What does the new EU Corporate Sustainability Reporting Directive (CSRD) mean for the future of digital infrastructure?

Non-Financial Reporting Directive (NFRD)

In 2014, the European Parliament adopted the Non-Financial Reporting Directive (NFRD). Together with the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation, it forms the central components of sustainability reporting obligations under the EU's sustainable finance strategy. The overarching goal is a consistent and coherent flow of information on sustainability issues along the financial value chain. Companies were required to report for the first time in 2018 for the financial year 2017.

IDED believes that this framework had good intentions at its inception. It is undoubtedly important for the economy and financial sector to create more transparency regarding their environmental impact. However, the NFRD is not very ambitious: Firstly, it only applies to "large companies that are publicly listed and have an average number of employees exceeding 500 in the financial year". Secondly, the reporting obligations allow room for interpretation, leading to different views on what is relevant for each company. Thirdly, there are no sanctions for non-compliance, raising fundamental questions about the effectiveness of the regulations.

In a recent press release, the EU Council elaborated on the weaknesses of the NFRD and why it needs to be revised — particularly the discrepancy between the information provided and the actual information needs of users. There is also the issue of lacking machine readability. The communication also highlights the need for "more detailed reporting obligations".

Corporate Sustainability Reporting Directive (CSRD)

In response to these weaknesses, the European Commission proposed the Corporate Sustainability Reporting Directive (CSRD) in 2021. The main innovations compared to the NFRD are:

• Extension of the scope to all large companies and publicly listed companies (excluding publicly listed micro-enterprises)

• Mandatory audit of sustainability information

• More detailed reporting obligations based on mandatory EU sustainability standards

• Publication as part of the management report in a digital, machine-readable format

The scope extends to publicly listed small and medium-sized enterprises (SMEs) — except for publicly listed micro-enterprises. Companies will be required to report for the first time starting January 1, 2024 (for the financial year 2023).

IDED explicitly welcomes the requirement to publish in a machine-readable format — it significantly enhances the comparison and analysis of data. We also support the goal of greater corporate transparency regarding environmental impact. This development aligns with IDED's belief that sustainability data should have the same importance and availability as financial data.

The implementation schedule of the CSRD is ambitious. Thus, it is crucial that clarity on mandatory and voluntary reporting standards is established as soon as possible — so companies can prepare in advance and collect the right data. With the commissioning of EFRAG to develop EU recommendations for binding standards, IDED expects that sustainable digital infrastructure will become a central reporting element.

IDED is closely monitoring this initiative and relies on it to provide comprehensive information to make the actual environmental impact of companies — including their digital infrastructure — measurable. This is an important step towards sustainable digital infrastructure by 2030.