Comparing EU CSRD vs. US SEC Sustainability Reporting Directives

Why Do These Regulated Sustainability Disclosures Exist?

For private companies, climate disclosures are currently done on a voluntary basis, often driven by stakeholder pressure. Though there are standard frameworks available through organizations such as CDP, GRI, and B Corp, a significant number of global companies still do not disclose or do so inconsistently.

Both the European Union’s recently finalized Corporate Sustainability Reporting Directive (CSRD) and the upcoming Securities and Exchange Commission (SEC) climate disclosure rule in the United States will require mandatory carbon footprint disclosures. These regulations aim to provide investors with consistent, comparable, and reliable information. Carbon footprint data will be required to be disclosed with the same level of rigor as their accompanying financial statements.

Who Is Affected by These Regulations?

• US SEC: Will cover both domestic and foreign SEC registrants, encompassing around 12,000 companies, including approximately 1,150 non-US companies.
• EU CSRD: Broader in scope than the SEC. It applies to large public interest entities, listed companies, banks, insurance companies, EU-listed SMEs, and third-country corporations with significant EU subsidiaries or branches. In total, around 50,000 organizations will be required to report, covering about 75% of the EU’s total company turnover.

When Do These Regulations Apply?

• EU CSRD: Entered into force on January 5, 2023. The European Commission is reviewing the Delegated Act for the first set of European Sustainability Reporting Standards (ESRS). Final adoption is expected in August 2023, with staged implementation from 2024 for EU companies through to 2028 for third-country companies.
• US SEC: Proposed in March 2022 but delayed multiple times due to comments and political opposition. A final publication is expected in Q3 2023, with first reports likely due in 2025 for the 2024 financial year.

What Information Will Organizations Need to Provide?

• EU CSRD: Requires reporting under a common framework on strategies, business models, governance, sustainability impacts, opportunities, risk resilience, policies, targets, action plans and performance. Climate-specific data includes energy consumption and mix, Scopes 1, 2 and 3 (Scope 3 expected to be optional for the first three years), total GHG emissions, GHG removal plans, use of carbon credits and internal carbon pricing.
• US SEC: Focuses only on climate-related risks, including governance, material impacts on business strategy and outlook, climate-related targets and transition plans. Scope 1 and 2 emissions are required. The inclusion of Scope 3 emissions remains contentious.

Next steps

Once both directives are finalized, most reported data will be public and searchable through XBLR tagging. Voluntary reporting organizations such as CDP are aligning with these requirements, easing the burden of reporting across multiple entities. Mandatory disclosure and standardized frameworks should improve both the quality and quantity of climate reporting.

Inspired by the EU and US, other jurisdictions—including the United Kingdom, Canada, Australia, India and China—are also considering climate disclosure rules.

Interested or have any questions?