Top 5 Companies Specializing in SBTI
In this article, we’ll review what the SBTi is, the benefits, how the SBTi differs from net-zero, and our top 4 companies specializing in SBTi.
ESG / CSR
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Introduced by the European Commission in 2021, the Corporate Sustainability Reporting Directive (CSRD) seeks to standardise non-financial reporting by companies, enhancing the consistency and quality of publicly available data. Notably, these new standards will impact a vast array of organisations, coming into effect on January 1st, 2024.
💡 What exactly is the CSRD directive? Who does it concern? What changes can be expected? Why could this directive prove beneficial for your company?
In this article, we'll explain the importance for EU companies report for sustainability information, how the CSRD differs from the Financial Reporting Directive (NFRD), how non EU companies are subject to CSRD requirements, and how sustainability matters affect large public interest companies and their financial risks.
The acronym CSRD stands for Corporate Sustainability Reporting Directive and was drafted by the European Commission in April 2021. This new European regulatory framework for sustainability was published on December 16, 2022, in the Official Journal of the EU.
It will require large companies to publish non-financial reports in accordance with standards established at the European level (the ESRS, which we will discuss further below). Detailed information on risks, opportunities, and material impacts related to social, environmental, and governance issues is expected.
Generally speaking, it seeks to fulfill the ambitions of the European Green Deal by achieving carbon neutrality by 2050 – and also aligns with the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy information.
Unlike financial reporting, climate related disclosures and other non-financial reporting includes three additional dimensions:
Until now, the non-financial performance statements of European companies were regulated by the NFRD (Non-Financial Reporting Directive). However, deemed insufficiently ambitious, it will be replaced by the well-known directive (EU) 2022/2464, known as "CSRD"."
👉 The main goal of the CSRD is to increase the economic flow towards more sustainable business models throughout the European Union.
The CSRD aims to accentuate the growing awareness of environmental, social, and governance factors, otherwise known as ESG factors.
In turn, this can not only allow companies to meet CSRD reporting requirements, but also to promote the importance of collecting sustainability data, sufficient reporting principles, reduce greenhouse gas emissions, cultivate new business relationships, and rectify their overall business model.
The European Union has always been a leader in environmental measures, and the CSRD helps to unify the European Union in the efforts to cultivate more sustainable business practices.
The CSRD targets financial and non-financial companies covered by the Accounting Directive and the Transparency Directive, and falling into the following categories:
💡 Important: If the parent company prepares consolidated reporting, subsidiaries may be exempt from reporting. However, certain information must still be provided by the exempted entity. Furthermore, large listed companies cannot benefit from this arrangement.
Note: SMEs will have reduced reporting obligations. The size of European subsidiaries and branches will also be taken into account. Similarly, non-European companies will only be required to disclose information related to their socio-environmental impacts.
As a reminder, micro-enterprises are entities meeting the following criteria:
The CSRD is taking European countries by storm, as this new directive will require more companies than ever before to disclose their emission activity and other notable environmental impacts – finally requiring the transparency and action in the EU necessary in order to curb climate change once and for all.
However, companies within the United Kingdom may still be in the dark about how the CSRD will affect them – seeing as the CSRD is a European initiative to tackle emissions and encourage greater sustainability.
That being said, many companies implicated by the CSRD may have U.K. counterparts, branches, or partners – meaning that some companies in the U.K. may be more affected by the CSRD than they might think.
👉 Even if U.K. companies do not have roots in the European Union, the CSRD will still apply to them if they have reasonable financial revenue from the EU – such as popular stores headquartered in the U.K. like M&S, Primark, and Lush.
This means that any U.K. companies that have profitable operations within the EU will still be affected by the CSRD, especially if that branch accumulates more than €40 million euros (around £33 million GBP) or has a net turnover of over €150 million euros from sales within the EU (around £125 million GBP) over the past two consecutive years.
In addition to these, U.K. companies need to remain mindful that if they are indeed required to report under the CSRD, their report must include the activity from all of their operations – meaning U.K. companies could be subject to the same requirements as European companies.
However, these stringent regulations will become more clear once a relationship is established between the UK's ISSB and the CSRD.
U.K. companies that will be required to report under the CSRD will need to prepare one of the following reports in order to be deemed compliant:
💡 Overall, the CSRD will extend into U.K. companies which are profitable companies operating within the European Union – meaning that any U.K. companies with financial success in the EU should take the necessary precautions sooner than later.
As a reminder, the CSRD was presented to the European Commission and the European Parliament on April 21, 2021. Published on December 16, 2022, in the Official Journal of the EU, it was added to the national legislation of each EU member state by the end of that same year.
The application of this directive will occur on four dates:
Below is a summary table of the CSRD calendar.
Timeline | Concerned companies |
---|---|
January 1, 2025 | Both European and non-European companies already subject to NFRD reporting |
January 1, 2026 | Large European companies and non-European companies listed on a European regulated market not subject to NFRD |
January 1, 2027 | Listed European and non-European SMEs (with an additional two-year extension subject to justification) |
January 1, 2028 | Non-European companies whose European revenue exceeds 150 million euros through a subsidiary or branch |
The CSRD directive replaces and consolidates the NFRD adopted in 2014, which already aimed to harmonise non-financial reporting.
The main changes to note between CSRD requirements and NFRD requirements are:
Good to know: previously, only public interest entities (banks and insurance companies) with more than 500 employees were subject to this form of reporting.
The ESRS (European Sustainability Reporting Standards) are intended to standardise non-financial statements by companies. The first standards prepared by the EFRAG (European Financial Reporting Advisory Group) were adopted by the European Commission on July 31, 2023.
It's worth noting that in October 2023, the ESRS narrowly escaped being discarded after a majority vote in the European Parliament prevented the standards from being scrapped. The proposal to get rid of the standards stemmed from criticism that the ESRS is lacking in overlap with other disclosure requirements and places too high a burden on businesses.
Two standards specify the general principles and general reporting requirements, while the remaining eleven address the various ESG criteria.
💡 Note: Multiple standards will be gradually adopted (universal, sector-specific, or even specific to SMEs listed on regulated markets).
As a result, all companies will be called upon to pay attention to their social impacts, environmental risks associated with their activity, and their governance practices (pollution, resource use, working conditions, or internal control systems).
👉 To learn more about the ESRS standards and their content, please consult our dedicated article.
On June 21st, 2024 – Greenly held an entire event dedicated to the CSRD. We designed this CSRD day specifically to address the challenges and solutions related to the Corporate Sustainability Reporting Directive (CSRD), such as seeking to understand the new reporting requirements and complying with a double materiality assessment.
Ultimately, the CSRD Day event organised by Greenly aims to help decision-makers and CSR managers gain significant expertise and skills through conferences, innovative solution presentations, and networking opportunities, ultimately advancing the ecosystem towards new sustainability standards.
CSRD Day with Greenly allowed attendees to:
According to Directive 2014/95/EU, the concerned companies must report:
The CSRD adds several requirements applicable from 2023:
Sanctions are planned in case of non-compliance with the CSRD. Minimum penalties will have to be defined by each member state.
According to Article 1 of the CSRD, these penalties can take three forms:
The reporting aligns with the European taxonomy and the regulation governing sustainable finance (SFDR - Sustainable Finance Disclosure). These two mechanisms form an ambitious legislative and regulatory arsenal, aiming to create carbon-neutral finance through so-called "sustainable" investments.
In this sense, the EU continues to encourage companies to implement an effective sustainable development strategy.
The CSRD directive is based on the principle of double materiality, which considers both:
💡 Important: Non-financial reporting must be fed with data that can be compared. The CSRD aims to improve the quality, reliability, and accessibility of information for investors seeking to make evaluations and comparisons.
In this regard, the European Commission has set up a platform (European Single Access Point - ESAP), which centralizes all financial and sustainability information.
In practice, this directive will also undoubtedly contribute to combating greenwashing.
Companies that already subject to NFRD are already required to report. If you are not one of them, here is how to anticipate the implementation of the evolution of European regulations.
Let's be honest: the subject is complex. The new rules and requirements induced by the entry into force of the CSRD are numerous, not to mention the host of ESRS standards with which you must become familiar.
Therefore, if your company is concerned about the upcoming changes next year, we urge you to familiarise yourself with these topics as soon as possible.
Our advice: start by familiarising yourself with the fundamentals. Keep in mind that all issues related to the CSRD are related to ESG criteria (Environmental, Social, and Governance). Before looking into the details of your new requirements, make sure you understand the scope of these three concepts - this will be very useful when it comes to defining, collecting, and synthesising the information required.
Then take the necessary time to study the principle of double materiality - a central element of the directive, it will allow you to identify: the main themes to address in terms of opportunities, risks, and impacts; material data representative of these issues (indicators, for example).
EFRAG will shortly publish its guide on "materiality analysis" to support companies subject to the CSRD.
Caution: Producing sustainability reports is not an overnight task. The complexity arises from the numerous functions within your organisation. Ensure you give it the time and attention it deserves.
❗It is important to remember that the implementation of a sustainable development policy involves all levels of the company.
Regarding the implementation of the CSRD, we recommend promptly briefing your teams on this topic. Strategically plan the required steps for your reporting and establish appropriate deadlines.
Vigilance is key: some of the obligations are entirely new. Gathering the necessary information might demand time, and potentially data consolidation too, especially considering the standards encompass the entire value chain.
However, it's worth noting that some data might already be at your fingertips. To save time, catalog information shared through various communication channels or under other regulatory guidelines. This ensures you won’t duplicate your efforts!
Reporting will undergo scrutiny by either an auditor or an independent entity.
In light of this, the directive has expanded the accountability of governance bodies. Essentially, they are tasked with ensuring the accuracy and compliance of the sustainability report presented.
Given the circumstances, we urge affected companies to proactively reach out with any questions to the authorities responsible for upcoming verifications. This proactive approach helps mitigate unforeseen challenges and facilitates necessary adjustments.
Moreover, due to their comprehensive perspective, governance bodies can play a pivotal role in pinpointing the company's key areas of research and analysis. For instance, understanding the climate risks intertwined with the value chain, which includes all company suppliers, can be intricate. Thus, it counts for a substantial part of the work to be done.
CSRD reporting can feel daunting which is why we're here to help! Greenly can guide you all the way through your CSRD reporting, starting with the identification of your disclosure requirements. Our technology and expertise can help you save valuable time through automated data collection and reporting, making the whole process as pain-free as possible. To find out more, head over to our website where you can request a free demo.
Given the CSRD is only applicable to businesses operating within the EU-regulated market and affects European sustainability reporting standards, the directive isn't going to have a direct global impact on sustainability.
💡However, that isn't to say that the CSRD doesn't hold the potential to influence other nations and regions of the world to require the same sustainability reporting as the European Union does.
If the EU can illustrate the environmental benefits of regulations like the CSRD, the world could be well on its way to a more sustainable future.
If reading this article about the CSRD, has made you interested in reducing your carbon emissions to further fight against climate change – Greenly can help!
At Greenly, we can help you to assess your company’s carbon footprint, and then give you the tools you need to cut down on emissions. We offer a free demo for you to better understand our platform and all that it has to offer – including assistance with boosting supplier engagement, personalized expertise, and new ways to involve your employees to adhere to all of your reporting requirements such as the CSRD while also going above and beyond in your climate journey.
Learn more about Greenly’s carbon management platform here.