The Corporate Sustainability Reporting Directive (CSRD) is an upcoming EU regulation that aims to establish common rules for sustainability reporting by companies. The CSRD builds on the existing Non-Financial Reporting Directive (NFRD), which requires large companies to report on environmental, social, and governance (ESG) issues. Here’s everything you need to know about the CSRD in 10 questions.
1 – What is the Corporate Sustainability Reporting Directive (CSRD)?
The CSRD is a new EU regulation that aims to ensure that companies provide investors and other stakeholders with comprehensive and comparable sustainability information.
The CSRD will expand the scope of the NFRD to more companies, introduce mandatory sustainability reporting standards, and ensure that the reported information is audited.
2 – How does CSRD relate to ESG?
The CSRD expands the ESG reporting requirements introduced by the NFRD and aims to ensure that companies report on a broader range of sustainability issues, including climate change, biodiversity, and human rights.
The CSRD will introduce mandatory sustainability reporting standards, making it easier for investors to compare companies’ sustainability performance.
3 – What is the relationship with EU Green Deal?
The CSRD is part of the EU’s broader strategy to support sustainable finance and achieve the goals of the European Green Deal, which aims to make the EU economy more sustainable and climate-neutral by 2050.
4 – To what companies will CSRD apply?
Nearly 50,000 EU companies that meet two of the following three criteria:
- Turnover exceeding €40 million per year.
- A balance sheet total of more than €20 million.
- More than 250 employees
5 – What financial year should you start reporting?
The EU CSRD regulation takes effect in four phases:
2024 – Companies already subject to the NFRD
2025 – Large companies not currently subject to the NFRD
2026 – Listed SMEs
2028 – International companies with net turnover above 150€ million in the EU
6 – What is double materiality
Double Materiality is a concept in sustainability reporting that takes into account both the financial impact of sustainability issues on a company’s operations and the impact of the company’s operations on sustainability issues.
This means that companies not only report on the financial implications of sustainability risks and opportunities for their business, but also the broader social and environmental impacts of their activities.
7 – What do you need to report on?
Under the CSRD, companies will need to report on a range of sustainability issues, including:
- Environmental issues, such as greenhouse gas emissions, resource use, and pollution
- Social issues, such as employee rights, health and safety, and diversity and inclusion
- Governance issues, such as anti-corruption measures, board diversity, and executive pay
8 – What are the benefits?
The CSRD is expected to bring several benefits
- Improved transparency and comparability of sustainability information
- Encouraging companies to integrate sustainability into their business models and decision-making processes
- Supporting the transition to a more sustainable and climate-neutral economy.
9 – What are the challenges?
- Ensuring that the reporting standards are relevant, comprehensive, and comparable across different industries and sectors
- Ensuring that the reporting requirements do not create an undue burden on companies, particularly SMEs
10 – How to prepare for the CSRD?
To prepare for the CSRD, companies can take the following steps:
- Determine how the CSRD will impact your reporting requirements and assess gaps and potential risks
- Seek external support from sustainability consultants, auditors, and reporting experts to help prepare for the CSRD
- Invest in technology and data management systems to support data collection, analysis, and reporting
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