The Corporate Sustainability Reporting Directive (CSRD)

In November 2022, the European Parliament and the European Council have adopted the Corporate Sustainability Reporting Directive (CSRD), which will replace the non-financial reporting directive (NFRD). From reporting year 2024 onward, the first EU-based companies must comply with enhanced non-financial reporting obligations. The number of affected companies will progressively grow.

What is the CSRD?

The main objective of the CSRD is to strengthen the existing rules regarding sustainability reporting and for sustainability information to reach the same status as financial information. By providing reliable, relevant, and comparable sustainability information, more capital should be channeled into financing the economy’s green and social transition, as proposed by the EU Green Deal.

Due to the extended scope, almost 50,000 companies will have to comply with the CSRD. They will be required to provide a machine-readable integrated report, which means that sustainability-related information will become part of the companies’ annual reports. The sustainability disclosures will be subject to mandatory assurance.

The detailed reporting requirements are specified in the European Sustainability Reporting Standards (ESRS). A first set of standards will be adopted by the European Commission by the end of June 2023. Companies will have to provide information on those sustainability-related issues that are considered as material, from an impact or a risk perspective (double materiality).

Which companies are affected?

The CSRD will be implemented over several years:

• From reporting year 2024, companies of public interest with more than 500 employees and a balance sheet of over €20 Mio. or a net turnover of over €40 Mio. are affected. These companies already report according to the NFRD.
• From reporting year 2025, companies with more than 250 employees and a balance sheet of over €20 Mio. or a net turnover of over €40 Mio. are affected.
• From reporting year 2026, EU-based, listed SMEs will be affected. However, they can choose to opt-out until reporting year 2028.
• From reporting year 2028, non-EU companies, with a net turnover of over €150 Mio. in the EU and with one EU subsidiary or branch office with a turnover of over €40 Mio. are affected.

If the parent company reports according to the CSRD, subsidiaries can be included into this report and don’t have to provide a separate report. However, the subsidiaries need to include in their management report a reference to their parent undertaking and a explanation that they are exempted from sustainability reporting.

How can ELEVATE support you?

• Double Materiality Assessment: We conduct double materiality assessments, which adhere to the CSRD requirements. This includes the combination of an impact and a risk and opportunity assessment, and helps you define the relevant sustainability topics for your company, on which you must report.
• Social and Environmental Due Diligence: As part of the CSRD, companies need to set up environmental and social due diligence processes. This requirement will become more stringent with the proposed EU corporate sustainability due diligence directive (CSDDD). We support you in setting up the required processes to provide reliable and rigorous due diligence processes to identify and manage risks and negative impacts along your supply chain.
• Sustainability Strategy Development: The CSRD requires to report detailed information on your sustainability strategy, governance, and policies. We support you in the development of ambitious sustainability strategies, including the definition of relevant targets and metrics and the set-up of the relevant governance structures.
• Implementation of Sustainability Strategy and Reporting: We help you identify and implement relevant measures to reach your sustainability ambitions and with the controlling of the corresponding metrics and targets. We support you with the evaluation of the strategy, including measures and targets, and with the preparation of CSRD-compliant reports.
• ESG Reporting and Disclosure Strategy: We help you keeping track with various mandatory and voluntary ESG reporting requirements. We support you in developing a future-proof ESG-reporting and disclosure strategy, which complies with the relevant standards, manages stakeholder requests, and supports the strategic management of your sustainability ambitions.
• Climate Strategy and Reporting: CSRD asks companies to report on their 1.5°-compatible climate strategy. We help you to develop a strategy with science-based targets, and in setting up the governance structures and the reporting, in line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).
• Gap Analysis: With our gap analysis, you identify the relevant gaps in your current sustainability report, which must be closed to reach CSRD-compliance. We also conduct gap analyses for other standards and legal requirements (e.g., GRI-Standards, German Supply Chain Act, Swiss legal requirements)
• Report Assurance: we provide services to ensure that you comply with the CSRD assurance requirements.

Reach out to us here for more information.

These blogs are written by ELEVATE staff members or associates and the views and opinions expressed are not necessarily those of ELEVATE.