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What is the Corporate Sustainability Reporting Directive (CSRD)?
The Corporate Sustainability Reporting Directive (CSRD) is a new EU directive that will impact large and listed companies, requiring them to disclose information on how they monitor a wide range of ESG issues and their impact on our planet.
The primary objective of the CSRD is to foster transparency and accountability while advancing sustainable practices and investments. With heightened stakeholder scrutiny and expanded reporting obligations, companies are compelled to disclose a broader spectrum of ESG metrics, offering stakeholders unparalleled insight into their sustainability endeavours.
Beyond regulatory compliance, the CSRD presents a unique opportunity to deepen your organisation's understanding of sustainability risks and opportunities. By integrating reporting into your business strategy, you can unlock the dual benefits of profit and purpose, safeguard your reputation, and drive sustainable growth. Ensuring compliance and staying ahead of the curve are imperative for success in today's evolving landscape.
Who is impacted by the CSRD?
The CSRD is set to affect a larger number of companies than any previous sustainability regulation, setting higher standards for disclosures covering environmental (‘E’), social (‘S’), and governance (‘G’) aspects. Around 50,000 companies globally will have to disclose, monitor, and assess their sustainability performance. Any company meeting two of the three criteria listed below will be obligated to adhere to the CSRD:
- Annual turnover exceeding €50 million
- Total assets on the balance sheet exceeding €25 million
- Employing more than 250 staff members
In due course, small and medium-sized enterprises will also fall under its scope, underlining the urgency for strategy development and implementation at present. With the intricate disclosure requirements and escalating demand for transparency, companies not directly impacted will probably face heightened investor pressure to divulge information in alignment with the CSRD. As stakeholders seek to comprehend the correlation between sustainability and broader business risks and opportunities, a key consideration for those in a supply chain of an organisation which is required to report in 2024 is demonstrating their own transparency on CSRD related issues.
What actions should businesses impacted by CSRD take now?
The Corporate Sustainability Reporting Directive presents both challenges and opportunities for businesses striving to enhance their sustainability practices. By understanding the requirements, assessing current practices, and implementing robust reporting frameworks, organisations can navigate the complexities of CSRD and unlock the benefits of transparent and impactful sustainability reporting. However, given the evolving landscape of sustainability regulations, seeking expert advice is paramount. Consulting with sustainability professionals can provide invaluable guidance tailored to your business's specific needs, ensuring compliance with CSRD while driving meaningful progress towards a more sustainable future, lasting value and confidence.
Get CSRD ready with RSM
Internationally, we collaborate directly with regulators to mould and refine the reporting framework, ensuring our team of specialists remains at the forefront of ESG legislation. Our experts span various aspects of sustainability disclosure requirements. From initial scoping and readiness assessments to gap analyses, we provide a streamlined and coherent response to the CSRD and broader sustainability disclosure ecosystem, including the EU Taxonomy. Our technology-driven approach prioritises integration, allowing our clients to harness value while fulfilling both current and future regulatory obligations.
Our team of sustainability experts constructs and integrates ESG processes, effectively mitigating risks, dismantling barriers, and realising economic and environmental objectives. Through cohesive collaboration, we instill confidence in our clients to drive sustainable growth while enhancing their environmental and social impact.
Frequently Asked Questions
CSRD stands for Corporate Sustainability Reporting Directive. It requires certain EU-based companies to disclose non-financial information, focusing on environmental, social, and governance (ESG) aspects in their annual reports. It aims to promote transparency and sustainability.
Large EU-based entities, both listed and unlisted, and subsidiaries of non-EU parent companies meeting specific criteria based on balance sheet totals, net turnovers, and employee counts fall under the CSRD's scope.
CSRD affects non-EU-based subsidiaries connected to EU-regulated markets through their parent companies. It also impacts businesses indirectly involved in EU-based value chains due to disclosures related to ESG impacts.
Companies falling under CSRD must disclose material ESG impacts, risks, and opportunities. Additionally, they need to reveal information about their upstream and downstream value chains concerning ESG aspects.
CSRD allows a three-year grace period for companies to adjust and set up processes for collecting data related to their value chains. During this time, companies can omit certain data while disclosing efforts, reasons for omission, and future plans to obtain the data.
CSRD is designed to align with existing reporting frameworks to avoid duplication and streamline reporting efforts. Companies may leverage these frameworks' guidelines while meeting CSRD requirements.
Penalties for non-compliance with CSRD may include fines or reputational damage. The specific consequences depend on individual EU member state regulations and enforcement mechanisms.
Companies can prepare for CSRD compliance by assessing their current ESG reporting practices, identifying gaps, establishing data collection processes, and integrating sustainability considerations into their business strategies.
CSRD encourages companies to adopt and prioritize sustainable practices by mandating comprehensive reporting on ESG aspects. It promotes transparency, accountability, and the integration of sustainability into corporate decision-making.
Companies can access guidance and resources related to CSRD compliance through official EU publications, industry associations, consulting firms specialised in sustainability, and online platforms offering ESG reporting tools and support.
