What does mandatory reporting under CSRD mean for you?
The Corporate Sustainability Reporting Directive (CSRD) is an important EU directive that aims to improve corporate transparency and accountability on sustainability. This directive requires companies to report more comprehensively and in more detail on their sustainability practices. The CSRD replaces the Non Financial Reporting Directive (NFRD).
How does the CSRD relate to other directives?
The CSRD is closely linked to the Corporate Sustainability Due Diligence Directive (CSDDD). Under the CSDDD, the company is required to implement due diligence processes related to sustainability and human rights. The data and insights gained from sustainability reporting under the CSRD can help companies better carry out their due diligence processes under the CSDDD.
The CSRD applies to not only large companies, but also medium and smaller listed companies. The implementation of the CSRD will take place in phases. Companies covered by the NFRD will have to start reporting on 2023 in 2024. In 2025, it will apply to all large companies not covered by the NFRD. Finally, the CSRD will start applying to listed SMEs in 2026.
What is the purpose of CSRD?
The CSRD was introduced for several reasons:
- Improved Transparency: By requiring companies to report in more detail on their environmental and social impacts, it makes it easier for stakeholders to assess and compare companies’ sustainability performance.
- Accountability: Companies will be held accountable for their sustainability policies and their implementation. This helps promote ethical business practices and encourage sustainable growth.
- Harmonization: The CSRD seeks a harmonized sustainability reporting framework within the European Union, creating consistency and comparability across companies and sectors.
Currently, a few large companies include sustainability in their annual reports. Each of them has found its own way of reporting on sustainability. With the introduction of the CSRD directive, this will change. The CSRD directive includes prescribed standards for reporting on sustainability goals, policies, performance, and risks. Companies that have already prepared a sustainability report in their own way can still use it as input for a report following the CSRD. Many companies choose to report based on Environmental, Social, and Governance (ESG) factors. Additionally, the directive requires that the report be verified, which increases the reliability of sustainability reporting.”
How do you know what to report on?
The CSRD has clear guidelines on reporting, which means you cannot choose which sustainability topics to report on. A double materiality analysis must be carried out to find out which topics are material (significant) for your business. You must then report on how your activities affect the environment (impact materiality) and on how sustainability issues may affect your business. Flux Partners can help your company with report preparation in accordance to the CSRD guideline using ESG factors.