CSRD: new sustainability reporting requirements

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Sophie Harbert

What is CSRD?

The EU Corporate Sustainability Reporting Directive (CSRD) requires organisations of a certain size to report on various ESG metrics to measure their sustainability and impact on the planet. The EU legislation formally came into place in 2024, meaning that almost 50,000 companies are now subject to mandatory sustainability reporting, including non-EU companies with subsidiaries or operations in the EU or those listed on EU-regulated markets.

The reporting directive aims to increase transparency and accountability, allowing organisations to look at risks and opportunities and report on their impact publicly. It will likely promote sustainable investments and operations as businesses take a more strategic approach to the sustainability agenda.

Who needs to report?

Companies that meet two of the three requirements below will be required to report on CSRD, making it the most widely used sustainability reporting framework assessing the triple bottom line.

  • Has a net turnover of more than €40 million
  • Balance sheet assets greater than €20 million
  • More than 250 employees

Large, listed companies already subject to the Non-Financial Reporting Directive (NFRD) will be the first to need to comply by reporting on their 2024 financial year. Medium and small businesses will follow them on a reporting scale from 2025 to 2028. With a clear timeline, companies should begin preparing to report in alignment with CSRD if they are in scope over the coming years. They may also be required to disclose to assess supply chain impacts for larger organisations.

What does it mean for business sustainability strategy and sustainability reporting?

CSRD drives a more robust approach to reporting sustainability strategy and action in areas such as climate change, risk assessment and double-materiality. This means looking at the business’s impacts on people and the planet while considering how sustainability issues such as climate change will impact business performance and development.

Underpinning the CSRD is the European Sustainability Reporting Standards (ESRS), which defines how companies must report. Alongside the ESRS, the common EU taxonomy establishes a list of environmentally sustainable economic activities for reporting. Additionally, the public consultation on a digital taxonomy has just been released (February 2024) by EFRAG. This means that reports must be tagged using iXBRL when shared online to make information machine-readable and, therefore, more accessible.

Bigger, better sustainability reporting

The CSRD will drive change in the sustainability reporting landscape as it demands more depth, scope and detail. Existing frameworks, including the Global Reporting Initiative (GRI), United Nations Global Compact (UNGC) and the Taskforce on Climate-Related Financial Disclosure (TCFD), are expected to have linkages to the CSRD reporting. However, CSRD will be more far-reaching in the data required. With a mandatory requirement to disclose across 10 key ESG topics and report on 1,000 data points that look at short- and long-term impacts across the value chain of the business, it’s evident that both time and resources will be needed to report effectively.  

CSRD will prove to be valuable for sustainability as stakeholders can assess the true impact of organisations when disclosures are made, reducing the risk of greenwashing and promoting climate action. CSRD also includes mandatory assurance to ensure reporting is reliable.

Get in touch if you would like to discuss how we can help with the ESG reporting for your business.

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