The CSRD Directive is an extension of the EU’s existing Non-Financial Reporting Directive (NFRD) of 2014 and aims to expand the reporting obligations of companies.
The CSRD will require more companies to produce comprehensive sustainability reports. This should help companies integrate sustainability into their business strategies and ensure long-term value creation for all stakeholders.
In order to support or specify the operational implementation, the EU Commission published Set 1 of the European Sustainability Reporting Standards (ESRS) on July 31, 2023, thus establishing standards for sustainability reporting in the EU.
These standards must be observed by companies committed to the EU Sustainability Reporting Directive (CSRD).
The ESRS reporting standard was developed to ensure that companies report transparently on their sustainability efforts (and achievements …). It is intended to enable uniform reporting on the three criteria of environmental impact (Enviromental), social performance (Social) and corporate governance (Governance) (ESG).
By requiring companies to provide standardized information, the comparability of sustainability information is improved, which helps investors, consumers and other stakeholders to make informed decisions. (Here again, other obligations take effect, e.g. in the financial market – banks also ask for ESG information!)
There will be a gradual implementation of the CSRD guidelines:
- Large publicly traded companies with more than 500 employees that are now required to report under NFRD will be subject to CSRD starting in fiscal year 2025, so must be able to report in 2025 for 2024 (which means: already think about data collection in 2024)
- Starting in 2026 for the 2025 fiscal year, then all other large companies (corporations, limited liability companies, credit institutions and insurance companies) that have at least two of the following characteristics: Balance sheet total of 20 million euros or more Sales of 40 million euros over 250 employees.
- Starting in 2027 for the 2026 financial year, also capital market-oriented SMEs
- Starting in 2029 for the 2028 financial year, third-country companies with subsidiaries or branches in the EU (> €150 million net sales in the EU area over two years)
The graduated approach provides a transition period for companies before the full reporting requirement is imposed.
What does this mean for individual companies and organizations?
There is not too much time left – we recommend building capacity for implementation, e.g. building knowledge in many areas, involving relevant departments and preparing or implementing data management.
To whom do we recommend it? Actually all companies and organizations, because in addition to the direct effects of CSRD, there are numerous indirect consequential effects (relatively independent of organizational size and sector): In supply chains, in funding, in the financial market, etc. – more and more often companies are asked – in addition to “how are your finances?” – are asked “how is your sustainability impact”?
The ESG Cockpit supports you in answering these questions or in fulfilling sustainability reporting obligations!
NFRD https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0095
ESRS https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=PI_COM%3AC%282023%295303&qid=1692630788237
CSRD https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=PI_COM%3AC%282023%295303&qid=1692631023396
