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With the European Union’s Corporate Sustainability Reporting Directive (CSRD) now in effect, businesses are facing a new era of non-financial reporting, one that strengthens and modernizes environmental, social, and governance (ESG) disclosures.
For companies operating within or connected to the EU, understanding and implementing the CSRD is crucial. This isn’t just about ticking boxes for compliance, it's about being part of a transformative movement towards sustainable and responsible business practices.
👉 In this guide, we'll take you through what it means to comply with the CSRD reporting, offering practical steps to ensure your business stays ahead of the curve in this evolving corporate landscape.
Introduced by the European Commission in 2021, the Corporate Sustainability Reporting Directive (CRSD) significantly elevates the standards of non-financial reporting among companies, improving the way environmental, social, and governance (ESG) factors are reported and evaluated. Its primary objective? To enhance transparency and consistency in publicly available corporate sustainability information.
The CSRD is a more ambitious successor to the Non-Financial Reporting Directive (NFRD). While the NFRD laid the groundwork for sustainability reporting, the CSRD takes this a step further. It aims to close the gaps left by the NFRD, introducing more stringent, detailed reporting requirements. This change mirrors the increasing global focus on sustainable business practices and the growing investor demand for comprehensive ESG information.
The CSRD isn't merely a regulatory requirement, it represents a significant shift towards integrating sustainability into the core of corporate strategy. Its objectives are clear: ensure that sustainability reports across the EU are more consistent, comparable, and comprehensive. By doing so, the CSRD not only holds businesses accountable for their impacts on society and the environment but also plays a critical role in guiding investment decisions towards more sustainable business models.
Importantly, the CSRD’s reach is not confined to the EU. It extends to non-EU companies that have substantial business activities within the EU, making its implications global. This broader scope underlines the EU's commitment to leading global efforts in sustainable development and corporate transparency.
👉 To learn more about the CSRD reporting requirement head over to our comprehensive guide.
A wide range of organizations fall under the scope of the Corporate Sustainability Reporting Directive. Here’s a breakdown of the entities that need to gear up for compliance:
Scope: This category includes companies listed on an EU-regulated market exchange. However, there's an exception for 'micro undertakings' that do not meet two of the following criteria on consecutive balance sheet dates:
Definition: These are companies, whether listed or not, that fulfill at least two of these three criteria on any two consecutive balance sheet dates:
Non-EU parent companies: The directive also casts its net over non-EU parent companies with annual EU revenues of at least EUR 150 million in the most recent two years. These companies must also own:
Understanding the specific requirements of the CSRD is essential for companies to effectively comply with its reporting mandates. The CSRD sets a new standard in corporate sustainability reporting, demanding a level of detail and clarity that goes beyond previous directives.
Companies are expected to provide extensive information on their impacts related to social, environmental, and governance issues. This includes not just the company's direct impact but also how it manages risks and opportunities related to these areas. The reporting must cover a broad range of topics from climate change and environmental damage to social rights and employee matters.
Under the CSRD, reporting is standardized through the European Sustainability Reporting Standards (ESRS). These standards are designed to ensure that the reports are consistent, comparable, and provide a clear picture of a company’s sustainability performance. Companies are required to report on a variety of metrics and indicators, which are crucial for assessing their ESG impacts comprehensively.
An important element of the CSRD is 'double materiality', requiring companies to report not just on how sustainability issues impact their financial performance (financial materiality) but also on how their operations affect the environment and society (environmental/social materiality). This dual focus ensures a comprehensive view of a company's sustainability impacts and responsibilities.
The directive emphasizes the need for regular and consistent reporting. Companies must integrate their sustainability reporting into their annual reporting cycles. This integration ensures that sustainability is not an afterthought but a core aspect of the company’s strategic and operational planning.
To enhance the credibility of the reports, the CSRD requires that they be verified by independent auditors. This verification process ensures that the information disclosed is accurate and meets the specified standards. The move towards independent auditing marks a significant shift towards greater transparency and reliability in sustainability reporting.
When it comes to ensuring compliance with the CSRD’s reporting requirements it’s crucial to develop and implement an action plan for compliance. This process requires preparation, careful execution, and ongoing management. We’ve created a roadmap to guide companies through this journey:
Navigating the CSRD’s requirements presents its unique set of challenges for businesses. Understanding these hurdles and having strategies in place to overcome them is crucial if you want to comply with the CSRD reporting requirements.
We’ve outlined a few of the main challenges that companies encounter along with solutions to help you overcome them.
By proactively addressing these challenges and implementing effective solutions, companies can navigate the complexities of CSRD compliance more effectively. This not only ensures adherence to regulatory requirements but also strengthens the company’s overall approach to sustainability and corporate responsibility.
Greenly offers a tailored solution to simplify the CSRD reporting process. With the support of cutting-edge software and expert insights, our platform makes CSRD reporting more streamlined and manageable.
👉 Leverage Greenly’s dedicated CSRD solution to make your compliance journey smooth, efficient, and comprehensive.
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. Why not request a free demo with one of our experts - no obligation or commitment required.
If reading this article has inspired you to consider your company’s own carbon footprint, Greenly can help. Learn more about Greenly’s carbon management platform here.
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