ESG Today reports that this rule represents a major extension from the previous Non-Financial Reporting rule (NFRD), bringing its reach up from 12,000 to over 50,000 firms.

Large corporations are required to provide comprehensive disclosures on their environmental impact, human rights, social norms, and sustainability-related risks under the CSRD, which went into force at the beginning of 2024. By 2025, the first reports under this guideline must be submitted.

These 17 member states—Belgium, Spain, the Netherlands, and Germany—have a clear deadline of July 6, 2024, to transpose the CSRD into national legislation. As a result, the Commission has issued official notifications in response to their noncompliance. By taking this move, the EU is demonstrating its commitment to establishing a common reporting standard for sustainability among its members, which will increase transparency and help investors make well-informed sustainability evaluations.

The EU legal system known as the infringement process starts with a formal notification and may proceed to the Court of Justice, wherein financial penalties may be levied. This move is in line with the Commission's overarching plan to strictly enforce EU legislation, as seen by a related infringement case brought against 26 member states for failing to reach the 2030 objectives for renewable energy permits.

According to the Commission: "Investors will not be able to consider the sustainability performance of companies when making investment decisions, and it will not be possible to achieve the necessary level of harmonisation of sustainability reporting in the EU in the absence of transposition of these new rules."

This development highlights the EU's proactive approach to guaranteeing that corporate sustainability policies are transparent and consistent throughout all member states, in addition to the rising significance of these practices in investment choices.