; 

3. ‘audit firm’ means a legal person or any other entity, regardless of its legal 
form,  that  is  approved  in  accordance  with  this  Directive  by  the  competent 
authorities  of  a  Member  State  to  carry  out  statutory  audits  and  assurance 
engagements of sustainability reporting;’ 

(b) 

the following points 21 and 22 are added: 

‘21.  ‘sustainability  reporting’  means  sustainability  reporting  as  defined  in 
Article 2, point (18), of Directive 2013/34/EU; 

‘22. ‘assurance of sustainability reporting’ means the opinion expressed by the 
statutory  auditor  or  audit  firm  in  accordance  with  Article  34(1),  second 
subparagraph, point (aa) and Article 34(2) of Directive 2013/34/EU .’; 

(3) 

Articles 6 and 7 are replaced by the following: 

‘Article 6 

Educational qualifications 

EN 

56 

  EN 

Without  prejudice  to  Article  11,  a  natural  person  may  be  approved  to  carry  out  a 
statutory  audit  and  an  assurance  engagement  of  sustainability  reporting  only  after 
having  attained  university  entrance  or  equivalent  level,  then  completed  a  course  of 
theoretical  instruction,  undergone  practical  training  and  passed  an  examination  of 
professional  competence  of  university  final  or  equivalent  examination  level, 
organised or recognised by the Member State concerned.  

The  competent  authorities  referred  to  in  Article  32  shall  cooperate  with  each  other 
with  a  view  to  achieving  a  convergence  of  the  requirements  set  out  in  this  Article. 
When  engaging  in  such  cooperation,  those  competent  authorities  shall  take  into 
account  developments  in  auditing  and  in  the  audit  profession  and,  in  particular, 
convergence that has already been achieved by the profession. They shall cooperate 
with  the  Committee  of  European  Auditing  Oversight  Bodies  (CEAOB)  and  the 
competent authorities referred to in Article 20 of Regulation (EU) No 537/2014 in so 
far as such convergence relates to the statutory audit and assurance of sustainability 
reporting of public-interest entities. 

Article 7 

Examination of professional competence  

The examination of professional competence referred to in Article 6 shall guarantee 
the  necessary  level  of  theoretical  knowledge  of  subjects  relevant  to  statutory  audit 
and assurance of sustainability reporting and the ability to apply such knowledge in 
practice. Part at least of that examination shall be written.’; 

(4) 

Article 8(1) is amended as follows: 

(a) 

the following point (bb) is inserted: 

legal  requirements  and  standards  relating  to  the  preparation  of  annual 

‘(bb) 
and consolidated sustainability reporting;’; 

(b) 

the following point (cc) is inserted: 

‘(cc) 

sustainability reporting standards;’; 

(c) 

the following point (dd) is inserted: 

‘(dd) 

sustainability analysis;’; 

(d) 

the following point (ff) is inserted: 

‘(ff) 

due diligence processes with regard to sustainability matters;’; 

(e) 

the following point (ii) is inserted: 

‘(ii) 

sustainability assurance standards as referred to in Article 26a;’; 

(f) 

point (h) is replaced by the following: 

legal requirements and professional standards relating to statutory audit 

‘(h) 
and assurance of sustainability reporting and statutory auditors;’; 

(5) 

in Article 10, paragraph 1 is replaced by the following: 

‘1. 
In order to ensure the ability to apply theoretical knowledge in practice, a test 
of which is included in the examination, a trainee shall complete a minimum of three 
years'  practical  training  in,  inter  alia,  the  auditing  of  annual  financial  statements, 
consolidated financial statements or similar financial statements and the assurance of 
annual and consolidated sustainability reporting. At least two thirds of such practical 

EN 

57 

  EN 

training shall be completed with a statutory auditor or an audit firm approved in any 
Member State.’;  

(6) 

in Article 11, point (a) is replaced by the following: 

‘(a)  that  he  or  she  has,  for  15  years,  engaged  in  professional  activities  which  have 
enabled him or her to acquire sufficient experience in the fields of finance, law and 
accountancy,  and  sustainability  reporting  and  has  passed  the  examination  of 
professional competence referred to in Article 7, or’; 

(7) 

in Article 14, paragraph 2, third subparagraph is replaced by the following: 

‘The  aptitude  test  shall  be  conducted  in  one  of  the  languages  permitted  by  the 
language rules applicable in the host Member State concerned. It shall cover only the 
statutory  auditor's  adequate  knowledge  of  the  laws  and  regulations  of  that  host 
Member State in so far as it is relevant to statutory audits and assurance engagements 
of sustainability reporting.’; 

(8) 

the following Article 14a is inserted: 

‘Article 14a 
Statutory auditors approved or recognised before 1 January 2023  

Member States shall ensure that statutory auditors that are approved or recognised to 
carry out statutory audits before 1 January 2023 are not subject to the requirements 
of Articles 6, 7, 10, 11 and 14 of this Directive. 

Member States shall  ensure that statutory  auditors approved  before 1 January 2023 
acquire  the  necessary  knowledge  in  sustainability  reporting  and  the  assurance  of 
sustainability reporting via the continuing education requirement of Article 13.’;  

(9) 

Article 24b is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

‘1. Member States shall ensure that, when the statutory audit and the assurance 
of  sustainability  reporting  is  carried  out  by  an  audit  firm,  that  audit  firm 
designates at least one key audit partner. The audit firm shall provide the key 
audit  partner(s)  with  sufficient  resources  and  with  personnel  that  have  the 
necessary  competence  and  capabilities  to  carry  out  his,  her  or  its  duties 
appropriately. 

Securing audit quality, independence and competence shall be the main criteria 
when the audit firm selects the key audit partner(s) to be designated. The key 
audit  partner(s)  shall  be  actively  involved  in  the  carrying-out  of  the  statutory 
audit and the assurance of sustainability reporting.’;  

(b) 

the following paragraph 2a is inserted: 

‘2a. When carrying out  the  assurance of sustainability reporting, the statutory 
auditor  shall  devote  sufficient  time  to  the  engagement  and  shall  assign 
sufficient  resources  to  enable  him  or  her  to  carry  out  his  or  her  duties 
appropriately.’; 

(c) 

in paragraph 4, point (c) is replaced by the following: 

‘(c) the fees charged for the statutory audit, for the assurance of sustainability 
reporting and the fees charged for other services in any financial year.’; 

(d)  paragraph 5 is replaced by the following: 

EN 

58 

  EN 

‘5.  A  statutory  auditor  or  an  audit  firm  shall  create  an  audit  file  for  each 
statutory  audit.  The  audit  file  shall  also  include  information  related  to  the 
assurance of sustainability reporting, where applicable.’; 

(10) 

Article 25 is replaced by the following: 

‘Article 25 

Audit fees 

Member States shall ensure that adequate rules are in place which provide that fees 
for statutory audits and the assurance of sustainability reporting:  

(a) are not influenced or determined by the provision of additional services to 
the audited entity;  

(b) cannot be based on any form of contingency.’;  

(11) 

the following Article 25b is inserted: 

‘Article 25b 

Professional Ethics, Independence, Objectivity, Confidentiality and Professional Secrecy 
as regards the assurance of sustainability reporting 

The  requirements  of  Articles  21  to  24a  as  regards  the  statutory  audit  of  financial 
statements shall apply to the assurance of sustainability reporting.’; 

(12) 

the following Article 26a is inserted: 

‘Article 26a 

Assurance standards for sustainability reporting 

1.  Member States shall require statutory auditors and audit firms to carry out the 
assurance of sustainability reporting in compliance with assurance standards adopted 
by the Commission in accordance with paragraph 2.  

Member States shall apply national assurance standards, procedures or requirements 
as long as the Commission has not adopted an assurance standard covering the same 
subject-matter. 

Member  States  shall  communicate  the  assurance  procedures  or  requirements  to  the 
Commission at least three months before their entry into force.  

2. 
The Commission shall be empowered to adopt, by means of delegated acts in 
accordance  with  Article  48a,  the  assurance  standards  referred  to  in  paragraph  1  in 
order  to  set  out  the  procedures  that  the  auditor  shall  perform  in  order  to  draw  its 
conclusions  on  the  assurance  of  sustainability  reporting,  including  engagement 
planning,  risk  consideration  and  response  to  risks  and  type  of  conclusions  to  be 
included in the audit report. 

The Commission may adopt the assurance standards only where they: 

(a) have been developed with proper due process, public oversight and transparency; 

(b)  contribute  a  high  level  of  credibility  and  quality  to  the  annual  or  consolidated 
sustainability reporting; 

(c) are conducive to the Union public good.’ 

EN 

59 

  EN 

3.  Where the Commission adopts standards for reasonable assurance, the opinion 
referred to in Article 34(1), second subparagraph, point (aa) of Directive 2013/34/EU 
shall be based on a reasonable assurance engagement.’; 

(13) 

the following Article 27a is inserted: 

‘Article 27a 

Assurance of consolidated sustainability reporting 

The  requirements  of  Article  27  as  regards  the  audit  of  consolidated  financial 
the  assurance  of  consolidated 
statements  shall  apply  mutatis  mutandis 
sustainability reporting.’; 

to 

(14) 

Article 28 is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

‘1. The statutory auditor(s) or the audit firm(s) shall present the  results of the 
statutory  audit  and,  where  applicable,  of  the  assurance  of  sustainability 
reporting in an audit report. The report shall be prepared in accordance with the 
requirements  of  auditing  standards  adopted  by  the  Union  or  Member  State 
concerned, as referred to in Article 26 and with the requirements of assurance 
standards adopted by the Commission or Member State concerned, as referred 
to in Article 26a.’; 

(b)  paragraph 2 is amended as follows: 

(i) 

the following point (aa) is inserted: 

‘(aa)  specify  the  annual  or  consolidated  sustainability  reporting  and  the  date 
and period they cover; and identify the sustainability reporting framework that 
has been applied in their preparation;’; 

(ii) 

the following point (bb) is inserted: 

‘(bb)  include  a  description  of  the  scope  of  the  assurance  of  sustainability 
reporting  which  shall,  as  a  minimum,  identify  the  assurance  standards  in 
accordance  with  which 
the  assurance  of  sustainability  reporting  was 
conducted;’; 

(c) 

in paragraph 2, point (e) is replaced by the following: 

‘(e)  include  the  opinions  and  statement,  which  shall  be  based  on  the  work 
undertaken in the course of the audit, referred to in the second subparagraph of 
Article 34(1) of Directive 2013/34/EU, where applicable;’; 

(d) 

in paragraph 3, the following subparagraph is added: 

‘The requirements of the first subparagraph as regards the statutory audit shall 
apply to the assurance of sustainability reporting.’; 

(e) 

in paragraph 4 the first subparagraph is replaced by the following: 

‘The audit report shall be signed and dated by the statutory auditor. Where an 
audit firm carries out the statutory audit and, where applicable, the assurance of 
sustainability reporting, the audit report shall bear the signature of at least the 
statutory  auditor(s)  carrying  out  the  statutory  audit  and  the  assurance  of 
sustainability  reporting  on  behalf  of  the  audit  firm.  Where  more  than  one 
statutory  auditor  or  audit  firm  have  been  simultaneously  engaged,  the  audit 
report  shall  be  signed  by  all  statutory  auditors  or  at  least  by  the  statutory 

EN 

60 

  EN 

auditors  carrying  out  the  statutory  audit  and  the  assurance  of  sustainability 
reporting on behalf of every audit firm. In exceptional circumstances Member 
States may provide that such signature(s) need not be disclosed to the public if 
such disclosure could lead to an imminent and significant threat to the personal 
security of any person.’; 

(f) 

paragraph 5 is replaced by the following: 

‘5.  The  report  of  the  statutory  auditor  or  the  audit  firm  on  the  consolidated 
financial  statements  and,  where  applicable,  on  the  consolidated  sustainability 
reporting  shall  comply  with  the  requirements  set  out  in  paragraphs  1  to  4.  In 
reporting  on  the  consistency  of  the  management  report  and  the  financial 
statements  as  required  by  paragraph  2,  point  (e),  the  statutory  auditor  or  the 
audit  firm  shall  consider  the  consolidated  financial  statements  and  the 
consolidated management report. Where the annual financial statements of the 
parent  undertaking  are  attached  to  the  consolidated  financial  statements,  the 
reports of the statutory auditors or the audit firms required by this Article may 
be combined.’ 

(15) 

Article 29 is amended as follows: 

(a) 

in paragraph 1, point (d) is replaced by the following: 

‘(d) the persons who carry out quality assurance reviews shall have appropriate 
professional education and relevant experience in statutory audit and financial 
reporting  and  in  the  assurance  of  sustainability  reporting  and  sustainability 
reporting combined with specific training on quality assurance reviews;’; 

(b) 

in paragraph 1, point (h) is replaced by the following: 

‘(h) quality assurance reviews shall take place on the basis of an analysis of the 
risk and, in the case of statutory auditors and audit firms carrying out statutory 
audits as defined in Article 2, point (1)(a), and, where applicable, carrying out 
assurance engagements of sustainability reporting, at least every six years;’; 

(c) 

in paragraph 2, point (a) is by the following: 

‘(a)  reviewers  shall  have  appropriate  professional  education  and  relevant 
experience  in  statutory  audit  and  financial  reporting  and  in  the  assurance  of 
sustainability  reporting  and  sustainability  reporting  combined  with  specific 
training on quality assurance reviews;’; 

(16) 

the following Article 30(g) is inserted: 

‘Article 30g 

Investigations and Sanctions as regards the Assurance of Sustainability Reporting 

The  requirements  of  Articles  30  to  30f  as  regards  the  statutory  audit  of  financial 
statements shall apply to the assurance of sustainability reporting.’; 

(17) 

the following Article 36(a) is inserted: 

‘Article 36a 

Public Oversight and Regulatory Arrangements between Member States as regards the 
assurance of sustainability reporting 

EN 

61 

  EN 

The  requirements  of  Articles  32,  33,  34  and  36  as  regards  the  statutory  audit  of 
financial  statements  shall  apply  mutatis  mutandis  to  the  assurance  of  sustainability 
reporting.’; 

(18) 

the following Article 38a is inserted: 

‘Article 38a 

Appointment and dismissal as regards the assurance of sustainability reporting 

The  requirements  of  Articles  37  and  38  as  regards  the  statutory  audit  of  financial 
statements shall apply to the assurance of sustainability reporting.’; 

(19) 

in Article 39(6), points (a) to (e) are replaced by the following: 

‘(a)  inform  the  administrative  or  supervisory  body  of  the  audited  entity  of  the 
outcome of the statutory audit and of the outcome of the  assurance of sustainability 
reporting  and  explain  how  the  statutory  audit  and  the  assurance  of  sustainability 
reporting  contributed  to  the  integrity  of  financial  and  sustainability  reporting  and 
what the role of the audit committee was in that process; 

(b)  monitor  the  financial  and  sustainability  reporting  process,  including  the  digital 
reporting  process  referred  to  in  Article  19d  and  the  process  carried  out  by  the 
undertaking to identify the information  reported according to the standards adopted 
pursuant  to  Article  19b  of  Directive  2013/34/EU,  and  submit  recommendations  or 
proposals to ensure its integrity; 

(c)  monitor  the  effectiveness  of  the  undertaking's  internal  quality  control  and  risk 
management systems and, where applicable, its internal audit, regarding the financial 
and  sustainability  reporting  of  the  audited  entity,  including  its  digital  reporting  as 
referred to in Article 19d, without breaching its independence;’ 

(d)  monitor  the  statutory  audit  of  the  annual  and  consolidated  financial  statements 
and  the  assurance  of  the  annual  and  consolidated  sustainability  reporting,  in 
particular, its performance, taking into account any findings and conclusions by the 
competent authority pursuant to Article 26(6) of Regulation (EU) No 537/2014; 

(e) review and monitor the independence of the statutory auditors or the audit firms 
in  accordance  with  Articles  22,  22a,  22b,  24a,  24b  and  25b  of  this  Directive  and 
Article 6 of Regulation (EU) No 537/2014, and in particular the appropriateness of 
the provision of non-audit services to the audited entity in accordance with Article 5 
of that Regulation;’; 

(20) 

Article 45 is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

‘1.  The  competent  authorities  of  a  Member  State  shall,  in  accordance  with 
Articles  15,  16  and  17,  register  every  third-country  auditor  and  audit  entity, 
where  that  third-country  auditor  or  audit  entity  provides  an  audit  report 
concerning  the  annual  or  consolidated  financial  statements  and,  where 
applicable,  concerning  annual  or  consolidated  sustainability  reporting  of  an 
undertaking  incorporated  outside  the  Union  whose  transferable  securities  are 
admitted  to  trading  on  a  regulated  market  of  that  Member  State  within  the 
meaning of Article 4(1), point (14), of Directive 2004/39/EC, except where the 
undertaking  in  question  exclusively  issues  outstanding  debt  securities  for 
which one of the following applies:  

EN 

62 

  EN 

(a) 
those  securities  have  been  admitted  to  trading  on  a  regulated 
market in a Member State within the meaning of Article 2(1), point (c), 
of  Directive  2004/109/EC  of  the  European  Parliament  and  of  the 
Council*19 prior to 31 December 2010 and the denomination per unit of 
which is, at the date of issue, at least EUR 50 000 or, in the case of debt 
securities  denominated  in  another  currency,  equivalent,  at  the  date  of 
issue, to at least EUR 50 000;  

(b) 
those securities are admitted to trading on a regulated market in 
a  Member  State  within  the  meaning  of  Article  2(1),  point  (c),  of 
Directive  2004/109/EC  from  31  December  2010  and  the  denomination 
per unit of which is, at the date of issue, at least EUR 100 000 or, in case 
of  debt  securities  denominated  in  another  currency,  equivalent,  at  the 
date of issue, to at least EUR 100 000.’; 

(b) 

in paragraph 5, the following point (dd) is inserted: 

the  assurance  of  the  annual  or  consolidated  sustainability  reporting 
‘(dd) 
referred  to  in  paragraph  1  are  carried  out  in  accordance  with  assurance 
standards as referred to in Article 26a, as well as the requirements laid down in 
Articles 22, 22b, 25 and 25b;’; 

(c) 

paragraph 5a is replaced by the following: 

‘5a.  A Member State may register a third-country auditor only if he or she 
meets the requirements set out in paragraph 5, points (c), (d), (dd) and (e). 

_______________________________________________________________ 

*19 

Directive  2004/109/EC  of  the  European  Parliament  and  of  the  Council  of  15  December  2004  on  the 
harmonisation of transparency requirements in relation to information about issuers whose securities are 
admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, 
p. 38).’; 

(21) 

Article 48a is amended as follows: 

(a) 

in paragraph 2 the following subparagraph is added: 

‘The  power  to  adopt  delegated  acts  referred  to  in  Article  26a(2)  shall  be 
conferred on the Commission for an indeterminate period of time.’; 

(b)  paragraph 3 is replaced by the following: 

‘3. The delegation of power referred to in Articles 26(3), 26a(2), 45(6), 46(2) 
and  47(3)  may  be  revoked  at  any  time  by  the  European  Parliament  or  by  the 
Council. A decision to revoke shall put an end to the delegation of the power 
specified in that decision. It shall take effect the day following the publication 
of the decision in the Official Journal of the European Union or at a later date 
specified therein. It shall not affect the validity of any delegated acts already in 
force.’; 

(c) 

paragraph 5 is replaced by the following: 

‘5. A delegated act adopted pursuant to Articles 26(3), 26a(2), 45(6), 46(2) and 
47(3)  shall  enter  into  force  only  if  no  objection  has  been  expressed  either  by 
the  European  Parliament  or  the  Council  within  a  period  of  four  months  of 
notification of that act to the European Parliament and the Council or if, before 
the expiry of that period, the European Parliament and the Council have both 
informed  the  Commission  that  they  will  not  object.  That  period  shall  be 

EN 

63 

  EN 

extended by two months at the initiative of the European Parliament or of the 
Council.’  

Article 4 
Amendments to Regulation (EU) No 537/2014 

Regulation (EU) No 537/2014 is amended as follows:  

(22) 

Article 5 is amended as follows: 

(a) 

paragraph 1 is amended as follows: 

(i) 

the first subparagraph is replaced by the following: 

‘1.  A  statutory  auditor  or  an  audit  firm  carrying  out  the  statutory  audit  and, 
where applicable, the  assurance  of sustainability reporting of a public-interest 
entity, or any member of the network to which the statutory auditor or the audit 
firm belongs, shall not directly or indirectly provide to the audited entity, to its 
parent  undertaking  or  to  its  controlled  undertakings  within  the  Union  any 
prohibited non-audit services in: 

(a) the period between the beginning of the period audited and the issuing 
of the audit report; and  

(b)  the  financial  year  immediately  preceding  the  period  referred  to  in 
point  (a)  in  relation  to  the  services  listed  in  point  (e)  of  the  second 
subparagraph.’; 

(ii) 

in the second subparagraph, the following point (l) is added: 

‘(l) consulting services for the preparation of sustainability reporting, where the 
statutory  auditor  or  audit  firm  carries  out  the  assurance  of  sustainability 
reporting.’; 

(b) 

the following paragraph 6 is added: 

‘6.  Paragraphs  4  and  5  referring  to  the  statutory  audit  of  financial  statements 
shall apply to the assurance of sustainability reporting, where applicable.’ 

(23) 

in Article 14, point (b) is replaced by the following: 

‘(b)  revenues  from  non-audit  services  other  than  those  referred  to  in  Article  5(1) 
which are required by Union or national legislation, specifying the revenues from the 
assurance of sustainability reporting; and,’. 

Article 5 
Transposition  

1.  Member  States  shall  bring  into  force  the  laws,  regulations  and  administrative  provisions 
necessary to  comply with Articles 1 to  3 of this  Directive by 1  December 2022. They shall 
immediately inform the Commission thereof. 

Member  States  shall  provide  that  the  provisions  referred  to  in  the  first  subparagraph  shall 
apply for financial years starting on or after 1 January 2023 

When Member States adopt those provisions, they shall contain a reference to this Directive 
or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official  publication.  The 
methods of making such reference shall be laid down by Member States.  

EN 

64 

  EN 

2.  Member  States  shall  communicate  to  the  Commission  the  text  of  the  main  provisions  of 
national law which they adopt in the field covered by this Directive.  

Article 4 of this Directive shall apply to financial years starting on or after 1 January 2023. 

Article 6 
Date of application of Article 4 

Article 7 
Entry into force 

This Directive shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

. 

Article 8 
Addressees 

This Directive is addressed to the Member States. Article 4 shall, however, be binding in its 
entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

EN 

65 

  EN