Following the adoption of the corporate sustainability reporting directive:1 (the “ CSRD ”), the Member States of the European Union (the “ EU ”) are required to implement its relevant provisions into their national laws and regulations by 6 July 2024. At the date of this publication, only France, Hungary, Romania, and Czech Republic implemented CSRD into their national law. In this context, the long-awaited Luxembourg Bill of law 8370 was introduced before the Luxembourg Chambre des députés on 29 March 2024 (the “ Proposal”).
To implement CSRD provisions in Luxembourg, the Proposal amends a set of eight national laws, including inter alia the law of 19 December 2002 on the trade and companies register, the law of 10 August 1915 on commercial companies, and the law of 5 April 1993 on the financial sector.
Scope of application
The intention of the EU legislators was to broaden the scope of entities that would be required to report on non-financial and sustainable matters. In this context, CSRD primarily applies to companies in the industrial and commercial sectors, as well as major credit institutions and insurance companies that comply with at least two of the three criteria regarding large undertakings, with a definition of net turnover adapted to the specificities of credit and insurance activities.
The Proposal does not clarify the scope of the CSRD provisions within the Luxembourg landscape and reiterates that CSRD does not apply to financial products listed in Article 2 (12) (b) and (f) of Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services sector (“ SFDR ”), therefore excluding UCITS and alternative investment funds (“ AIFs ”) from the scope.2
Luxembourg specificities
The Proposal takes advantage of the CSRD provision allowing Member States to follow certain differentiation possibilities, namely by raising the thresholds defined in Article 1(2)(b) of the delegated directive (EU) 2023/2775 (the “ Delegated Directive ”) for small undertakings. The new thresholds are set to 7,5 million euros for the balance sheet and 15 million euros for the net turnover.
Regarding the limited assurance on the sustainability report required under CSRD, the Proposal confirms that it could only be performed by the statutory auditor of the company, or the group in charge of the annual financial report, or a statutory auditor other than the one in charge of the audit of the financial statement. It should therefore be noted that, at this stage, Luxembourg has chosen not to exercise the option which allows independent service providers, other than a statutory auditor, to provide limited assurance on (consolidated) sustainability information.
The Proposal also confirms that the Commission de Surveillance du Secteur Financier (the “ CSSF ”) will be the competent authority for the control of non-financial, sustainable information included in the annual financial report.
On the practical side, the sustainability report would have to be published on the Registre du Commerce et des Sociétés website, which will be adapted to receive reports in xHTML format and the mark-up of the sustainability reporting in iXBRL format, as required by CSRD.3
What’s next?
At this stage, the Proposal remains subject to interpretation by key Luxembourg stakeholders involved in the legislative process, as well as further potential amendments before finalisation and adoption of the implementation law. Luxembourg has until 6 July 2024 to implement CSRD into its national law.
Parts of the technical application of CSRD requirement are also subject to further clarifications and development by the European Union. The European Sustainability Reporting Standards (the “ ESRS ”) sector specific standards and the provisions related to third countries entities, which will complete CSRD standards for its application, are currently under development. On 11 April 2024, the European Parliament’s Plenary officially approved to delay their adoption to 30 June 2026. Additionally, the European Financial Reporting Advisory Group’s current and future guidance regarding the implementation of the ESRS will have a major impact for the application of CSRD.
1 Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting.
2 Article 68bis (11) of the Law of 19 December 2002 as modified by the Proposal.
3 Art. 75bis of the Law of 19 December 2002 as modified by the Proposal.
