Europe Leads the Charge in Corporate Sustainability: Unpacking the Corporate Sustainability Reporting Directive (CSRD)

Introduction

On November 28, the European Parliament and Council marked a significant milestone in the global sustainability movement by approving the Corporate Sustainability Reporting Directive (CSRD). This directive is not just a policy adjustment; it is a robust overhaul of the pre-existing Non-Financial Reporting Directive (NFRD). With the CSRD, the European Union aims to fortify its economic structure while setting a global benchmark for sustainability reporting. This initiative echoes the sentiment of Bruno le Maire, the French Finance Minister, who confidently stated, “Greenwashing is over. With this text, Europe is at the forefront of…setting high standards in line with our environmental and social ambitions.”

What is the CSRD?

The CSRD is the latest legislative framework designed to enhance transparency in how companies report their environmental and social impacts. Originating from the European Commission’s proposals in April 2021, and embedded in broader initiatives such as the EU Action Plan on Financing Sustainable Growth and the EU Green Deal, the directive seeks to standardize sustainability disclosures, making them as routine and comparable as financial reporting.

Navigating from NFRD to CSRD: What Changes?

The transition from the NFRD to the CSRD is not merely an expansion but a transformation in reporting:

  1. Scope of Application: The NFRD targeted over 11,700 large companies. The CSRD extends this to include about 50,000 companies that meet specified criteria regarding employee numbers, turnover, and asset value.
  2. Enhanced Reporting Requirements: Under CSRD, companies must apply ‘double materiality’ to assess how external ESG factors affect them and vice versa. The integration of ESG disclosures into both financial and management reporting segments, alignment with emerging European Sustainability Reporting Standards (ESRS), and mandatory third-party audits are some of the key enhancements.
  3. Digital Transparency: The directive mandates digital tagging of reported data to streamline its integration into the European Single Access Point (ESAP), enhancing accessibility and comparability.

Who is Affected by the CSRD?

  • EU Businesses: Companies already reporting under NFRD will transition to CSRD by January 2024, with the first reports due in 2025. New entrants meeting the broader criteria will follow suit in January 2025.
  • Non-EU Businesses: Significant economic entities in the EU, with turnovers exceeding EUR 150 million, will also need to comply with CSRD guidelines.

Implementation Timeline

Following its enactment, the CSRD will see a phased application, beginning in January 2024 for entities previously covered under the NFRD. Successive stages will incorporate additional companies under its scope with staggered compliance dates stretching up to January 2028 for third-country undertakings.

Looking Ahead: The Global Impact

The CSRD is set to revolutionize corporate sustainability practices by fostering a transparent, reliable, and comparable reporting environment across Europe and potentially setting a template for global standards. This directive could significantly influence investment decisions, corporate strategies, and even consumer behavior, steering the global market towards more sustainable and environmentally responsible practices.

Conclusion

The Corporate Sustainability Reporting Directive represents a pivotal shift in how business impacts are recorded and reported in Europe. By aligning financial and sustainability reporting, the EU is not only combating greenwashing but is also paving the way for a sustainable economic environment that could inspire similar reforms globally. For companies, the transition to CSRD compliance will be challenging but ultimately rewarding in building a resilient and sustainable business model. As this directive unfolds, it will be crucial for businesses to stay informed and prepared for the evolving reporting landscape.

Managing your reporting against CSRD can be challenging. Save time by using Empowered Systems’ Connected Risk for ESG and manage your ESG policies without issues. Learn more here.

Like this article?

Email
Share on Facebook
Share on LinkedIn
Share on XING

Talk to an Expert

"*" indicates required fields

Are you looking for support?

If you're looking for product support, please login to our support center by clicking here.

First, what's your name?*
This field is for validation purposes and should be left unchanged.

Submit a Pricing Request

"*" indicates required fields

First, what's your name?*
This field is for validation purposes and should be left unchanged.

Submit an RFP Request

"*" indicates required fields

First, what's your name?*
Which solution does your RFP require a response on?*
Drop files here or
Accepted file types: pdf, doc, docx, Max. file size: 1 MB, Max. files: 4.
    This field is for validation purposes and should be left unchanged.
    Skip to content