THIS TEXT WILL BE UPDATED (CHRISTINE REVIEWING FINAL VERSION NOW)
The Corporate Sustainability Reporting Directive (CSRD) is a new European Union (EU) regulation that will require large companies to report on their sustainability performance. Now, voluntary reporting will become mandatory.
Because CSRD will go into effect in 2023 and will require companies to fully report in the year 2024, companies must begin preparing for CSRD now to ensure requirement compliance.
There are inherent risks associated with the CSRD, such as compliance risk, reputational risk, and financial risk. Businesses must understand and mitigate these risks to ensure a seamless transition into a new reporting landscape.
Compliance with this regulation is an ethical imperative and a strategic advantage, fostering investor confidence, attracting environmentally conscious stakeholders, and promoting long-term business resilience.
Below are four things to know about CSRD from SAI360’s recent webinar—Prepare for the Corporate Sustainability Reporting Directive, CSRD—with Gabriela Troncoso Alarcon, Expert Support Services Manager at Enhesa, moderated by Christine Adeline, SAI360, where we discussed CSRD requirements and how companies can prepare for the new regulation.
1. Who must comply with CSRD?
The CSRD applies to all large companies that are either listed or non-listed in the EU market. A “large” company means you have two of the three: £40 million in net turnover, £20 million in assets, and/or at least 250 employees).
Additionally, non-EU companies with a turnover of above £150 million in the EU will also have to comply.
2. What does CSRD require of companies?
The CSRD will require all large companies to report on a wide range of sustainability issues, including environmental impact, social impact, and governance.
The CSRD will also require companies to report on a wider range of sustainability topics than the current Non-Financial Reporting Directive. Companies will need to collect data on these issues to report on them.
Additionally, the CSRD will require companies to develop a sustainability reporting framework. This framework will need to be consistent with CSRD’s requirements.
3. When does CSRD reporting happen?
By June of 2023, the first set of standards for the CSRD will be adopted—still in draft at the time of this writing.
From January 1, 2024, large public-interest companies with 500 or more employees will already be subject to the non-financial reporting directive, with reports due in 2025.
From January 1, 2025, reports are due in 2026 for large companies (as defined above) that are not presently subject to the non-financial reporting directive.
From January 1, 2026, for listed Subject Matter Experts (SMEs) and other undertakings, reports will be due in 2026. SMEs can opt out until 2026.
4. What do companies need to do to prepare for CSRD?
Companies that were not reporting previously now must meet CSRD reporting requirements. Fortunately, the data that needs to be collected is data companies already have available. What proves challenging, however, is accessing this data from silos in varying departments across different teams. Streamlining communications, efforts, and data retrieval across teams and departments is key.
To prepare for CSRD, companies will need to identify which sustainability issues are relevant to their business, collect data on their sustainability performance, and develop a sustainability reporting framework.
The CSRD is a complex regulation, but it is important for companies to understand it and to start preparing for it now. By doing so, you can ensure you are compliant with the CSRD and that you can demonstrate your commitment to sustainability to stakeholders.
By taking the necessary steps to mitigate risks and seize opportunities, businesses can successfully navigate the CSRD.
This webinar discusses:
- What is CSRD
- How to leverage current systems and processes
- Environment, Health, and Safety’s CSRD role
- How technology drives efficiency