The EU Corporate Sustainability Reporting Directive (“CSRD”), approved today, 28 November, at EU level, marks the biggest transformation in corporate reporting in the last almost 20 years, when the first accounting regulations harmonized with International Accounting Standards (IAS) were launched in Romania. However, companies are no longer assessed today from an economic-financial perspective, with commitments to ESG having to be integrated into an organization's business strategy and mission in order to meet regulatory frameworks and expectations of corporate information users.
The CSRD has introduced wide-ranging changes to the reporting requirements, and also includes a much wider range of reporting companies within its scope. The implementation of these requirements is fundamental in supporting the stated objective of the European Commission to direct capital flows towards sustainable activities.
The Directive provides for information on issues such as the business model, its strategy and policies, key non-financial performance indicators and target indicators, company governance on sustainability issues, assessment of double materiality, risk management and ESG opportunities, as well as environmental (including European taxonomy) and social information, in line with European sustainability reporting standards.
The new sustainability reporting rules will start to apply gradually between 2024 and 2028, as follows:
As Ramona Jurubiță, Country Managing Partner, KPMG in Romania, states: „The new requirements for reporting on sustainability are a catalyst for change and have a vital role in building the future.The responsibility for publishing sustainability reports and for addressing how challenges to the future of the planet will be addressed lies with boards of directors. While the preparation for the CSRD requires the allocation of substantial investments and specialized resources, organizations could also gain a competitive advantage by integrating the new reporting framework into the ESG risk and opportunity assessment process.”
According to Adela Ciucioi, Partner, Deputy Head of Audit & Assurance, KPMG in Romania: „We are seeing a profound change in the corporate reporting landscape, with ESG reporting evolving from a niche segment and acquiring a new value, in which sustainability issues are measured and reported with the same rigor as financial information. The independent assurance report issued by the financial auditor on sustainability reporting plays a key role in building confidence on the robustness of non-financial information, providing benefits such as:
Monica Drăgoi, Associate Partner, Audit & Assurance, Financial Services, KPMG in Romania, emphasizes that „sustainability reporting and the adoption of governance frameworks incorporating sustainability principles generates changes in the economy in general, and in financial services especially. In particular, the potential risks to financial stability due to climate change are a key priority for prudential regulators and financial institutions. The specific legislative framework for banks and insurers requires them to consider sustainability factors in their risk frameworks and stress tests. Banks and insurers should understand their own and their customers’ exposures when determining their business strategy and model. Reporting according to the CSRD will be a crucial step in this direction.”
Ioana Rizea-Popp, Associate Partner, Audit & Assurance, KPMG in Romania, comments: „ESRS initial standards have already been approved and published by the European Financial Reporting Advisory Group (EFRAG) and have been submitted to the European Commission for approval. In parallel, sectoral standards are being worked on in several working groups. Companies in various sectors will be affected differently, but certainly all companies will be affected by the new requirements. The scope and complexity of the ESRS are unprecedented and given that the deadline for first reporting is approaching rapidly, companies need to be prepared.”
Ovidiu Popescu, Director, Deal Advisory, Energy, Sustainability and Climate Change, KPMG in Romania, comments: „The EU Corporate Sustainability Reporting Directive comes with more requirements and brings more clarity in relation to the reporting of efforts in the ESG area. Increasing the level of transparency and communicating progress in meeting the targets in the company's ESG strategy is an opportunity to increase the confidence of employees, shareholders, financiers and communities, as a result of the open dialogue on how your business generates value, as it adapts to pressures in the field of sustainability.”
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In Romania and the Republic of Moldova, KPMG operates in six offices in Bucharest, Cluj-Napoca, Constanța, Iași, Timișoara and Chișinău. We currently have more than 1,000 professionals, both Romanian and foreign citizens.