Navigating The Corporate Sustainability Reporting Directive (CSRD): Your Guide To Compliance And Sustainability Reporting

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Navigating the Corporate Sustainability Reporting Directive (CSRD): Your Guide to Compliance and Sustainability Reporting

The Corporate Sustainability Reporting Directive (CSRD) is a regulatory framework proposed by the European Commission to standardize and enhance sustainability reporting requirements for companies operating within the European Union (EU). This article provides a detailed overview of the CSRD, including its objectives, expanded scope, reporting standards, timelines for compliance, and key considerations for companies.

Objectives of the CSRD:

  1. The CSRD aims to achieve several objectives:
    • Enhancing the quality, consistency, and comparability of sustainability reporting across the EU.
    • Providing investors, stakeholders, and the public with reliable and relevant information on companies’ environmental, social, and governance (ESG) performance.
    • Promoting transparency regarding companies’ impact on people and the environment.
    • Reducing reporting costs in the long term through the harmonization of information.
  1. Expanded Scope of the CSRD:
    • The CSRD expands the reporting obligations to a broader set of companies, including large companies and listed small and medium-sized enterprises (SMEs).
    • Approximately 50,000 companies within the EU will be subject to the CSRD’s reporting requirements.
    • This expansion ensures that a wider range of companies provide sustainability information, allowing investors and stakeholders to assess the risks and opportunities associated with climate change and other sustainability issues.
  1. Reporting Standards:
    • Under the CSRD, companies will be required to comply with the European Sustainability Reporting Standards (ESRS).
    • The ESRS will be developed by the European Financial Reporting Advisory Group (EFRAG).
    • These standards align with EU policies and contribute to international standardization efforts in sustainability reporting.
    • The first set of sector-agnostic ESRS is expected to be adopted by mid-2023.
  1. Timelines for Compliance:
    • The CSRD introduces phased timelines for compliance based on the type and size of companies:
      • Companies already falling under the Non-Financial Reporting Directive (NFRD):
      • Starting from the 2024 financial year, they will need to comply with the CSRD.
      • Reports for the 2024 financial year will be published in 2025.
    • Large companies currently not falling under the NFRD:
    • Starting from the 2025 financial year, they will be required to comply with the CSRD.
    • Reports for the 2025 financial year will be published in 2026.
    • These companies must meet at least two of the three specified criteria, such as a balance sheet total exceeding EUR 20 million, net revenue surpassing EUR 40 million, and an average employee count of over 250 during the financial year.
  • Listed SMEs, small credit institutions, and non-complex insurance companies:
    • Starting from the 2026 financial year, they will need to comply with the CSRD.
    • Reports for the 2026 financial year will be published in 2027.
  1. Key Considerations for Companies:
    • Companies should start preparing for the CSRD in advance, preferably in 2022, by developing policies, implementing ESG indicators for measurement and monitoring, and preparing necessary reports.
    • Digital reporting is encouraged to enhance accessibility, comparability, and searchability of sustainability information.
    • Assurance of reported information will be required, transitioning from limited assurance to reasonable assurance after six years from the adoption of the CSRD.

The CSRD represents a significant regulatory change in the realm of sustainability reporting within the EU. Companies need to familiarize themselves with the expanded reporting requirements, comply with the ESRS, embrace digital reporting, and ensure assurance processes are in place. By proactively adapting to the CSRD, companies can effectively demonstrate their commitment to sustainability and leverage its benefits in the evolving business landscape.

Sources:

Corporate sustainability reporting (europa.eu)

Wanneer gaat de CSRD in en voor welke bedrijven? Is dat 2023, 2024 of 2025? – Nieuws SRA – Nieuws – SRA: netwerkorganisatie van 370 zelfstandige accountantskantoren – SRA

Corporate Sustainability Reporting Directive (CSRD) explained | The Carbon Trust

CSRD – Guide: What to report & How to comply – Ecochain – LCA software company

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