CSRD requires companies to report on equal and fair pay

The EU Corporate Sustainability Reporting Directive replaces and builds on the EU Non-Financial Reporting Directive (NFRD), and heralds a new era in sustainability reporting. Through a new set of rules and standards, the CSRD aims to increase transparency on how large and listed companies perform in terms of sustainability. This should bring sustainability reporting on a par with financial reporting over time.

The timeline for implementing the new requirements is tight, to say the least. By the end of 2022, all member states must have incorporated the new CSRD requirements – which are still being developed – into national law. The reporting obligation is expected to apply to reports published from 1 January 2024 onwards. This means that the changes would already affect the financial year 2023 and that all EU members must comply from 2023.

The CSRD will apply directly to all large public interest entities with more than 500 employees. That is, all listed companies as well as banks and insurance companies. What’s new? It also applies to all non-listed large companies that meet at least two out of three of the following criteria, regardless of falling into the category of public interest entity:

• more than 250 employees
• an annual turnover of more than EUR 40 million
• a balance sheet total of more than EUR 20 million

In short, the number of European companies covered by the NFRD (approximately 11,000) will rise to nearly 50,000 under the CSRD. Important: this also includes subsidiaries of multinational companies (unless comparable reporting already exists at the level of the parent company).

A fair and equal remuneration system without pay gaps sounds like a given, but it’s not. Certainly not if you ask employees about it, as our recent research shows: only 44% of the European employees perceive their salary package as fair. Although not all those claims will be justified, it proves that there’s still plenty of room for improvement. One thing’s certain: if you’re not sure whether your remuneration system is on point or not, you’d better check soon.