Are you prepared for the new sustainability directive?

The new EU Corporate Sustainability Reporting Directive (CSRD) will bring significant changes for businesses across Europe. The CSRD will expand the reporting obligations for enterprises, requiring them to disclose how they are addressing sustainability in their operations. 

These enterprises will need to gather much more data and documentation for reporting purposes, as well as develop objectives and strategies for addressing key sustainability issues. In this way, the CSRD will impact the comprehensive and strategic sustainability efforts of businesses throughout Europe. This article provides essential insights into the CSRD directive and its potential effects on your business. 

CSRD: More Than "Just" a Reporting Requirement Starting in 2025, numerous European enterprises will be directly and indirectly influenced by the EU's new sustainability directive, CSRD. The CSRD is a game-changer for the strategic sustainability efforts of businesses and represents much more than a mere reporting directive. The CSRD aims to replace the NFRD (Non-financial Reporting Directive), integrating sustainability information with financial data. This integration will facilitate the comparison of sustainability data across different businesses, enabling strategic management, prioritization, and reporting on significant matters with reliable and enhanced data.

Double Materiality and Requirements for Strategy and Goals for Sustainability A core principle of the CSRD is the requirement to conduct a double materiality analysis. This analysis identifies the areas where a business impacts and is impacted by external financial factors. Moreover, the directive mandates that companies' strategies and goals align with the objectives of the Paris Agreement, specifically the 1.5-degree target.  

Direct and Indirect Consequences from the CSRD Directive Adopted in the EU in 2023, the CSRD directive is set to significantly affect European businesses, both directly and indirectly.  
A critical aspect for many businesses will be the requirement to provide data covering their entire value chain. What data a given company should disclose, and on which format this data is to be presented, is covered by the European Sustainability Reporting Standards (ESRD). The standards identify close to 1200 datapoints that could be mandatory, depending on the type of business, sector and the outcome of the double materiality assessment. The CSRD offers comprehensive guidance to help businesses obtain the necessary overview to meet these new requirements, marking an exciting era for sustainability reporting in Europe.   

Who Will Be Obligated to Report and When? The implementation of the CSRD will alter the reporting obligations for businesses across Europe, with a phased timeline as follows: 

For the fiscal year 2024 (reporting in 2025) 

• Listed companies, banks, insurance, and credit institutions meeting certain criteria:
  • At least 500 full-time employees
  • Sales revenue > EUR 70 million or
  • Balance sheet > EUR 35 million

For the fiscal year 2025 (reporting in 2026) 

• Large enterprises/groups that satisfy at least two of the following three criteria: 
  • Sales revenue > EUR 70 million
  • Balance sheet > EUR 35 million
  • Number of full-time employees > 250 

For the fiscal year 2026 (reporting in 2027) 

• Listed SMEs, small and non-complex credit institutions, and certain insurance companies, with specific size criteria. 

We Assist You with CSRD If your business is navigating the upcoming reporting requirements for 2024, 2025, and 2026, the implementation of the CSRD's mandates can be daunting. Given the quantity of data that is to be collected and reported, as well as the requirements for data quality, many businesses need to re-assess how they manage their ESG data. This is particularly important to ensure efficiency and to avoid costly investments in both software and people. Our team of advisors, ESG data management consultants and ESG reporting specialists is prepared to provide the guidance you need to successfully address these challenges.