What is the CSRD and Who Does It Affect?

The Corporate Sustainability Reporting Directive (CSRD) is a legislation created by the European Union, with the goal of enhancing and standardising sustainability reporting. It represents a significant step towards transparent sustainability reporting in the EU that requires companies to take accountability and actions towards sustainable issues. The CSRD replaces the Non-Financial Reporting Directive (NFRD) and demands more comprehensive and detailed requirements for sustainability disclosures, as well as expanding to more companies than the NFRD.

Read on to find out more about the key aspects of the CSRD regulations and who it affects.

Reporting Scope:

• Approximately 50,000 companies will be required to comply with the CSRD, compared to approximately 11,700 under the NFRD.
• The CSRD expands the scope of reporting requirements to include all large companies that meet two out of the following three criteria: over 250 employees, €40 million in net turnover, or €20 million in total assets. The CSRD also includes all companies listed on EU regulated markets, except micro-enterprises.

Reporting Requirements:

• Sustainability Reporting: Companies must provide detailed sustainability reports covering environmental, social, and governance (ESG) factors.
• Double Materiality: Reports must consider both the impact of sustainability issues on the company (financial materiality) and the company's impact on the environment and society (impact materiality).

Reporting Factors:

• Environmental Factors: Information regarding impacts on climate change, resource use, pollution, biodiversity, and circular economy practices.
• Social Factors: Assessment on factors such as working conditions, human rights, and social impacts on the community.
• Governance Factors: Evaluation of aspects such as business ethics and board diversity.

Timeline:

• The CSRD will be implemented in stages. Companies already subject to the NFRD will need to comply to the CSRD by 2024, with reports covering the 2023 financial year. Other large companies will follow in subsequent years.
• Small and medium-sized enterprises (SMEs) will have additional time to comply, as well as simplified requirements.

Objectives:

• Transparency and Accountability: The CSRD aims to increase transparency and accountability of companies regarding their sustainability impacts, encouraging responsible and sustainable business practices.
• Stakeholder Engagement: Improved sustainability disclosures and increased transparency will provide stakeholders with increased trust and more reliable and accurate information, aiding in making decisions such as investments.
• Sustainable Focus: By mandating comprehensive sustainability reporting, the CSRD supports the EU's goals of transitioning to a sustainable economy and reaching carbon neutrality.

The CSRD represents a significant step towards transparent and comprehensive sustainability reporting in the EU, encouraging corporate responsibility and sustainable strategic decision-making.

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